PART II AND III

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission (the “SEC”). Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the SEC is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

PRELIMINARY OFFERING CIRCULAR, DATED OCTOBER 11, 2017

Royalty Flow Inc.

$11,000,000 Minimum Offering Amount (1, 466,667 Shares of Common Stock)

$50,000,000 Maximum Offering Amount (6 ,666,666 Shares of Common Stock)

This is the initial public offering of Class A common stock, par value $0.001 per share (which we refer to in this offering circular as the “common stock”), of Royalty Flow Inc., a Delaware corporation (the “Company” or “Royalty Flow”). We are offering for sale a minimum of 1,466,667 shares of our common stock and a maximum of 6,666,666 shares of our common stock (the “Offered Shares”) on a “best efforts” basis. The offering price is $ 7.50 per share.

Upon achievement of the minimum offering amount and the closing on such amount, the proceeds from the minimum offering amount will be distributed to the Company and the associated Offered Shares will be issued to the investors in such Offered Shares. If the offering does not close, no investor funds will be available to the Company. Folio Investments, Inc. (“Folio”), a FINRA member and SEC-registered broker-dealer, will process investor subscriptions and conduct closings.

The minimum purchase requirement per investor is $2,250. We expect to commence the sale of the Offered Shares soon after the date on which the offering statement, of which this offering circular is a part, is qualified by the United States Securities and Exchange Commission (the “SEC”).

Prior to this offering, there has been no public market for our common stock. We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “RLTY”.

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, we are subject to reduced public company reporting requirements. See “Offering Circular Summary—Implications of Being an Emerging Growth Company.” We have not generated profits and have substantially relied on money obtained from our controlling stockholder, Royalty Exchange, Inc. (“Royalty Exchange”) to conduct our operations.

These securities are highly speculative and involve a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page  9 to read about factors you should consider before buying shares of our common stock.

	Per Share		Total Minimum		Total Maximum
Initial public offering price:	$	7.50	$	11,000,000	$	50,000,000
Underwriting Discounts and Commissions:(1)		—		—		—
Proceeds to the Company, before expenses:	$	7.50	$	11,000,000	$	50,000,000

_______

⁽¹⁾ The Offered Shares will be offered on a “best-efforts” basis by our officers and directors pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for Tier 2 offerings. We are not selling the shares through commissioned sales agents or underwriters. Does not include fees payable by us to Folio for use of its online selling platform and related services in connection with this offering. See “Plan of Distribution.”

Generally, unless our common stock is listed on the Nasdaq Capital Market or other national securities exchange in connection with the offering, no sale may be made to you in the offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

The SEC does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the SEC; however, the SEC has not made an independent determination that the securities offered are exempt from registration.

This offering circular follows the disclosure format prescribed by Part I of Form S-1 pursuant to the general instructions of Part II(a)(1)(ii) of Form 1-A.

The date of this offering circular is                 , 2017.

TABLE OF CONTENTS

	Page
Cautionary Note Regarding Forward-Looking Statements	ii
Offering Circular Summary	1
Risk Factors	9
Use of Proceeds	24
Dividend Policy	25
Capitalization	25
Dilution	26
Business	27
Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Management	40
Executive Compensation	44
Security Ownership of Management and Certain Security Holders	50
Certain Relationships and Related Party Transactions	51
Description of Capital Stock	52
Plan of Distribution	54
Shares Eligible for Future Sale	57
Material U.S. Federal Income Tax Considerations	58
Legal Matters	62
Experts	62
Where You Can Find More Information	62
Index to Financial Statements	F-1

We have not authorized anyone to provide you with any information other than that contained in this offering circular. We do not take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, Offered Shares only in jurisdictions where offers and sales are permitted. The information in this offering circular is complete and accurate only as of date on the cover hereof regardless of the time of delivery of this offering circular or any sale of Offered Shares. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of these securities in any jurisdiction where the offer thereof is not permitted.

We have not undertaken any efforts to qualify this offering for offers to investors in any jurisdiction outside the United States (“U.S.”). Investors must have a U.S. mailing address (other than a P.O. Box) and a U.S. social security number and/or a U.S. tax identification number to be eligible to participate in this offering.

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The offering circular contains forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events and are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

Any statements contained in the offering circular that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. Key factors that could cause actual results to be different than expected or anticipated include, but are not limited to:

· our limited operating history and experience in acquiring, holding and managing royalty portfolios;

· our future capital needs;

· the health of the music industry as a whole;

· risks related to the solvency and operations of the Counterparties (as defined herein);

· risks related to popularity and reputation of the recorded music artists;

· competitive and contractual risks;

· risks related to our intellectual property rights;

· the absence of liquidity of our common stock;

· the risk of substantial dilution from future issuances of our equity securities; and

· the other risks set forth herein under the caption “Risk Factors.”

In light of these risks, uncertainties and assumptions, you are cautioned not to place undue reliance on forward-looking statements, which are inherently unreliable and speak only as of the date of the offering circular. When considering forward-looking statements, you should keep in mind the cautionary statements in the offering circular. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ii

OFFERING CIRCULAR SUMMARY

The following summary highlights certain information about us and this offering contained or incorporated by reference in this offering circular and is qualified in its entirety by the more detailed information and financial statements included elsewhere or incorporated by reference in this offering circular. This summary does not contain all of the information that may be important to you. You should read and carefully consider the following summary together with the entire offering circular, including the documents incorporated by reference herein, before deciding to invest in our common stock. Some of the statements in this offering circular constitute forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the “Risk Factors” and other sections of this offering circular and in the information incorporated by reference herein.

About the Company

Royalty Flow Inc. (the “Company,” “we,” “us” or “our”) is engaged in the business of acquiring, holding and managing royalty interests derived from intellectual property created in the media industry (“Royalty Interests”). Royalty Interests are passive (non-operating) interests in media catalogs (collections of work) that provide the right to revenue produced from the catalog. As it relates to music catalogs, this includes revenue generated from streaming, downloads, physical album sales and other forms of usage by movies, television and advertisements.

Music royalties, as an asset class, have the potential to produce attractive characteristics for investors including consistent cash flow for long-term periods (per U.S. copyright laws, music royalties are paid for the life of the author plus 70 years), relative price stability and capital appreciation potential. They also have the potential to produce investor returns with low correlation to traditional investment markets like stocks, bonds and commodities given that royalty cash flows are often more dependent on popularity and sales versus stock market movement or interest rate activity.

Royalty Flow will seek to acquire existing Royalty Interests and will not act as a record label or music publisher. This should help keep management costs low, and additional acquisitions and growth should create economies of scale for investors.

Royalty Flow will seek to grant investors access to media royalty streams via a stock traded on a public exchange. The key element of our business model is the building of a diversified portfolio of high-quality Royalty Interests. We plan to acquire assets with an income focus, and our target is to acquire assets generating uncorrelated income of 8% to 16% internal rate of return, although there can be no guarantee that we will achieve this target. Our acquisition and growth strategy will initially focus on music assets. We will actively analyze and potentially acquire other forms of media-based IP, including but not limited to movies, television and trademarks. Royalty Flow’s acquisition and growth strategy will focus on dividend growth, capital appreciation and cost efficiency, given we are targeting passive interests alongside established operating partners.

Royalty Flow’s board of directors will include two founders of our controlling stockholder, Royalty Exchange, Inc. (“Royalty Exchange”), consisting of Matthew Smith, who is the Chief Executive Officer of Royalty Exchange and our Executive Chairman, and Gary Young, who is the Chief of Staff of Royalty Exchange. Finding, valuing, acquiring and administering media-based intellectual property (“IP”) royalties has been the specialty of Royalty Exchange. Upon the closing of this offering, Royalty Flow and Royalty Exchange will enter into a shared services agreement, but Royalty Exchange will not be entitled to any investment management or performance fees from Royalty Flow. Instead, Royalty Exchange’s primary interest in Royalty Flow will be as a significant stockholder, and Royalty Exchange will continue to own at least 20% of Royalty Flow following the closing of this offering.

1

Royalty Flow will offer one of the most direct exposures to a media royalty currently available on a public exchange. We are engaged in a continual review of opportunities to acquire existing royalties. We currently, and generally at any time, have acquisition opportunities in various stages of active review. At this time, we cannot provide assurance that any of the possible transactions under review by us will be concluded successfully. Acquired Interests We intend our first acquisition of a Royalty Interest to be an interest in a catalog of work from 1999 through 2013 by Eminem, an iconic hip-hop artist who was the top-selling recording artist of the 2000’s in the U.S. and one of the best-selling music artists of all time. Following are some of his career highlights:
	·	Per Nielsen SoundScan, which tabulates the Billboard magazine’s charts, Eminem sold more than 32.2 million albums in the decade of 2000-2010, edging out the Beatles to claim the title of top-selling artist in that decade;
	·	Eminem has won 15 Grammy Awards, including six for Best Rap Album, and been nominated 43 times;
	·	In 2003, Eminem won the Academy Award for Best Original Song for his single “Lose Yourself”;
	·	Rolling Stone ranked him 83rd on its list of 100 Greatest Artists of All Time, calling him the King of Hip Hop;
	·	In 2010, VH-1 ranked him 79th on the VH-1 100 Greatest Artists of All-Time;
	·	Per Buzzangle Music 2017 U.S. Mid-Year Report, Eminem is the 12th most streamed artist in the world , and, he hasn’t released an album in four years;
	·	Ten #1 albums on Billboard Top 200, and five #1 singles on the Billboard Hot 100 in the U.S.;
	·	During the 23-year period that Nielsen SoundScan has collected data, Eminem is the sixth best-selling album artist;
	·	In 2014, Eminem became the second best-selling male artist in the U.S. of the Nielsen Sound Scan era;
	·	Often referred to as the best-selling hip-hop artist of all time, in 2016, Billboard named Eminem’s work from 2000-2013 the #1 highest-selling Rap album series;
	·	Eminem has sold over 172 million records worldwide; and
	·	Long-term relevance: This catalog has four albums currently charting on the Billboard 200. Eminem’s “ Curtain Call ” was named the longest-charting hip-hop album of all time.
Following are some financial highlights from Eminem’s royalty catalog that we plan to acquire an interest in :
	·	T he amount of royalties earned and paid has varied significantly due to, among other things, the timing of new album releases and out-of-period recoveries related to royalty audits and settlements. For example, total royalties earned increased approximately 190% from calendar year 2013 to calendar year 2014 following the release of an album by Eminem in late 2013, and then dropped approximately 66% from calendar year 2014 to calendar year 2015 and grew 43% from calendar year 2015 to calendar year 2016 . Total royalties earned from calendar year 2010 to calendar year 2016 decreased by an average of 5% per year.
	·	The recurring streaming royalties earned by this catalog grew by approximately 76% for calendar year 2016 over calendar year 2015. Streaming represented 46% of total royalties earned for calendar year 2016.
	·	The top 20 revenue-producing songs only represent approximately 27% of the total catalog earnings. Unlike many assets, this catalog doesn’t rely on one massive hit to make money.

2

Our controlling stockholder is party to an option agreement to acquire either a 15 percent or 25 percent partial passive royalty interest in the catalog of work by Eminem from 1999 through 2013 (the “Acquired Interests”), which agreement our controlling stockholder intends to assign to us in connection with this offering. The Acquired Interests are derived from Universal Music Group’s future promotion and exploitation of Eminem’s entire catalog of masters and videos from 1999 through 2013, including side projects, compilations, greatest hits, and brief appearances, known as step-outs (collectively, the “Eminem Catalog”). The Universal Music Group (“Universal Music”) is one of the world’s largest music companies and owns and operates a broad array of businesses engaged in recorded music, music publishing, merchandising, and audiovisual content in more than 60 countries.

We will receive royalty payments based on: (i) the number of physical and digital copies sold; (ii) ringtones or other uses, such as downloads of music clips; (iii) the frequency with which the recordings are streamed on services such as Spotify and YouTube; (iv) advertising revenue related to free streaming services; and (v) the number of times songs are synchronized with movies, television shows, advertisements, or video games. These royalties are paid in arrears and accounted for by Universal Music, on a semi-annual basis. From 1999 through calendar year 2016, the Eminem Catalog earned more than $82 million in royalties.

The Acquired Interests are completely segregated and un-affected by any costs, expenses, recoupments, claims, advances, etc. that Eminem may be subject to on a forward going basis. The Acquired Interests do not extend to any monies generated from any live performances, such as concerts, or merchandise sales.

Option Agreement

On April 27, 2017, Royalty Exchange, our controlling stockholder, and F.B.T. Productions LLC (“FBT”) and Em2M LLC (“Em2M” and, together with FBT, the “Counterparties”), entered into an Option Agreement (the “Option Agreement”) granting Royalty Exchange or its assigns the right to purchase either a 15 percent (the “15% Option”) or 25 percent (the “25% Option”) passive interest in the Eminem Catalog (the “Option”). In connection with the execution of the Option Agreement, Royalty Exchange made a payment of $50,000 to FBT and Em2M (the “Holding Fee”). The Option Agreement will be assigned to us by Royalty Exchange in accordance with the Option Agreement prior to the consummation of the offering.

The Option is exercisable in our sole and absolute discretion on or before November 15, 2017. At the time we exercise the Option, we must indicate whether we are exercising (i) the 15% Option for a total purchase price of $9,750,000 or (ii) the 25% Option for a total purchase price of $18,750,000. In either case the purchase price will be reduced by the amount of the Holding Fee. From the date of the Option Agreement, FBT and Em2M have agreed to certain covenants related to the Acquired Interests, including notice and information covenants and a prohibition on actions that may materially affect our rights under the Option or the Acquired Interests.

While the Option Agreement provides that we or another assign of Royalty Exchange have until November 15, 2017 to exercise the Option (unless extended by the Counterparties), the Option Agreement provides that we may raise capital from sources other than a public offering in order to fund the purchase price for the Option before the expiration date. In the event we do raise capital other than in a public offering to fund the purchase price, the Option Agreement provides that we must conduct an initial public offering prior to April 27, 2018. If we fail to conduct an initial public offering by April 27, 2018, we would be required to pay $100,000 to the Counterparties, and the Counterparties would have the option, for the six months following April 27, 2018, to repurchase the Acquired Interests at the purchase price less the Holding Fee.

Payment History

The Eminem Catalog earned more than $82 million in royalties for the Counterparties from 1999 through calendar year 2016. The Acquired Interests will represent an interest in either 15% or 25% of such payments, which are paid in arrears, commencing upon the closing of the Option, from the Eminem Catalog to the Counterparties, including regular royalty payments and payments resulting from audits and litigation settlements.

Historical results are not indicative of future performance. The Company is not entitled to any of the historical payments.

3

Assuming the Company exercises the alternative to acquire a 15% ownership interest, the following represents the pro rata share of historical revenue and other recoveries associated with the Eminem Catalog:
Revenue and Recoveries for 15% Ownership Interest
Cash Received During Six Months Ended	Universal Music Group Reporting Period for Six Months Ended	Total
March 31, 2011	June 30, 2010	$	511,184
March 31, 2011	December 31, 2010		604,860
September 30, 2011	June 30, 2011		354,091
March 31, 2012	December 31, 2011		235,316
September 30, 2012	June 30, 2012		322,432
September 30, 2013	December 31, 2012		1,945,457
September 30, 2013	June 30, 2013		234,107
March 31, 2014	December 31, 2013		305,100
September 30, 2014	June 30, 2014		1,216,556
March 31, 2015	December 31, 2014		347,614
September 30, 2015	June 30, 2015		287,295
March 31, 2016	December 31, 2015		244,665
September 30, 2016	June 30, 2016		469,418
March 31, 2017	December 31, 2016		291,361
September 30, 2017(1)	June 30, 2017		403,574
__________
(1) Cash was received on October 3, 2017.

Assuming the Company exercises the alternative to acquire a 25% ownership interest, the following represents the pro rata share of historical revenue and other recoveries associated with the Eminem Catalog:
Revenue and Recoveries for 25% Ownership Interest
Cash Received During Six Months Ended	Universal Music Group Reporting Period for Six Months Ended	Total
March 31, 2011	June 30, 2010	$	851,973
March 31, 2011	December 31, 2010		1,008,101
September 30, 2011	June 30, 2011		590,151
March 31, 2012	December 31, 2011		392,193
September 30, 2012	June 30, 2012		537,387
September 30, 2013	December 31, 2012		3,242,428
September 30, 2013	June 30, 2013		390,179
March 31, 2014	December 31, 2013		508,501
September 30, 2014	June 30, 2014		2,027,593
March 31, 2015	December 31, 2014		579,357
September 30, 2015	June 30, 2015		478,826
March 31, 2016	December 31, 2015		407,775
September 30, 2016	June 30, 2016		782,364
March 31, 2017	December 31, 2016		485,602
September 30, 2017(1)	June 30, 2017		672,623
__________
(1) Cash was received on October 3, 2017.

4

Industry Overview Music is one of the primary mediums for consumer entertainment in the world. From 1990 to 1999, according to Recording Industry Association of America, the music business in the U.S. grew by more than 7% per year. This growth was driven by demand for music and the shift from vinyl to compact discs. The industry continued to sell millions of albums of new work and boosted revenue by re-issuing classic works in the then new compact disc format.  However, Napster and other forms of digital piracy had a substantial negative impact on the music industry. From 1999 to 2015, the music industry declined substantially until the trend reversed in 2016. For the first time in fifteen years, the music industry grew. And that growth was driven, in large part, by new digital distribution models — including digital streaming.  According to the International Federation of the Phonographic Industry (“IFPI”), in 2016, the global music industry grew by 5.9%. Digital revenue accounted for 50% of the global music revenue and digital revenue grew by 17.7%. Streaming revenue grew 60.4% which made up for the 7.6% decline in physical revenue and 20.5% decline in download revenue. Music streaming is booming and we believe is leading the way towards an anticipated music industry resurgence. In 2016, streaming generated approximately $3.9 billion according to the Recording Industry Association of America. The industry analysts have projected that streaming revenue will reach upwards of $28 billion by 2030. IFPI reported 112 million paying subscribers to music streaming services at the end of 2016, representing approximately 3% of the four billion smartphones worldwide. Beyond the portable device usage, Amazon, Google and Apple are introducing home-based streaming devices. Technology is providing data and transparency previously not available in the music business. Collecting, aggregating and analyzing data has become much easier in the digital world. More accurate, transparent data should result in more accurate, transparent royalty reporting and collection. Additionally, advertising supported music revenue is expected to grow along with the digital revenue. The improvement in advertising technology is expected to increase the effectiveness of targeted advertising, increasing demand for advertising space related to free streaming services. We believe that the music industry is well positioned to grow based on broad consumer adoption of legitimate digital distribution channels. Our Strategy The passive royalty interest in the Eminem Catalog is emblematic of our intended approach to acquiring royalty interests: We look for great assets, operated by world-class management teams, referred to as operators, and acquire a passive interest so that we can participate in the royalties generated. To date, Royalty Exchange has entered into one option agreement to acquire Royalty Interests, which it intends to assign to us. The key elements of our business model and growth strategy are as follows:
	·	Focus on non-operating royalty interests in high quality intellectual property. We have established our business model based on the premise that acquiring non-operating, passive royalty interests in great intellectual property assets can produce better returns than engaging in the activities of a record label or music publisher. Our acquisition and growth strategy will initially focus on music assets. We will actively analyze and potentially acquire other forms of media-based IP, including but not limited to movies, television and trademarks.
	·	Acquisition of passive interests in assets that have a track record of earning royalties. Instead of pursuing speculative deals with unproven creatives, we will seek to acquire royalty interests that have a history of earnings and the potential to earn for a long time.

5

	·	Partner with world-class management teams. We will seek to acquire passive interests where there is an operator that has a proven track record of promoting, enforcing, and collecting royalty income.
	·	Flexible Acquisition and Financing Approaches. Because we only pursue passive interests in royalty-producing intellectual property, we intend to offer flexible financing terms that work for the catalog owners we will partner with. Traditionally, catalog acquisitions have been “all or nothing” deals. We intend to provide financing to owners of assets that does not require them to sell their entire interest. As we’ve seen with the Acquired Interests, this flexibility will allow us to attract excellent operating partners with great assets.
	·	Royalty Interest Evaluation Criteria. We use a series of quantitative, qualitative, financial, and legal criteria by which we evaluate the potential acquisition of royalty interests. We plan to acquire assets with an income focus, and our target is to acquire assets generating uncorrelated income of 8% to 16% internal rate of return, although there can be no guarantee that we will achieve this target. Among the factors considered are: (1) the asset’s track record of royalty earnings; (2) the type of intellectual property that generates royalties; (3) the experience and skill of the active management team of the asset; (4) our assessment of the longevity and staying power of the underlying intellectual property; and (5) the potential for revenue growth and capital appreciation.
Royalty Exchange, our controlling stockholder, creates financing opportunities for artists, songwriters and rightsholders. The executive team has provided financing options for more than 180 music catalogs. This experience gives the executive team broad and deep experience conducting due diligence and valuing and analyzing music catalog assets. Royalty Flow will use Regulation A+ of the JOBS Act to raise capital to acquire its initial Royalty Interest or Interests. Our goal is to bring Royalty Flow to the Nasdaq Capital Market, but it may be necessary to initially list on the OTC markets and then up-list to Nasdaq. Investors will be able to buy and sell shares in a brokerage account. We believe that our dividend-based model will support liquidity no matter what exchange we’re traded on. Dividend distribution is a key part of our strategy. Royalty Flow intends to return cash to stockholders through a dividend. We intend to pay our first dividend next year and aim to grow this dividend each year as we acquire income-producing royalty assets. Royalty interests are an example of alternative assets available for investment. Alternative investments can be an important part of a broader portfolio. Generally, royalty interests offer low correlation to traditional investments like stocks and bonds. Music consumption doesn’t have a history of changing when interest rates go up or when stock market sentiment turns bearish. They often have the potential to generate income as well. The owners of royalty rights are paid based on streams, downloads, physical album sales, and other usage. In essence, consumption of music drives royalty payments. Risks Associated with Our Business Our ability to implement our business strategy is subject to numerous risks and uncertainties. You should carefully consider all of the information set forth in this offering circular, including information incorporated by reference in this offering circular. See “Risk Factors.” Conflicts of Interest Following the offering, Royalty Exchange, our controlling stockholder, will own capital stock representing a majority of our voting power, and the actions that Royalty Exchange undertakes as our controlling stockholder may differ from or adversely affect the interests of the holders of our common stock. Because Royalty Exchange controls a majority of our voting power, it has the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as to elect our directors, to change our management and to approve any other changes to our operations. Royalty Exchange also has the power to direct us to engage in strategic transactions, with or involving other companies in our industry, including acquisitions, combinations or dispositions, and the acquisition of certain assets that may become available for purchase, and any such transaction could be material. Additionally, Royalty Exchange is in the business of facilitating sales of Royalty Interests and may compete, directly or indirectly, with us. Royalty Exchange may also pursue acquisition opportunities that may be complementary to our business, which could have the effect of making such acquisition opportunities unavailable to us.

6

Corporate History We were incorporated on May 22, 2017 under the laws of the State of Delaware. We are controlled by, and will continue to be controlled following this offering by, Royalty Exchange. We are located at 1444 Wazee Street, Suite 350, Denver, CO 80202. Our main phone number is 800-718-2891. Our website is www.royaltyflow.com. Our fiscal year ends on September 30. Implications of Being an Emerging Growth Company As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
	·	a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations;
	·	an exemption from the auditor attestation requirement on the effectiveness of our internal control over financial reporting;
	·	an extended transition period for complying with new or revised accounting standards;
	·	reduced disclosure about the company’s executive compensation arrangements; and
	·	no non-binding advisory votes on executive compensation or golden parachute arrangements.
We may take advantage of these provisions until the end of the fiscal year in which the fifth anniversary of this offering occurs, or such earlier time when we no longer qualify as  an emerging growth company. We would cease to be an emerging growth company on the earlier of (1) the last day of the fiscal year (a) in which we have more than $1,070,000,000 in annual revenue or (b) in which we have more than $700,000,000 in market value of our capital stock held by non-affiliates, or (2) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have irrevocably taken advantage of other reduced reporting requirements in this offering circular, and we may choose to do so in future filings. To the extent we do, the information that we provide stockholders may be different than you might get from other public companies in which you hold equity interests.

7

The Offering
Issuer	Royalty Flow Inc.
Securities offered	A minimum of 1,466,667 and a maximum of 6,666,666 shares of our Class A common stock, par value $0.001 (“common stock”) at an offering price of $ 7.50 per share (the “Offered Shares”).
Number of shares outstanding before the offering	No shares of our Class A common stock 1,666,667 shares of our Class B common stock (1)
Number of shares to be outstanding after the offering	A minimum 1,616,667 and a maximum of 6,816,666 shares of our Class A common stock (in each case including 150,000 shares of our Class A common stock to be issued to management upon the closing of the offering) 1,666,667 shares of our Class B common stock (1)
Price per share	$7.50
Minimum offering amount	1,466,667 shares at $ 7.50 per share, or $11,000,000
Maximum offering amount	6,666,666 shares at $ 7.50 per share, or $50,000,000
Offering type	The offering is being conducted on a best-efforts, “minimum/maximum” basis. Until we sell at least $11,000,000 of shares, no investor funds will be available to the Company.
Voting rights	Each share of our Class A common stock has one vote per share. Each share of our Class B common stock, all of which are owned by Royalty Exchange, has ten votes per share. Following this offering, Royalty Exchange will control approximately 91.2% of the voting power of our outstanding capital stock following the offering, assuming the minimum number of shares are sold, or approximately 71.0% of the voting power assuming the maximum number of shares are sold.
Dividend Policy	We intend to pay a growing and sustainable cash dividend derived from available cash received from the Acquired Interests to the extent permitted by the Delaware General Corporation Law, provided that such dividend is not expected to have a material impact on our liquidity or capital resources and is otherwise approved by our board of directors. Please see “Dividend Policy.”
Proposed listing and symbol	We have applied to list our common stock on the Nasdaq Capital Market under the symbol “RLTY.” Our common stock will not commence trading on the Nasdaq Capital Market until all of the following conditions are met: (i) the offering is completed; and (ii) we have filed a post-qualification amendment to the offering statement of which this offering circular forms a part and a registration statement on Form 8-A (“Form 8-A”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such post-qualification amendment is qualified by the SEC and the Form 8-A has become effective. Pursuant to applicable rules under Regulation A, the Form 8-A will not become effective until the SEC qualifies the post-qualification amendment. We intend to file the post-qualification amendment and request its qualification immediately prior to the termination of the offering in order that the Form 8-A may become effective as soon as practicable. Even if we meet the minimum requirements for listing on the Nasdaq Capital Market, we may wait before terminating the offering and commencing the trading of our common stock on the Nasdaq Capital Market in order to raise additional proceeds. As a result, you may experience a delay between the closing of your purchase of shares of our common stock and the commencement of exchange trading of our common stock on the Nasdaq Capital Market. If we fail to meet the minimum requirements for listing on the Nasdaq Capital Market, we will seek quotation of our common stock on an over-the-counter market operated by OTC Markets Group Inc. and would anticipate quotation on an OTC market to begin following the termination of this offering.
Use of proceeds	We estimate that the net proceeds to us from the offering will be approximately $10,590,000 if only the minimum number of shares are sold and approximately $49,200,000 if the maximum number of shares are sold, in each case after deducting estimated offering expenses payable by us. We intend to use $9,750,000 of the net proceeds to exercise the 15% Option if net proceeds from the offering are less than $25,000,000. If net proceeds from the offering are $25,000,000 or more, we intend instead to use $18,750,000 of the net proceeds to exercise the 25% Option. We intend to use any remaining net proceeds from this offering for general corporate purposes, which may include working capital, general and administrative matters, and the acquisition of additional Royalty Interests. See “Use of Proceeds.”
U.S. federal income tax considerations	For material U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common stock, please see “Material U.S. Federal Income Tax Considerations” herein.
Risk factors	You should read “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our common stock.

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(1) Reflects the amendment and restatement of our certificate of incorporation and a forward stock split in which we will issue an additional 1,666,567 shares of our Class B common stock to Royalty Exchange before the consummation of the offering.

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RISK FACTORS

Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this offering circular, including the financial statements and the related notes included elsewhere in this offering circular, before deciding whether to invest in our securities. The risks and uncertainties described in this offering circular are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we believe are not material at this time could also materially adversely affect our business, financial condition or results of operations. See also the information contained under the heading “Cautionary Note Regarding Forward-Looking Statements.” If any of the events discussed in the risk factors below or elsewhere in this offering circular occur, it could have a material and adverse impact on our business, results of operations, financial condition and cash flows. If that were to happen, the trading price of the Offered Shares could decline, and you could lose all or part of your investment.

Risks Relating to Our Limited Operating History, Financial Position and Capital Needs

We have a very limited operating history, which may make it difficult for investors to evaluate the success of our business to date and to assess our future viability. Our business model also requires us to make substantial upfront payments to our contract parties in exchange for rights to future payments.

Our operations to date have been limited to organizing and staffing our Company and engaging in the registration process for the offering of the Offered Shares.

Royalty Exchange, our controlling stockholder, intends to assign the Option Agreement to the Company. We intend to enter into additional contracts in the future with other contract parties to purchase other Royalty Interests associated with other music intellectual property and are actively pursuing these contracts, but we have no current commitments to enter into another contract to purchase Royalty Interests. We expect that any contract for the purchase of Royalty Interests that we enter into will require us to make upfront payments in return for the right to future payments based on royalties paid. We will be at risk if for any reason we do not receive those future payments, or if they are less than we would need to be profitable or to offset our expenses. We have no history to demonstrate, and we can make no assurances, that our business model will be successful, or whether any of the Acquired Interests or future Royalty Interests will be profitable. Consequently, it will be difficult for anyone to predict our future success, performance or viability, and more difficult than it would be if we had a longer operating history and/or successful Royalty Interests to judge the viability of our business model. Any such predictions may not be accurate or reliable.

We may not receive the cash amounts that we expect, or any at all, from the Acquired Interests or from any future Royalty Interests and we may never generate sufficient income to become profitable.

Our ability to generate income from the Acquired Interests and future Royalty Interests and become profitable will depend, among other things, upon our ability to successfully evaluate, target and access Royalty Interests that have the potential to generate significant royalty payments, acquire an interest in the Royalty Interest for an appropriate purchase price, and enforce the contracts for Royalty Interests and collect our payments with respect to these Royalty Interests and Acquired Interests. Even if we are able to successfully do these and other things that are within our control, there are numerous other factors, some of which are not within our control, that could impact our ability to generate income or cash flows or be profitable, including those discussed in these risk factors.

In addition, there are numerous risks and uncertainties associated with the Royalty Interests in which we invest, including that the success of the Acquired Interests and future Royalty Interests will depend upon the contributions, success and longevity of a recording artist. We are unable to predict the timing or amount of future cash receipts, or when or whether we will be able to achieve or maintain profitability. Even if we are able to acquire and manage the Acquired Interests and Royalty Interests as described above, we anticipate incurring significant costs associated with our efforts to achieve or maintain profitability. Further, we may not receive the cash amounts that we expect, or any at all, from any of our Acquired Interests or future Royalty Interests.

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Our business strategy depends in large part on our ability to build a robust platform of Royalty Interests by entering into additional contracts to purchase Royalty Interests. We may not be able to enter into additional contracts in the future, or enter into the number of additional contracts that we anticipate would be necessary to support our business model.

Our strategy of acquiring, holding and managing royalty interests depends in large part on our ability to build a robust platform of royalty interests and benefit from economies of scale. Accordingly, we are actively pursuing additional contracts to purchase Royalty Interests that we intend to enter into in the future. However, we have no current commitments to enter into another contract to purchase Royalty Interests.

We do not know if future potential contract parties will agree to enter into additional contracts to sell Royalty Interests and we may not be able to attract sufficient additional contracts. For example, future potential contract parties may not view the contract to sell Royalty Interests as an attractive value proposition to them due to any number of factors, including differing expectations of an appropriate purchase price, which may be based on any number of factors, such as:

· we and future potential contract parties may not agree on the assumptions and estimates used to determine the estimated future earnings of potential Royalty Interests;

· potential contract parties may not want to incur legal, tax and other burdens associated with entering into a contract, including, for example, ongoing information and disclosure requirements;

· the potential impact of possible disclosure of the terms of material contracts, and the impact that these disclosure obligations may have on the ability of a contract party to enter into additional deals;

· any negative perception by the media, fans or others of our business model;

· any negative perception by the media, fans or others of any of our current contract parties or other future contract parties, as a result of their decision to sell Royalty Interests to us, or otherwise; and

· the performance of our Acquired Interests or other contracts to purchase future Royalty Interests that we may enter into in the future, and/or the performance of the Offered Shares, which may be worse than anticipated.

As a result, we may be forced to revise our business model to attract additional Royalty Interests. Even if potential contract parties are willing to agree to enter into additional contracts to purchase Royalty Interests with us, the record companies or others may take actions that could restrict our ability or make it more costly for us to enter into future contracts for Royalty Interests. And even if we are successful in entering into additional contracts with additional contract parties, we may not be successful in conducting offerings to finance the purchase price under these contracts.

We will need to obtain additional funding to acquire additional Royalty Interests. If we fail to obtain the necessary financing, or fail to become profitable or are unable to sustain profitability on a continuing basis, then we will need to significantly delay, scale back or discontinue the anticipated levels of our acquisitions of Royalty Interests and operations.

We are offering the Offered Shares in order to acquire the Acquired Interests under the Option Agreement, and any contracts that we enter into in the future with other contract parties will likely also require us to make substantial upfront payments to purchase Royalty Interests. We do not, and we do not expect to have, the necessary funds that we would need to make any of these upfront payments under future contracts in the foreseeable future. Therefore, we expect that our future contracts for the foreseeable future will be contingent upon obtaining financing to fund the acquisition of the Royalty Interests, and we intend to finance these acquisitions through the issuance of additional common stock or some other method of financing. Such financing may be expensive and time consuming to obtain, and we may not have investor interest that would enable us to obtain such financing.

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In addition, our operations (excluding upfront payments under future contracts to purchase Royalty Interests), consisting primarily of the costs of this offering, have consumed substantial amounts of cash since inception, and we expect that our operations will continue to consume substantial amounts of cash as we aggressively seek Royalty Interests and maintain our internal marketing, compliance and other administrative functions. To date, these operations have been financed by contributions from Royalty Exchange. We are dependent on the continued support of Royalty Exchange; at this time Royalty Exchange intends to continue to fund operations for at least the next 12 months. Royalty Exchange has no obligation to continue to finance our operations. Although we believe future funding from Royalty Exchange will be sufficient to fund our projected operating expenses for the next 12 months, as noted above, we will require additional capital to finance the acquisition of future Royalty Interests, and we may also need to raise additional funds sooner if our operating and other expenses are higher than we expect or our cash received from the Acquired Interests is lower than we expect.

Our future funding requirements, both near and long‑term, will depend on many factors, including, but not limited to:

· the rate at which we begin to realize income under the Acquired Interest, as well as under any additional Royalty Interests that we may acquire in the future;

· the cost of our efforts to evaluate, target and access the Royalty Interests that meet our criteria, as well as the cost and expense of negotiating any new contracts to purchase Royalty Interests;

· our ability to enter into additional contracts to purchase Royalty Interests, and if so the amount of the upfront purchase price that we would have to pay to acquire rights under any such contracts;

· the number and characteristics of any new contracts to purchase Royalty Interests that we may enter into;

· the cost and expenses of any equity or debt financings that would be necessary to pay the purchase price under any additional contracts to purchase Royalty Interests, and any regulatory or other delays in any of these offering processes;

· the effect of competing technological and market developments; and

· the cost of establishing and building our sales, marketing and compliance capabilities.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may not be able to continue to acquire additional future Royalty Interests and we may have to significantly delay, scale back or discontinue our operations. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders or fixed payment obligations that could reduce our ability to pay dividends or otherwise fund our other operations. Furthermore, these securities may have rights senior to our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license Royalty Interests without consent and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects. In addition, if a lack of available capital means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

Risks Relating to Our Business

The Company will initially have only a single asset.

The Company has no history of operations and will initially be reliant on a single asset for all its revenues, namely, partial passive royalty interest in the catalog of work by Eminem from 1999 through 2013. The Company will be exposed to greater risk due to the lack of diversification until it acquires additional Royalty Interests, which may not occur in the near term, if ever.

The Company has not yet exercised the Option or closed on the Acquired Interest.

The Company does not currently own the Acquired Interest and will not own the Acquired Interest until after the closing of this offering. The Option Agreement provides that, upon exercise of the 15% Option or the 25% Option, the Company will provide a purchase agreement to the Counterparties under the Option Agreement, and that their consent to such agreement shall not be unreasonably withheld or delayed. The negotiation of final documentation carries risks. There is no guarantee that an agreement with the Counterparties will be reached in a timely manner or at all, or that the agreement will be on terms that are advantageous to the Company.

We are an early stage company and have not yet generated any revenue

We have had no net income, a short operating history, and no revenue generated since our inception. There is no assurance that we will ever be profitable or generate sufficient revenue to pay dividends to the holders of our common stock. Even if this offering is successful, we will need to raise significant additional capital to purchase additional Royalty Interests. If planned operating levels are changed, higher operating costs are encountered, lower royalty revenue is received, more time is needed to implement the plan, or less funding is received from any potential, yet-identified potential funding sources, more funds than currently anticipated may be required. If additional capital is not available as and when required or is not available on acceptable terms, if at all, we may be forced to modify or abandon our business plan.

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Our principal source of cash flows for the foreseeable future will be derived from the Acquired Interests.

After the offering, our principal source of cash flows will be derived from the Acquired Interests for the foreseeable future. There are a number of risks relating to the Acquired Interests, which are discussed elsewhere in this offering circular. If any of these risks occur it could have a material and adverse impact on our business, financial condition and results of operations.

We have limited experience acquiring, holding and managing Acquired Interests and we have very limited historical performance data about Royalty Interests.

Royalty Exchange entered into the Option Agreement in April 2017. Due to our limited experience with Royalty Interests, we have limited historical performance data regarding the likelihood of long‑term performance of the Acquired Interests or other Royalty Interests. As a result, the Royalty Interests that we acquire may generate lower royalty revenue than we anticipate. We may therefore pay a purchase price for Royalty Interests that is too high. As we gain more experience with Royalty Interests, we may change how we estimate the value of future Royalty Interests, and investors who invest early may not benefit from the experience that we gain from acquiring early Royalty Interests.

Cash received from Royalty Interests will depend upon the continued popularity of the related recording artist, and we do not have any rights to require the recording artist to take any actions to attract or maintain or otherwise generate royalty payments.

Some or all of the payments that the Acquired Interests and future Royalty Interests will generate is contingent on continued popularity of the related recording artist and is not guaranteed. Neither the recording artist nor any other counterparty has any obligation to take any actions to produce new music or to continue to promote such recording artist’s portfolio underlying any Royalty Interests. In addition, even if the recording artist continues to produce new music and promote his or her portfolio, there is no guarantee that such activities will increase the value of the Royalty Interests. We cannot ensure that any of the recording artists associated with the Acquired Interests or other Royalty Interests we acquire in the future will continue to be popular.

The valuation of the Acquired Interests and expected royalty payments requires us to make material assumptions that may ultimately prove to be incorrect. In such an event, we could suffer significant losses that could materially and adversely affect our results of operations.

Our principal assets are expected initially to consist of the Acquired Interests. Those assets are considered “Level 3” assets under Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, as there is currently no active market where we are able to observe quoted prices for identical assets. As a result, our valuation of those assets incorporates significant inputs that are not observable. Fair value of future expected payments is determined by measuring expected returns on the Royalty Interests and anticipated length of the popularity of the relevant artist based on comparable individuals in the same industry. However, valuation of the expected royalty payments is highly speculative due to the heavily subjective nature of identifying comparable recording artists and is inherently difficult due to the uniqueness of each recording artist and the limited number of available comparable recording artists.

The fair value measurement of Level 3 assets is inherently uncertain and creates additional volatility in our financial statements that are not necessarily related to the performance of the underlying assets. To determine the amount of our purchase price and the fair values of the Acquired Interests with the Counterparties, we applied discount rates subjectively determined in our analysis based on assumptions that have not been reviewed by any independent financial advisor. If we determine in the future that the discount rates we used were too low, then our estimate of the fair value of the Acquired Interests may be too high. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of fair value measurements. 

An economic downturn and adverse economic conditions may harm the potential royalty payments under the Acquired Interests.

Economic downturns and adverse economic conditions may negatively affect the payments from the Acquired Interests and future Royalty Interests. For example, an economic downturn could result in a decrease of disposable income that consumers have available to purchase music or to pay for music streaming services. In addition, an economic downturn could decrease potential royalty payments from third parties that use the underlying music portfolios in other creative endeavors, such as movies and advertising.

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Changes in government policy, legislation or regulatory or judicial interpretations could hinder or prevent us from conducting our business operations, including by hindering or preventing our ability to enforce the Acquired Interests or conduct offerings of securities.

Changes in government policy, legislation or regulatory or judicial interpretations could hinder or prevent us from conducting our business operations, including by hindering or preventing us from enforcing the Acquired Interests or conducting offerings of securities. The Acquired Interests are intended to be effective in perpetuity and may be terminated only as specified in the underlying agreement. In some jurisdictions, perpetual contracts have been found to be against public policy and therefore terminable in some circumstances. Our contracts to purchase the Acquired Interests are governed by Michigan law, and Michigan legal decisions do not disfavor express contractual terms for indefinite duration. However, we can provide no assurances that a Michigan court may not rule differently in the future, that a court of another jurisdiction might attempt to apply a different choice of law to our Acquired Interests or future Royalty Interests, or that a court may determine that the contractual terms for indefinite duration are not sufficiently clear or tailored to the business realities of the Acquired Interests or future Royalty Interests. If this occurs then we may become involved in expensive and time-consuming litigation, or may be unable in certain cases to enforce the Acquired Interests or future Royalty Interests. Any other changes in or interpretations of current laws and regulations could also require us to increase our compliance expenditures, inhibit our ability to purchase new Royalty Interests or cause us to significantly alter or to discontinue offerings of our common stock. Altering the terms of Royalty Interests to comply with changes in or interpretations of applicable laws and regulations could require significant legal expenditures, increase the cost of acquiring, holding and managing Royalty Interests or make offerings of our common stock less attractive to investors. In addition, our failure to comply with applicable laws and regulations could lead to significant penalties, fines or other sanctions. If we are unable to effectively respond to any such changes or comply with existing and future laws and regulations, our competitive position, results of operations, financial condition and cash flows could be materially adversely impacted.

We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner, or at all.

Our success depends largely upon the continued services of our executive officers and other key personnel, particularly Jeff Schneider, Matthew Smith and Gary Young. Our executive officers or key employees could terminate their employment with Royalty Exchange or us at any time without penalty. In addition, we do not maintain key person life insurance policies on any of our employees. The loss of one or more of these executive officers or key employees could seriously harm our business and may prevent us from implementing our business plan in a timely manner, or at all.

It is difficult to estimate with precision the projected future royalty payments under any Royalty Interests because such estimation is necessarily based on future events that may or may not occur and that could change based on a number of factors that are hard to control. As a result, it is difficult to predict an accurate return on investment or rate of return for an investment in our common stock.

Because the length of a recording artist’s popularity is uncertain, we must estimate the popularity of a recording artist in the future. Due to the inherent uncertainty in predicting the future, it is difficult to estimate with precision the projected future royalty payments associated with the Acquired Interests or any future Royalty Interests. These estimations are based on future events that may or may not occur, such as the continued growth of streaming revenue. Additionally, future events change based on a number of factors that are difficult or impossible to control. As a result, it is difficult to predict an accurate return on investment or rate of return of an investment in any Royalty Interest, and our competitive position, results of operations, financial condition and cash flows could be materially adversely impacted if we receive less revenue from Royalty Interests than estimated.

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Our business may be adversely affected by competitive market conditions and we may not be able to execute our business strategy.

We expect to increase revenue and cash flow over time through a business strategy which requires us, among other things, to purchase additional Royalty Interests. We face competition in the acquisition of Royalty Interests from royalty holders and may not be successful in acquiring Royalty Interests. Even if we are successful in acquiring additional Royalty Interests, competition may compel us to purchase such Royalty Interests at prices that are higher than would otherwise be the case.

Expanding on our portfolio of Royalty Interests will require sustained management focus, organization and coordination over significant periods of time. This will also require success in building relationships with third parties and in anticipating and keeping up with technological developments and consumer preferences. The results of our strategy and the success of our implementation of this strategy will not be known for some time in the future. If we are unable to implement our strategy successfully or properly react to changes in market conditions, our financial condition, results of operations and cash flows could be adversely affected.

Future acquisitions of Royalty Interests, if any, may be sporadic and require considerable time and expense.

The identification, negotiation and closing of the acquisition of future Royalty Interests will require significant time and effort, and future acquisitions, if any, may be sporadic. As a result, the anticipated benefit to our business and revenue from additional Royalty Interests may be slow to be realized, if ever. We may also incur significant expense pursuing opportunities that never result in the acquisition of additional Royalty Interests, and our financial condition, results of operations and cash flows could be adversely affected. There can be no assurance that we will be successful in acquiring additional Royalty Interests.

Payments under Royalty Interests may be reduced if the recorded music industry fails to grow or streaming revenue fails to grow at a sufficient rate to offset download and physical sales declines.

In the last several years, recorded music sales have been mainly flat with some slight growth following a long period of decline. Legal digital music has rapidly grown since 2003, and revenue from music downloads and streaming services has emerged, with streaming revenue in particular growing into an increasingly important portion of overall revenue in the recorded music business. According to the International Federation of the Phonographic Industry (“IFPI”), digital downloads accounted for 45% of global digital recorded music revenue in 2015. Streaming revenue, which includes revenue from ad-supported and subscription services, accounted for 43% of digital revenue in 2015, up 10 percentage points year-over-year. Although revenue from digital downloads fell by 10.5% in 2015, the decline was offset by an increase in streaming revenue, helping digital revenue grow by 10.2%.

Streaming models comprise a range of margins. These trends are expected to continue to impact the industry for the foreseeable future. There can be no assurance that this growth pattern will persist or that digital revenue will grow at a rate sufficient to offset declines in physical sales, or that changes in streaming models will not negatively impact payments under Royalty Interests. A declining recorded music industry is likely to lead to reduced levels of revenue and operating income generated by the recorded music business. There are also a variety of factors that could cause the prices in the recorded music industry to be reduced. They are, among others, price competition from the sale of motion pictures and videogames in physical and digital formats, the negotiating leverage of mass merchandisers, big-box retailers and distributors of digital music, the increased costs of doing business with mass merchandisers and big-box retailers as a result of complying with operating procedures that are unique to their needs and any associated changes.

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Changes in technology may affect our ability to receive payments from Royalty Interests.

The recorded music business is dependent in part on technological developments, including access to and selection and viability of new technologies, and is subject to potential pressure from competitors as a result of their technological developments. For example, the recorded music business may be further adversely affected by technological developments that facilitate the piracy of music, such as Internet peer-to-peer filesharing activity, by an inability to enforce intellectual property rights in digital environments, and by a failure to develop successful business models applicable to a digital environment. The recorded music business also faces competition from other forms of entertainment and leisure activities, such as cable and satellite television, motion pictures, and videogames, whether in physical or digital formats. The new digital business, including the impact of ad-supported music services, some of which may be able to avail themselves of “safe harbor” defenses against copyright infringement actions under copyright laws, may also limit the recorded music industry’s ability to receive payments from Royalty Interests. Due to such “safe harbor” defenses, revenue from ad-supported music services may not fully reflect increases in consumption of recorded music. In addition, the recorded music industry is currently dependent on a small number of leading digital music services, which allows such services to significantly influence the prices that can be charged in connection with the distribution of digital music. It is possible that the share of music sales by a small number of leading mass-market retailers, as well as online retailers and digital music services, will continue to grow, which could further increase their negotiating leverage and put pressure on prices, ultimately decreasing the payments we receive from Royalty Interests.

Digital piracy may lead to decreased sales in the recorded music industry and affect our ability to receive payments from Royalty Interests.

The combined effect of the decreasing cost of electronic and computer equipment and related technology such as the conversion of music into digital formats have made it easier for consumers to obtain and create unauthorized copies of music recordings in the form of, for example, MP3 files. For example, estimates are that 20% of fixed-line internet users worldwide regularly access services offering copyright infringing music through platforms such as Tumblr, Twitter and Bit Torrent according to IFPI’s 2015 Digital Music Report. In 2014, the estimated illegal downloads from Bit Torrent alone was estimated at 4 billion. Separately, data provided by comScore and Nielsen indicate that 20% of Internet users globally still access unauthorized digital sites or services on desktop-based devices on a regular basis. In addition, while growth of music-enabled mobile consumers offers new opportunities for growth in the music industry, it also opens the market up to risks from behaviors such as “sideloading” and mobile app-based downloading of unauthorized content. As the business shifts to streaming music or access models, piracy in these models is increasing. For example, the practice of “stream-ripping,” where websites or software programs enable end-users to obtain an unauthorized copy of the audio file associated with a music video, is a growing practice among young people and in parts of the world with high mobile data costs. Research conducted by Ipsos, a recognized third-party market research firm, in conjunction with IFPI, reflects that 30% of consumers across 13 key countries engaged in stream-ripping activity in 2016, with incidence rising to 49% among 16 – 24 year-olds. The impact of digital piracy on legitimate music sales and subscriptions is hard to quantify but we believe that illegal filesharing and other forms of unauthorized activity has a substantial negative impact on music sales and on the royalty payments that we may receive. The music industry is working to control this problem in a variety of ways including by litigation, by lobbying governments for new, stronger copyright protection laws and more stringent enforcement of current laws, through graduated response programs achieved through cooperation with Internet service providers and legislation being advanced or considered in many countries, through technological measures and by enabling legitimate new media business models. However, we do not know whether such measures will be effective, and if such measures are not effective, our royalty payments may decrease. 

Organized industrial piracy may lead to decreased sales in the recorded music industry and affect our ability to receive payments from Royalty Interests.

The global organized commercial pirate trade is a significant threat to content industries, including the music sector. A 2015 study by Frontier Economics estimates that digitally pirated music, movies and software was valued $213 billion, and IFPI’s 2015 Digital Music Report cited research conducted by MediaLink on behalf of the Digital Citizens Alliance that placed advertising revenue generated by 596 piracy sites at $227 million. Unauthorized copies and piracy have contributed to the decrease in the volume of legitimate sales and may have an adverse impact on our ability to receive royalty payments.

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The involvement of the portfolio underlying Royalty Interests in intellectual property litigation could adversely affect our business.

Our ability to receive payments from Royalty Interests is highly dependent upon the intellectual property rights of our counterparties. We do not control the intellectual property underlying Royalty Interests, and litigation to either defend a claim that the portfolio underlying Royalty Interests infringes the intellectual property rights of a third party, or that a third party is infringing the intellectual property rights underlying the Royalty Interests, could decrease the potential sales of the portfolio and otherwise adversely affect the Acquired Interests or future Royalty Interests.

We face a potential loss of royalty payments to the extent that recording artists have a right to recapture rights in their recordings under the U.S. Copyright Act.

The U.S. Copyright Act provides authors (or their heirs) a right to terminate U.S. licenses or assignments of rights in their copyrighted works in certain circumstances. This right does not apply to works that are “works made for hire.” Since the effective date of U.S. federal copyright protection for sound recordings (February 15, 1972), many agreements with recording artists provide that such recording artists render services under a work-made-for-hire relationship. A termination right exists under the U.S. Copyright Act for U.S. rights in musical compositions that are not “works made for hire.” If any of the commercially available sound recordings underlying Royalty Interests that we may acquire were determined not to be “works made for hire,” then the recording artists (or their heirs) could have the right to terminate the U.S. federal copyright rights, generally during a five-year period starting at the end of 35 years from the date of release of a recording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording, generally during a five-year period starting at the end of 56 years from the date of copyright). A termination of U.S. federal copyright rights could have an adverse effect on our ability to receive royalty payments under Royalty Interests that we may acquire.

We have not conducted an evaluation of the effectiveness of our internal control over financial reporting. If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we will be required to maintain internal control over financial reporting for the year ending September 30, 2018 and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the fiscal year ending September 30, 2018, provide a management report on the internal control over financial reporting, which must be attested to by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by The Jumpstart Our Businesses Act of 2012 (“JOBS Act”), or smaller reporting companies. As we have not conducted an evaluation of the effectiveness of our internal control over financial reporting, we may have undiscovered material weaknesses. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

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We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of March 31, (ii) the end of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) five years from the date of this offering circular.

Risks Relating to Our Contract Parties

Neither the recording artist nor the Counterparties owe any fiduciary duties to us or our stockholders, and they have no obligation to enhance the value of the Acquired Interests or disclose information to our stockholders.

Events in the lives of the recording artist or Counterparties, including in their personal lives or business relationships, could have an impact on the Acquired Interests. The recording artist has no obligation to disclose any such events. Although the Counterparties will be contractually obligated to disclose all material facts to us, we cannot guarantee that the Counterparties will comply with such disclosure requirements or that we can independently verify or uncover material events. In addition, the recording artist and the Counterparties have no obligation to enhance the value of the Acquired Interests. For example, the recording artist may determine to retire which may have the effect of decreasing future royalty payments on the Acquired Interests. Furthermore, neither the recording artist nor the Counterparties owe any fiduciary duties to us or our stockholders. Our stockholders will have no recourse directly against the recording artist or the Counterparties, either under the agreement to purchase the Acquired Interests or under state or federal securities laws.

We will own passive interests in the Acquired Interests, and it will be difficult or impossible for us to ensure the properties are operated in our best interest. We will not have the ability to direct the operations of the assets we have a royalty interest in. 

All of our future revenue will be derived from royalty interests on assets operated or managed by third parties, including the Counterparties. We will have limited or no authority regarding the promotion, exploitation, or enforcement of the underlying intellectual property. Our strategy of having others operate or manage portfolios in which we retain a royalty interest puts us generally at risk to the decisions of others regarding operating decisions. Although we will attempt to secure contractual rights that will permit us to protect our interests to a degree, there can be no assurance that such rights will always be available or sufficient.

The Counterparties may refuse or fail to make payments to us under the Acquired Interests.

Our cash flows depend on Counterparties making royalty payments to us. A Counterparty may dispute amounts to which we believe we are entitled, or may be unwilling or unable to make payments to which we are entitled, including for reasons discussed elsewhere in these risk factors. In either event, we may become involved in a dispute with the Counterparties regarding the payment of such amounts, including possible litigation. Disputes of this nature could harm the relationship between us and the Counterparties, and could be costly and time-consuming for us to pursue. Failure of the Counterparties to make royalty payments to us for any reason would adversely affect our business and in particular the value of our common stock.

In addition, if a Counterparty who may be obligated to make payments to us were to become the subject of a proceeding under the United States Bankruptcy Code or a similar proceeding or arrangement under another state, federal or foreign law, our rights and interests under the Acquired Interests or otherwise may be prejudiced or impaired, perhaps significantly so. In such circumstances, we may be precluded, stayed or otherwise limited in enforcing some or all of our rights under the Acquired Interests or otherwise and realizing the economic and other benefits contemplated therein.

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Royalty payments may decrease due to factors outside our control, including operational decisions and other risks faced by the Counterparties.

Our ability to receive royalty payments from the Acquired Interests depends in part on the operational success of the Counterparties. We are not required to pay any costs associated with the ongoing collection, enforcement, and promotion of the underlying Eminem Catalog. However, actions taken by the Counterparties may have the result of decreasing the royalty payments under the Acquired Interests. Our financial results are indirectly subject to hazards and risks normally associated with the continued success of music intellectual property. For example, the Counterparties may determine to pull certain music from certain digital distributions in an attempt to bargain for high royalty rates. If this occurs and higher royalty rates are not received, the royalty payments under the Acquired Interests may be adversely affected.

An investor must rely on the Company to pursue remedies against the Counterparties in the event of any default.

If the Counterparties default on their payment obligations under the Acquired Interests, there can be no assurances that the Counterparties will have adequate resources, if any, to satisfy any obligations to us under the Acquired Interests. In addition, we request that the Acquired Interests be directly assigned to us by the Counterparties where commercially practicable and in the alternative that payments under the Acquired Interests are made directly to us. It may be necessary, therefore, for us to also pursue remedies against counterparties of the Counterparties. These counterparties may assert that the assignment of Royalty Interests by the Counterparties did not create an obligation on their part to pay any royalty payments to us.

Moreover, royalty payments under the Acquired Interests are an obligation of the Counterparties to us, not obligations to our stockholders. Our stockholders will have no recourse directly against the Counterparties.

The Acquired Interests do not restrict the Counterparties from incurring unsecured or secured debt, nor does it impose any other financial restrictions on the Counterparties.

If the Counterparties incur additional secured or unsecured debt after entering into an agreement with us, or if the Counterparties incur excessive expenses, the Counterparties may be impaired in their ability to make royalty payments to us under the Acquired Interests. In addition, additional debt or expenses may adversely affect the Counterparties’ creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the Counterparties. To the extent that the Counterparties have or incur other indebtedness and expenses and cannot pay all of their indebtedness or expenses, the Counterparties may choose to make payments to other creditors rather than us.

To the extent the Counterparties incur other indebtedness that is secured, such as mortgage, home equity, or auto loans, the ability of secured creditors to exercise remedies against the assets of the Counterparties may impair the Counterparties’ ability to make payments to us under the Acquired Interests. The Counterparties may also choose to repay obligations under secured indebtedness before making required royalty payments on the Acquired Interests.

Failure of the Counterparties to adequately protect and enforce their intellectual property could injure the value of the Acquired Interests.

The size of payments from the Acquired Interests will depend on the Counterparties protecting the underlying intellectual property from infringement (such as counterfeiting and other unauthorized uses of their intellectual property rights) and enforcing their right to payments due upon the use of the underlying intellectual property. Although the Counterparties may seek to protect the intellectual property rights associated with the Acquired Interests by ensuring that they own and control certain intellectual property rights in and to those assets and, where appropriate, by enforcing those intellectual property rights, it may not be possible to detect all instances of copyright infringement. Additionally, where instances of copyright infringement are detected, we cannot guarantee that such instances will be prevented as there may be legal or factual circumstances that give rise to uncertainty as to the validity, scope and enforceability of the Counterparties’ intellectual property rights. We will have no rights under the Acquired Interests to enforce any intellectual property rights associated with the Acquired Interests. Infringement of the Acquired Interests’ copyright by others could have an adverse effect on the royalty payments that we receive under the Acquired Interests. If the Counterparties were unable to secure, protect, maintain or enforce the intellectual property rights underlying the Acquired Interests, we could lose some or all of the payments we would have otherwise received from the Acquired Interests.

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Risks Relating to the Recording Artist

The value of our Acquired Interests in the Eminem Catalog is dependent upon the popularity of Eminem.

Our cash receipts from the Acquired Interests in the Eminem Catalog will be driven in part by the popularity of Eminem, and a deterioration of his popularity could adversely affect the cash receipts from the Acquired Interest in the Eminem Catalog. A variety of factors including poor or mediocre results of future albums or controversy surrounding Eminem’s personal life could lead to a decrease in the number of royalty payments under the Acquired Interests. There can be no assurance that Eminem will continue to be successful as a recording artist, or that the current level of popularity of his previously recorded music will continue.

Future negative publicity could damage Eminem’s reputation and impair the value of the Acquired Interests.

Eminem has in the past received, and we expect that in the future he will continue to receive, media coverage. The popularity of Eminem’s music portfolio is contingent upon a number of factors, including the general public’s view of Eminem. Unfavorable publicity regarding Eminem’s professional performance or his behavior could negatively affect the value of the Acquired Interests. Any negative publicity could damage Eminem’s reputation and lead to a decline in his popularity, which would decrease the value of the Acquired Interests.

Royalty payments may decrease due to factors outside our control, such as an injury, illness, medical condition or death of the recording artist, or due to other factors such as public scandal or other reputational harm to the recording artist. In any such event, we do not maintain any insurance against such an event, and it is likely that the royalty payments associated with the Acquired Interests may decrease.

Our focus for the foreseeable future is to purchase the Acquired Interests and other Royalty Interests associated with high-profile recording artists. There is a risk that a recording artist’s popularity will be short-lived. If the recording artist associated with any Royalty Interests that we may acquire has a sustained decrease in popularity, the royalty payments we would otherwise receive would likely be less than we anticipate, and it is likely that such Royalty Interests would not return to their prior levels or may cease completely.

We believe that our ability to receive royalty payments from Royalty Interests depends in part on the relevant recording artist’s reputation and ability to be viewed favorably by the public. Prior to purchasing Royalty Interests, we assess the reputation of the recording artist through our independent assessments. However, there can be no assurance that our review process will uncover all facts and characteristics that could adversely affect the reputation of a recording artist or the value of Royalty Interests, or that our assessment of reputational risk is accurate. Even if our review process provides us with an accurate assessment of a recording artist as of the date of our review, there can be no assurance that a recording artist may not suffer reputational damage in the future, whether as a result of future behavior or otherwise.

There could be a decline in the popularity of the hip-hop genre of music.

There can be no assurance that the hip-hop genre of music, including the Eminem Catalog, will retain its popularity. Any decline in popularity of the hip-hop music genre could result in lower retail rates paid for music associated with the Acquired Interests and a resulting decline in the value of our common stock. Even if Eminem remains relatively popular, a substantial decline in the popularity of the hip-hop genre of music, whether as a result of increase in the popularity of other current genres of music or the emergence of a similar genre, could have a material adverse effect on our revenue and the value of our common stock.

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Risks Relating to Conflicts of Interest

Royalty Exchange controls our company and may have conflicts of interest with our other stockholders in the future. Royalty Exchange may also enter into, or cause us to enter into, strategic transactions that could change the nature or structure of our business, capital structure or credit profile.

Following the offering, Royalty Exchange will continue to control the Company through its ownership of shares of our Class B common stock, representing a majority of the voting power of the Company. Royalty Exchange’s interests as our controlling stockholder may differ from or adversely affect the interests of the other holders of our common stock. Because Royalty Exchange holds a majority of the voting power of the Company, it has the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as to elect our directors, to change our management and to approve any other changes to our operations. Royalty Exchange also has the power to direct us to engage in strategic transactions with or involving other companies in our industry, including acquisitions, combinations or dispositions, and the acquisition of certain assets that may become available for purchase, and any such transaction could be material. Additionally, Royalty Exchange is in the business of selling interests in various Royalty Interests and may compete, directly or indirectly, with us. Royalty Exchange may also pursue acquisition opportunities that may be complementary to our business, which could have the effect of making such acquisition opportunities unavailable to us.

Risks Relating to the Offering and Ownership of Our Common Stock

There has been no prior public market for our common stock, the stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial offering price.

There has been no public market for our common stock prior to this offering. The offering price for our common stock may vary from the market price of our common stock following our initial public offering. If you purchase shares in this offering, you may not be able to resell those shares at or above the offering price. An active or liquid market in our common stock may not develop upon the closing of the offering or, if it does develop, it may not be sustainable. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

· overall performance of the equity markets;

· the development and sustainability of an active trading market for our common stock;

· our intentions and ability to list our common stock on the Nasdaq Capital Market and our subsequent ability to maintain such listing;

· our operating performance and the performance of other similar companies, or companies in the music industry;

· changes in recommendations by securities analysts that elect to follow the Company;

· press releases or other public announcements by us or others, including our filings with the SEC;

· changes in the market perception of the Acquired Interests or future Royalty Interests;

· announcements of future actions to be taken by the recording artists related to the Acquired Interests or future Royalty Interests;

· announcements regarding litigation involving us, the portfolio underlying the Acquired Interests or future Royalty Interests or the recording artists related to the Acquired Interests or future Royalty Interests;

· recruitment or departure of key personnel;

· changes in our capital structure, such as future issuances of debt or equity securities;

· regulatory developments in the United States or foreign countries;

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· the economy as a whole, market conditions in our industry, and the industries of our customers;

· the expiration of market standoff or contractual lock-up agreements;

· the size of our market float; and

· any other factors discussed in this offering circular.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many royalty-based companies. Stock prices of many royalty-based companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

We may not be able to satisfy listing requirements of the Nasdaq Capital Market to maintain a listing of our common stock.

If our common stock is listed on the Nasdaq Capital Market, we must meet certain financial and liquidity criteria to maintain such listing. If we violate the Nasdaq listing requirements, our common stock may be delisted. If we fail to meet any of the Nasdaq’s listing standards, our common stock may be delisted. In addition, our board may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the Nasdaq Capital Market may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, in order to list, we will be required to, among other things, file with the SEC a post-qualification amendment to the offering statement of which this offering circular forms a part, and then file a Form 8-A in order to register our shares of common stock under the Exchange Act. The post-qualification amendment of the offering statement is subject to review by the SEC, and there is no guarantee that such amendment will be qualified promptly after filing. Any delay in the qualification of the post-qualification amendment may cause a delay in the initial trading of our common stock on the Nasdaq Capital Market. For all of the foregoing reasons, you may experience a delay between the closing of your purchase of shares of our common stock and the commencement of exchange trading of our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

If we fail to meet the minimum requirements for listing on the Nasdaq Capital Market, we will seek to have our common stock quoted on the OTC markets. The OTC markets are not a stock exchange, and if our common stock trades on an OTC market rather than the Nasdaq Capital Market, there may be significantly less trading volume and analyst coverage of, and significantly less investor interest in, our common stock, which may lead to lower trading prices for our common stock.

We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an “emerging growth company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Capital Market and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

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The offering is a direct public offering conducted on a self-underwritten “best efforts, minimum-maximum” basis.

The Offered Shares are being offered on a self-underwritten, “best efforts, minimum-maximum” basis, which means that (i) we will not use the services of an underwriter and our executive officers and directors will attempt to sell the Offered Shares directly to investors, and (ii) the offering will be terminated in the event the minimum number of subscriptions set forth herein are not received and accepted by us. We do not intend to consummate the sale of any shares until we have received subscriptions and payment for at least 1,466,667 shares ($11,000,000), and we will maintain subscription proceeds in a segregated account until such time. Thereafter, however, subscription proceeds will be paid directly to us and will not be held in a segregated or escrow account. Moreover, the offering is self-underwritten and accordingly, there is no lead underwriter who would undertake a due diligence or comparable examination of us, our business and affairs.

Because the initial public offering price of the Offered Shares will be higher than the pro forma net tangible book value per share of our outstanding shares following the offering, new investors will experience immediate dilution.

The initial public offering price is expected to be higher than the pro forma net tangible book value per share of our shares immediately following the offering, based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase our common stock in the offering, you will experience immediate dilution of $ 4.12 per share  in the case of the minimum offering and $1.60 per share in the case of the maximum offering, which is the difference between the price per share you pay for the Offered Shares and our pro forma net tangible book value per share as of May 31, 2017, after giving effect to the issuance of Offered Shares in the offering.

State securities laws may limit secondary trading of our common stock if our common stock is not listed on a national securities exchange , which may restrict the states in which and conditions under which you can sell shares purchased in this offering.

Secondary trading of the shares sold in this offering will not be possible in any state until the shares are qualified for sale under the applicable securities laws of the state, or there is confirmation that an exemption, such as resulting from the listing of our common stock on the Nasdaq Capital Market or another national securities exchange or listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to list our common stock on a national securities exchange and otherwise fail to register, qualify, obtain or verify an exemption for the secondary trading of our common stock in any particular state, any shares purchased in this offering may not be offered, sold to, or be purchased by, a resident of such state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for our common stock could be significantly impacted, thus causing you to suffer a loss on your investment. While we intend to seek to facilitate secondary trading in our common stock in the event our common stock is not listed on a national securities exchange , there can be no assurances that we will be successful in qualifying or finding an exemption in each state or other jurisdictions.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us and our business. If few analysts commence coverage of us, or if analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price for our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause the price and trading volume for our common stock to decline.

We have broad discretion in the use of the net proceeds from the offering and may not use them effectively.

We intend to use at least $9,750,000 of the net proceeds from this offering to purchase the Acquired Interests. We will have broad discretion in the application of any remaining net proceeds, including working capital, possible acquisitions of other Royalty Interests, and other general corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

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The concentration of our stock ownership limits our stockholders’ ability to influence corporate matters.

Our Class B common stock has 10 votes per share and the Offered Shares of Class A common stock have one vote per share. As of the date of this offering circular, Royalty Exchange beneficially owned all of our outstanding Class B common stock, which will represent approximately 91.2% of the voting power of our outstanding capital stock following the offering, assuming the minimum number of shares are sold, and 71.0% of the voting power of our outstanding capital stock, assuming the maximum number of shares are sold. Royalty Exchange therefore has significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control limits or severely restricts our stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws, as amended and restated prior to the closing of the offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

· authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to defend against a takeover attempt;

· providing that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders; and

· preventing stockholders from calling special meetings.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder. For a description of our capital stock, see the section titled “Description of Capital Stock.”

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USE OF PROCEEDS

We estimate that our net proceeds from the offering will be approximately $10,590,000 if the minimum of 1,466,667 shares are sold and approximately $49,200,000 if the maximum of 6,666,666 shares are sold.

We intend to use the net proceeds from the offering as follows:

· $9,750,000 to exercise the 15% Option to acquire the 15% interest in the Acquired Interests;

· an additional $9,000,000, for an aggregate purchase price of $18,750,000, to exercise the 25% Option, if the net proceeds from the offering equal or exceed $25,000,000 in the aggregate; and

· any remaining proceeds for general corporate purposes, which may include working capital, general and administrative matters, and the acquisition of additional Royalty Interests, although we have no specific additional Royalty Interests in mind as of the date of this offering circular.

See “Business—Acquired Interests” and the accompanying financial statements for additional information concerning the Option and Acquired Interests.

We intend to establish an omnibus incentive plan through which we may make equity grants to our officers and directors upon the completion of this offering. We will not settle such awards in cash, nor will our officers and directors be compensated in connection with this offering or for soliciting investors or otherwise receive proceeds from this offering .

This expected use of the net proceeds from the offering represents our intentions based upon our current plans and business conditions. As of the date of this offering circular, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of the offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the number of potential Royalty Interests we intend to acquire, the status of negotiations for such Royalty Interests, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from the offering.

Pending our use of the net proceeds from the offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. Following the closing, our board of directors anticipates declaring and paying growing and sustainable dividends on our common stock derived from cash receipts from the Acquired Interests and future Royalty Interests we may acquire, to the extent permitted by the Delaware General Corporate Law (the “DGCL”), but any such dividends will be in the discretion of our board of directors. The holders of our Class A common stock and Class B common stock will have equal rights to cash dividends. The amount and timing of distributions to our stockholders is determined by our board of directors and will be based upon a review of various factors including current market conditions, our liquidity needs, and legal and contractual restrictions on the payment of distributions.

Our board of directors may change its dividend policy at any time and from time to time, and we may retain some or all available funds and future income to support our operations and finance the growth and development of our business as well as, in some circumstances, invest some of the available funds to further acquire additional Royalty Interests.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of May 31, 2017:

· on an actual basis;

· on an as adjusted basis giving effect to the sale in this offering of the minimum amount of shares being offered at an offering price to the public of $ 7.50 per share, resulting in net proceeds to us of $10,590,000; and

· on an as adjusted basis giving effect to the sale in this offering of the maximum amount of shares being offered at an offering price to the public of $ 7.50 per share, resulting in net proceeds to us of $49,200,000.

You should read this table in conjunction with the information contained in “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the financial statements and the notes thereto included elsewhere in this offering circular (unaudited, in thousands, except for per share amounts):

	As of May 31, 2017
	Actual		As adjusted assuming minimum offering amount		As adjusted assuming maximum offering amount
Assets
Cash and cash equivalents	$	—	$	890	$	30,500
Long-term assets:
Option deposit		50		—		—
Royalty interests		—		9,750		18,750
Total assets	$	50	$	10,640	$	49,250
Liabilities
Current liabilities	$	50	$	50	$	50
Stockholders’ equity:
Class A Common Stock, par value $0.001 per share		—		1		7
Class B Common Stock, par value $0.001 per share		—		—		—
Additional paid-in capital		—		10,589		49,193
Total stockholders’ equity		—		10,590		49,200
Total capitalization	$	50	$	10,590	$	49,200

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DILUTION

If you purchase common stock in the offering, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share immediately after the offering. Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares outstanding as of May 31, 2017. We did not have any net tangible assets or liabilities as of May 31, 2017 on a historical basis.

Dilution per share to investors participating in the offering represents the difference between the amount per share paid by purchasers of shares in the offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of the offering. If the minimum number of shares is sold in the offering at an initial public offering price of $7.50 per share, our pro forma as adjusted net tangible book value as of May 31, 2017 would have been $10,590,000, or approximately $3.38 per share, after deducting estimated offering expenses payable by us. This represents an immediate increase in net tangible book value of $3.38 per share to existing stockholders and immediate dilution in net tangible book value of $4.12 per share to purchasers of shares in the offering. If the maximum number of shares is sold in the offering, our pro forma as adjusted net tangible book value as of May 31, 2017 would have been $49,200,000, or approximately $5.90 per share, after deducting estimated offering expenses payable by us. This represents an immediate increase in net tangible book value of $5.90 per share to existing stockholders and immediate dilution in net tangible book value of $1.60 per share to purchasers of shares in the offering. The following table illustrates the foregoing calculations:

	Minimum Offering		Maximum Offering
Initial public offering price per share	$	7.50	$	7.50
Net tangible book value per share as of May 31, 2017	$	—	$	—
Increase per share attributable to investors participating in this offering	$	3.38	$	5.90
As adjusted net tangible book value per share as of May 31, 2017, after giving effect to this offering	$	3.38	$	5.90
Dilution per share to investors participating in this offering	$	4.12	$	1.60

The foregoing table and discussion is based on 100 shares of common stock outstanding as of May 31, 2017, as adjusted to give effect to a forward stock split in which we will issue an additional 1,666,567 shares of our Class B common stock to Royalty Exchange before the consummation of the offering, and the issuance of 1,466,667 shares in the case of the minimum offering and 6,666,666 shares in the case of the maximum offering.

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BUSINESS

Overview

Royalty Flow Inc. (the “Company,” “we,” “us” or “our”) is engaged in the business of acquiring, holding and managing royalty interests derived from intellectual property created in the media industry (“Royalty Interests”). Royalty Interests are passive (non-operating) interests in media catalogs (collections of work) that provide the right to revenue produced from the catalog. As it relates to music catalogs, this includes revenue generated from streaming, downloads, physical album sales and other forms of usage by movies, television and advertisements.

Music royalties, as an asset class, have the potential to produce attractive characteristics for investors including consistent cash flow for long-term periods (per U.S. copyright laws, music royalties are paid for the life of the author plus 70 years), relative price stability and capital appreciation potential. They also have the potential to produce investor returns with low correlation to traditional investment markets like stocks, bonds and commodities given that royalty cash flows are often more dependent on popularity and sales versus stock market movement or interest rate activity.

Royalty Flow will seek to acquire existing Royalty Interests and will not act as a record label or music publisher. This should help keep management costs lower than they otherwise would be, and additional acquisitions and growth should create economies of scale for investors.

Royalty Flow will seek to grant investors access to media royalty streams via a stock traded on a public exchange. The key element of our business model is the building of a diversified portfolio of high-quality Royalty Interests. We plan to acquire assets with an income focus, and our target is to acquire assets generating uncorrelated income of 8% to 16% internal rate of return, although there can be no guarantee that we will achieve this target. Our acquisition and growth strategy will initially focus on music assets. We will actively analyze and potentially acquire other forms of media-based IP, including but not limited to movies, television and trademarks. Royalty Flow’s acquisition and growth strategy will focus on dividend growth, capital appreciation and cost efficiency, given we are targeting passive interests alongside established operating partners.

Royalty Flow’s board of directors will include two founders of our controlling stockholder, Royalty Exchange, Inc. (“Royalty Exchange”), consisting of Matthew Smith, who is the Chief Executive Officer of Royalty Exchange and our Executive Chairman, and Gary Young, who is the Chief of Staff of Royalty Exchange. Finding, valuing, acquiring and administering media-based intellectual property (“IP”) royalties has been the specialty of Royalty Exchange. Upon the closing of this offering, Royalty Flow and Royalty Exchange will enter into a shared services agreement, but Royalty Exchange will not be entitled to any investment management or performance fees from Royalty Flow. Instead, Royalty Exchange’s primary interest in Royalty Flow will be as a significant stockholder, and Royalty Exchange will continue to own at least 20% of Royalty Flow following the closing of this offering.

Royalty Flow will offer one of the most direct exposures to a media royalty currently available on a public exchange. We are engaged in a continual review of opportunities to acquire existing royalties. We currently, and generally at any time, have acquisition opportunities in various stages of active review. At this time, we cannot provide assurance that any of the possible transactions under review by us will be concluded successfully.

We intend our first acquisition of a Royalty Interest to be an interest in a catalog of work from 1999 through 2013 by Eminem, an iconic hip-hop artist who was the top-selling recording artist of the 2000’s in the U.S. and one of the best-selling music artists of all time. It is emblematic of our approach to acquiring royalty interests: We look for great assets, operated by world-class management teams, referred to as operators, and acquire a passive interest so that we can participate in the royalties generated.

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Industry Overview

Music is one of the primary mediums for consumer entertainment in the world. From 1990 to 1999, according to Recording Industry Association of America, the music business in the U.S. grew by more than 7% per year. This growth was driven by demand for music and the shift from vinyl to compact discs. The industry continued to sell millions of albums of new work and boosted revenue by re-issuing classic works in the then new compact disc format. 

However, Napster and other forms of digital piracy had a substantial negative impact on the music industry. From 1999 to 2015, the music industry declined substantially until the trend reversed in 2016. For the first time in fifteen years, the music industry grew. And that growth was driven, in large part, by new digital distribution models — including digital streaming. 

According to the International Federation of the Phonographic Industry (“IFPI”), in 2016, the global music industry grew by 5.9%. Digital revenue accounted for 50% of the global music revenue and digital revenue grew by 17.7%. Streaming revenue grew 60.4% which made up for the 7.6% decline in physical revenue and 20.5% decline in download revenue.

Music streaming is booming and we believe is leading the way towards an anticipated music industry resurgence. In 2016, streaming generated approximately $3.9 billion according to the Recording Industry Association of America. The industry analysts have projected that streaming revenue will reach upwards of $28 billion by 2030. IFPI reported 112 million paying subscribers to music streaming services at the end of 2016, representing approximately 3% of the four billion smartphones worldwide. Beyond the portable device usage, Amazon, Google and Apple are introducing home-based streaming devices.

Technology is providing data and transparency previously not available in the music business. Collecting, aggregating and analyzing data has become much easier in the digital world. More accurate, transparent data should result in more accurate, transparent royalty reporting and collection. Additionally, advertising supported music revenue is expected to grow along with the digital revenue. The improvement in advertising technology is expected to increase the effectiveness of targeted advertising, increasing demand for advertising space related to free streaming services.

We believe that the music industry is well positioned to grow based on broad consumer adoption of legitimate digital distribution channels.

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Strategy

The key elements of our business model and growth strategy are as follows:

· Focus on non-operating royalty interests in high quality intellectual property. We have established our business model based on the premise that acquiring non-operating, passive royalty interests in great intellectual property assets can produce better returns than engaging in the activities of a record label or music publisher. Our acquisition and growth strategy will initially focus on music assets. We will actively analyze and potentially acquire other forms of media-based IP, including but not limited to movies, television and trademarks.

· Acquisition of passive interests in assets that have a track record of earning royalties. Instead of pursuing speculative deals with unproven creatives, we will seek to acquire royalty interests that have a history of earnings and the potential to earn for a long time.

· Partner with world-class management teams. We will seek to acquire passive interests where there is an operator that has a proven track record of promoting, enforcing, and collecting royalty income.

· Flexible Acquisition and Financing Approaches. Because we only pursue passive interests in royalty-producing intellectual property, we intend to offer flexible financing terms that work for the catalog owners we will partner with. Traditionally, catalog acquisitions have been “all or nothing” deals. We intend to provide financing to owners of assets that does not require them to sell their entire interest. As we’ve seen with the Acquired Interests, this flexibility will allow us to attract excellent operating partners with great assets.

· Royalty Interest Evaluation Criteria. We use a series of quantitative, qualitative, financial, and legal criteria by which we evaluate the potential acquisition of royalty interests. Among the factors considered are: (1) the asset’s track record of royalty earnings; (2) the type of intellectual property that generates royalties; (3) the experience and skill of the active management team of the asset; (4) our assessment of the longevity and staying power of the underlying intellectual property; and (5) the potential for revenue growth and capital appreciation.

Royalty Exchange, our controlling stockholder, creates financing opportunities for artists, songwriters and rightsholders. The executive team has provided financing options for more than 180 music catalogs. This experience gives the executive team broad and deep experience conducting due diligence and valuing and analyzing music catalog assets.

Strengths and Competitive Advantages

We believe the following competitive strengths will enable us to grow our revenue and increase our margins and cash flow and continue to generate recurring royalties.

· Flexible financing approaches. Traditionally, music industry acquisitions are done on an “all or nothing” basis where the owners of the intellectual property must sell their entire catalog and interest. This approach reflects the desire of the traditional players in the space (record labels and publishers) to seek to own and control the related intellectual property. That means that the owner of a great catalog must either sell the entire interest or hold the asset. Our model allows us to offer flexible financing to these owner-operators. Instead of taking over the entire catalog, we seek to partner with great management teams who do not want to sell their entire interest, but are seeking to monetize a portion of their interests. This will allow us to acquire high-quality royalty interests that competitors will not consider.

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· Low cost structure and limited operating capital requirements. Since we do not perform the functions of a traditional record label or music publisher, we have a substantially lower cost structure. We have no obligation to contribute capital to marketing, developing, promoting, or enforcing the rights to the catalogs we acquire a Royalty Interest in. Like a royalty company in the energy or precious metals industry, we intend to find great assets with a solid operator, finance them, and enjoy the benefits of passive ownership.

· Ability to offer artists a financing strategy that doesn’t look like “selling out.” All artists must consider the fan-relations impact of selling their catalog. If they sell all or part of their catalog to a private equity fund or other institutional investor, their reputation may be damaged as they may be viewed as “selling out,” which can hurt their career. Unlike traditional investors in music catalogs, our structure allows the fans themselves to purchase an indirect interest in the catalog which may limit this public relations risk for the artist.

Acquired Interests

We intend our first acquisition of a Royalty Interest to be an interest in a catalog of work from 1999 through 2013 by Eminem, an iconic hip-hop artist who was the top-selling recording artist of the 2000’s in the U.S. and one of the best-selling music artists of all time. Our controlling stockholder is party to an option agreement to acquire either a 15 percent or 25 percent partial passive royalty interest in the catalog of work by Eminem from 1999 through 2013 (the “Acquired Interests”), which agreement our controlling stockholder intends to assign to us in connection with this offering. The Acquired Interests are derived from Universal Music Group’s future promotion and exploitation of Eminem’s entire catalog of masters and videos from 1999 through 2013, including side projects, compilations, greatest hits, and brief appearances, known as step-outs (collectively, the “Eminem Catalog”). The Universal Music Group (“Universal Music”) is one of the world’s largest music companies and owns and operates a broad array of businesses engaged in recorded music, music publishing, merchandising, and audiovisual content in more than 60 countries.

We will receive royalty payments based on: (i) the number of physical and digital copies sold; (ii) ringtones or other uses, such as downloads of music clips; (iii) the frequency with which the recordings are streamed on services such as Spotify and YouTube; (iv) advertising revenue related to free streaming services; and (v) the number of times songs are synchronized with movies, television shows, advertisements, or video games. These royalties are paid in arrears and accounted for by Universal Music, on a semi-annual basis. From 1999 through calendar year 2016, the Eminem Catalog earned more than $82 million in royalties.

The Acquired Interests are completely segregated and un-affected by any costs, expenses, recoupments, claims, advances, etc. that Eminem may be subject to on a forward going basis. The Acquired Interests do not extend to any monies generated from any live performances, such as concerts, or merchandise sales.

About Eminem

Marshall Mathers, aka Eminem, is an American hip-hop artist. He was the best-selling artist of the 2000’s in the U.S. He has had ten number-one albums on the Billboard 200 and five number-one singles on the Billboard Hot 100. He has been nominated for 43 Grammy Awards and won 14. He also won an Oscar for " Lose Yourself." Eminem was ranked by both Rolling Stone and VH-1 as one of the hundred greatest artists of all time. Following are some of his career highlights:

· Per Nielsen SoundScan, which tabulates the Billboard magazine’s charts, Eminem sold more than 32.2 million albums in the decade of 2000-2010, edging out the Beatles to claim the title of top-selling artist in that decade;

· Eminem has won 15 Grammy Awards, including six for Best Rap Album, and been nominated 43 times;

· In 2003, Eminem won the Academy Award for Best Original Song for his single “Lose Yourself”;

· Rolling Stone ranked him 83rd on its list of 100 Greatest Artists of All Time, calling him the King of Hip Hop;

· In 2010, VH-1 ranked him 79^th on the VH-1 100 Greatest Artists of All-Time;

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· Per Buzzangle Music 2017 U.S. Mid-Year Report, Eminem is the 12^th most streamed artist in the world , and, he hasn’t released an album in four years;

· Ten #1 albums on Billboard Top 200, and five #1 singles on the Billboard Hot 100 in the U.S.;

· During the 23-year period that Nielsen SoundScan has collected data, Eminem is the sixth best-selling album artist;

· In 2014, Eminem became the second best-selling male artist in the U.S. of the Nielsen SoundScan era;

· Often referred to as the best-selling hip-hop artist of all time, in 2016, Billboard named Eminem’s work from 2000-2013 the #1 highest-selling Rap album series;

· Eminem has sold over 172 million records worldwide; and

· Long-term relevance: This catalog has four albums currently charting on the Billboard 200. Eminem’s “Curtain Call” was named the longest-charting hip-hop album of all time.

Following are some financial highlights from Eminem’s royalty catalog that we plan to acquire an interest in:

· T he amount of royalties earned and paid has varied significantly due to, among other things, the timing of new album releases and out-of-period recoveries related to royalty audits and settlements. For example, total royalties earned increased approximately 190% from calendar year 2013 to calendar year 2014 following the release of an album by Eminem in late 2013, and then dropped approximately 66% from calendar year 2014 to calendar year 2015 and grew 43% from calendar year 2015 to calendar year 2016 . Total royalties earned from calendar year 2010 to calendar year 2016 decreased by an average of 5% per year.

· The recurring streaming royalties earned by this catalog grew by approximately 76% for calendar year 2016 over calendar year 2015. Streaming represented 46% of total royalties earned for calendar year 2016 .

· The top 20 revenue-producing songs only represent approximately 27% of the total catalog earnings. Unlike many assets, this catalog doesn’t rely on one massive hit to make money.

Option Agreement

On April 27, 2017, Royalty Exchange, Inc., our controlling stockholder (“Royalty Exchange”), and F.B.T. Productions LLC (“FBT”) and Em2M LLC (“Em2M” and, together with FBT, the “Counterparties”), entered into an Option Agreement (the “Option Agreement”) related to the potential purchase of either a 15 percent (the “15% Option”) or 25 percent (the “25% Option”) interest in the Acquired Interests (the “Option”). In connection with the execution of the Option Agreement, Royalty Exchange made a payment of $50,000 to FBT and Em2M (the “Holding Fee”). The Option Agreement will be assigned to us by Royalty Exchange in accordance with the Option Agreement prior to the consummation of this offering.

The Option is exercisable in our sole and absolute discretion on or before November 15, 2017. At the time we exercise the Option, we must indicate whether we are purchasing either (i) 15 percent of the Acquired Interests for a total purchase price of $9,750,000 or (ii) 25 percent of the Acquired Interests for a total purchase price of $18,750,000. In each case the purchase price will be reduced by the amount of the Holding Fee. From the date of the Option Agreement, FBT and Em2M have agreed to certain covenants related to the Acquired Interests, including notice and information covenants and a prohibition on actions that may materially affect our rights under the Option or the Acquired Interests.

The Option Agreement required that we file an initial Form 1-A with the SEC by June 26, 2017, which we did, on a confidential basis. While the Option Agreement provides that we or another assign of Royalty Exchange have until November 15, 2017 to exercise the Option (unless extended by the Counterparties), the Option Agreement provides that we may raise capital from sources other than a public offering in order to fund the purchase price for the Option before the Option’s expiration date. In the event we do raise capital other than in a public offering to fund the purchase price, the Option Agreement provides that we must conduct an initial public offering prior to April 27, 2018. If we fail to conduct an initial public offering by April 27, 2018, we would be required to pay $100,000 to the Counterparties, and the Counterparties would have the option , for the six months following April 27, 2018, to repurchase the Acquired Interests at the purchase price less the Holding Fee.

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Purchased Portfolio

The Acquired Interests consist of the following assets (the “Eminem Catalog”):

ALBUM	SONGS
THE SLIM SHADY LP (EMINEM)	Public Service Announcement My Name Is Guilty Conscience Brain Damage Paul If I Had ‘97 Bonnie & Clyde Bitch Role Model Lounge My Fault Ken Kaniff Cum on Everybody Rock Bottom Just Don’t Give a Fuck Soap As the World Turns I’m Shady Bad Meets Evil Still Don’t Give a Fuck
THE MARSHALL MATHERS LP (EMINEM)	Public Service Announcement 2000 Kill You Stan Paul (Skit) Who Knew Steve Berman The Way I Am The Real Slim Shady Remember Me? I’m Back Marshall Mathers Ken Kaniff (Skit) Drug Ballad Amityville Bitch Please II Kim Under the Influence Criminal The Kids

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ALBUM	SONGS
THE EMINEM SHOW (EMINEM)	Curtains Up (Skit) White America Business Cleanin’ Out My Closet Square Dance The Kiss (Skit) Soldier Say Goodbye Hollywood Drips Without Me Paul Rosenberg (Skit) Sing for the Moment Superman Hailie’s Song Steve Berman (Skit) When the Music Stops Say What You Say ‘Till I Collapse My Dad’s Gone Crazy Curtains Close (Skit)
ENCORE (EMINEM)	Curtains Up Evil Deeds Never Enough Yellow Brick Road Like Toy Soldiers Mosh Puke My 1st Single Paul [Skit] Rain Man Big Weenie Em Calls Paul (Skit) Just Lose It Ass Like That Spend Some Time Mockingbird Crazy in Love One Shot 2 Shot Final Thought (Skit) Encore We as Americans Love You More Ricky Ticky Toc

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ALBUM	SONGS
CURTAIN CALL (EMINEM)	Fack Shake That When I’m Gone Intro (Curtain Call) The Way I Am My name Is Stan Lose Yourself Shake That Sing For The Moment Without Me Like Toy Soldiers The Real Slim Shady Mockingbird Guilty Conscience Cleanin Out My Closet Just Lose It
RELAPSE (EMINEM)	Dr. West (Skit) 3 A.M. My Mom Insane Bagpipes from Baghdad Hello Tonya (Skit) Same Song & Dance We Made You Medicine Ball Paul (Skit) Stay Wide Awake Old Time’s Sake Must Be the Ganja Mr. Mathers (Skit) Déjà Vu Beautiful Crack a Bottle Steve Berman (Skit) Underground Careful What You Wish For My Darling
RELAPSE: REFILL (EMINEM)	Forever Hell Breaks Loose Buffalo Bill Elevator Taking My Ball Music Box Drop the Bomb On ‘Em

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ALBUM	SONGS
RECOVERY (EMINEM)	Cold Wind Blows Talkin’ 2 Myself On Fire Won’t Back Down W.T.P. Going Through Changes Not Afraid Seduction No Love Space Bound Cinderella Man 25 to Life So Bad Almost Famous Love the Way You Lie You’re Never Over Untitled (Hidden Track)
THE MARSHALL MATHERS LP 2 (EMINEM)	Bad Guy Parking Lot (Skit) Rhyme Or Reason So Much Better Survival Legacy Asshole Berzerk Rap God Brainless Stronger Than I Was The Monster So Far Love Game Headlights Evil Twin
DEVIL’S NIGHT (D-12)	These Drugs
8 MILE SOUNDTRACK (VARIOUS)	Love Me Lose Yourself Rabbit Run 8 Mile Places To Go Rap Game
CHEERS (OBIE TRICE)	Hands On You Lady Outro Shit Hits The Fan We All Die One Day
RESURRECTION (TUPAC)	One Day At A Time
GET RICH OR DIE TRYIN’ (50 CENT)	Don’t Push Me Patiently Waiting

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ALBUM	SONGS
LOYAL TO THE GAME (2PAC)	Black Cotton Soldier Like Me
D12 WORLD (D-12)	6 In The Morning American Psycho 2 Bitch Get My Gun Git Up How Come Keep Talkin’ Leave Dat Boy Alone Loyalty
THE HUNGER FOR MORE (LLOYD BANKS)	Warrior Part 2
THE MASSACRE (50 CENT)	Gatman & Robin
KISS OF DEATH (JADAKISS)	Welcome To D-Block
THE PEOPLE VS. (TRICK TRICK)	No More To Say Welcome 2 Detroit
THE LONGEST YARD SOUNDTRACK (VARIOUS - D12)	My Ballz
THOUGHTS OF A PREDICATE FELON (TONY YAYO)	Drama Setter
EMINEM PRESENTS THE RE-UP (VARIOUS)	Shady Narcotics We’re Back Murder The Re-Up You Don’t Know Jimmy Crack Corn Whatever You Want Smack That (Remix) Public Enemy #1 Cry Now No Apologies
SECOND ROUND’S ON ME (OBIE TRICE)	Wake Up There They Go
THE BLUEPRINT (JAY-Z)	Renegade
KONVICTED (AKON)	Smack That
THE COUNTY HOUND (CA$HIS)	Pistol Poppin
HELL: THE SEQUEL (BAD MEETS EVIL)	Welcome 2 Hell Fastlane The Reunion Above the Law I’m On Everything A Kiss Lighters Take from Me Loud Noises Living Proof Echo

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Payment History

The Eminem Catalog earned more than $82 million in royalties for the Counterparties from 1999 through calendar year 2016. The following table illustrates all payments in United States dollars from the Eminem Catalog to the Counterparties since payments commenced in 1999, including regular royalty payments and payments resulting from audits and litigation settlements. The Acquired Interests will represent an interest in either 15% or 25% of such future payments. Historical results are not indicative of future performance. The Company is not entitled to any of the historical payments.

Fiscal Years Ended September 30	Annual Total
1999-2010	$	33,267,344
2011		9,800,897
2012		3,718,323
2013		14,530,426
2014		10,144,374
2015		4,232,731
2016		4,760,556
For the six months ended March 31, 2017		1,942,408
For the six months ended September 30, 2017 (unaudited)(1)		2,621,712
_________
(1) Cash was received on October 3, 2017.

This is the catalog of an iconic artist, with a long track-record of earning substantial royalties, well positioned to take advantage of the digital trend in the music industry, that is operated by an impressive management team.

Competition

The market for acquiring music royalties is competitive and has many participants. 

Record labels, especially the major labels (Universal, Sony, and Warner) frequently look to acquire catalogs. The major publishers (Universal, Song/ATV, and Warner Chappell) have also frequently acquired catalogs. Deals with a major label or publisher almost always come with a "go-forward" commitment; that means that the party selling their catalog will often be obligated to produce additional work for the label or publisher.

Aside from the traditional participants in this market, there is consistent interest from private equity funds, family offices, and other investment groups in acquiring catalogs. These entities have aggressively sought out high quality catalogs to acquire.

Employees

As of October 10 , 2017, we had no employees. We are currently being supported by personnel employed by Royalty Exchange. None of these employees are represented by labor unions or covered by collective bargaining agreements.

Facilities

We share Royalty Exchange’s 3,608 square foot real estate facility located in Denver, Colorado, used primarily for corporate function. The lease for this space expires in October 2020. We believe that this facility is sufficient for our needs for the foreseeable future.

Legal Proceedings

We are not currently a party to any material legal proceedings.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this offering circular. This discussion and other parts of this offering circular contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this offering circular entitled “Risk Factors.”

Overview

We are engaged in the business of acquiring, holding and managing Royalty Interests derived from intellectual property created in the media industry. Royalty Interests are passive (non-operating) interests in media catalogs (collections of work) that provide the right to revenue produced from the catalog. As it relates to music catalogs, this includes revenue generated from streaming, downloads, physical album sales and other forms of usage by movies, television and advertisements . We were founded as a Delaware corporation in May 2017 to raise capital and purchase the Acquired Interests in the Eminem Catalog and pursue the acquisition of additional Royalty Interests. See “Business—Acquired Interests” for a description of the Acquired Interests.

Results of Operations

Our operations to date have been limited. We were incorporated in May 2017. We have not engaged in operations and have no or nominal assets or liabilities. We have no employees.

Liquidity and Capital Resources

To date, we have relied exclusively on Royalty Exchange for liquidity and capital resources. Royalty Exchange has no obligation to continue to finance our operations, and it will continue to finance our operations as determined in Royalty Exchange’s sole discretion. We are not committed to any capital expenditures. We expect that, after the closing of the offering, the payments from the Acquired Interests will sufficient to cover our operating expenses, including compliance and other administrative functions.

We believe the net proceeds from the offering together with existing cash and cash equivalents and interest thereon will be sufficient to fund our projected operating expenses for the next 12 months. However, if our operating and other expenses are higher than we expect or our cash receipts from the Acquired Interests are lower than we expect then we may also need to raise additional funds sooner.

In addition, any contracts to purchase Royalty Interests that we enter into in the future with other contract parties may require us to make substantial upfront payments to acquire the Royalty Interests. Therefore, future contracts to purchase Royalty Interests may be contingent upon us obtaining financing to fund the acquisition, and we may finance these acquisitions through the issuance of additional shares or through other financing alternatives.

Until we begin receiving a sufficient amount of cash from our Acquired Interests, if ever, we expect to finance future cash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may not be able to continue to acquire additional Royalty Interests and we may have to significantly delay, scale back or discontinue our operations. If we raise additional funds through the issuance of additional equity or debt securities it could result in dilution to our existing stockholders, and/or fixed payment obligations that could reduce our ability to pay dividends or otherwise fund our other operations. Furthermore, these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license Royalty Interests without consent and other operating restrictions that could adversely impact our ability to conduct our business.

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Significant Accounting Policies

In connection with the acquisition of the Acquired Interests, the Company expects to adopt the following significant accounting policies:

Revenue Recognition

The Company intends to recognize revenue upon cash receipt of the Royalty Interest. Due to the industry practice of reporting royalties earned on a semi-annual basis by the major record label to the Counterparties, the Company only obtains reports from the Counterparties on a semi-annual basis to report the amount of royalties. Based on historical records of the Counterparties, there is a wide variation in the amount of semi-annual royalties and, accordingly, management believes recording revenue upon the receipt of cash is preferable for future reporting.

The Counterparties have the right to conduct audits of the major record label’s calculations to ensure that all performances are included and that the appropriate royalty rates are utilized. The Counterparties have audited royalty calculations for performances through December 2011. Additional royalty recoveries based on audits will be recognized in the period in which the audit results are resolved and agreed to by the parties.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new guidance provides a five-step process for recognizing revenue that depicts 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. The new guidance also requires expanded qualitative and quantitative disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for public companies with annual reporting periods beginning after December 31, 2017, and is to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial adoption. Early adoption is permitted for all entities but not before the original effective date for public entities. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. Under ASU 2014-09, the Company will be required to estimate the amount of royalties on the accrual basis. The Company has elected to delay the application of new accounting standards under the provisions of our status as an emerging growth company pursuant to the JOBS Act. We will adopt this standard using the full retrospective methodology for our annual period ending on September 30, 2019 as allowed by the JOBS Act. Adoption will have a material effect on our financial statements.

Royalty Interests

The Company intends to adopt the policy of amortizing the cost of the Royalty Interests using the straight-line method over a period of 15 years. The Royalty Interests are considered a long-lived asset that is required to be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists for the Royalty Interests if the carrying amount exceeds the estimates of future net undiscounted cash flows expected to be generated by such assets. An impairment charge is required to be recognized if the carrying amount of the asset, or asset group, exceeds its fair value.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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MANAGEMENT

The following table sets forth information about our executive officers and directors as of October 10 , 2017.

Name	Age	Position
Jeff Schneider	34	Chief Executive Officer and Chief Financial Officer
Matthew Smith	42	Executive Chairman
Gary Young	29	Secretary and Director

Jeff Schneider serves as our Chief Executive Officer and Chief Financial Officer, and has held such positions since our founding in May 2017. Mr. Schneider has served as President and Chief Financial Officer of Royalty Exchange since January 2016. Prior to joining Royalty Exchange, Mr. Schneider was the Chief Executive Officer of a financial publishing company, Choose Yourself Media and helped grow the business to $17 million in gross revenue. From 2012 through 2015, Mr. Schneider was also the COO at Early to Rise Publishing, a digital publishing company focused on health and wellness. After receiving an MBA from Purdue University, Mr. Schneider worked in audit and consulting for a medical device company, as well as finance management at General Electric. Mr. Schneider is a licensed CPA in the state of Minnesota.

Matthew Smith serves as Executive Chairman of our board of directors. Mr. Smith has served as Chief Executive Officer of Royalty Exchange since January 2016. Mr. Smith is an experienced entrepreneur, investor and advisor who has founded and led multiple successful businesses. He currently serves as CEO of Royalty Exchange, the leading online platform for buying and selling royalties. He previously founded several companies including a jobs portal in the late 1990’s, an ad agency, a marketing analytics business, a real estate listings portal and several niche publishing companies. Along the way, he acquired several ventures as well, including a domain registrar, an Irish pub and, most recently Royalty Exchange. Before acquiring Royalty Exchange, Matt served as CEO of Stansberry Research, a financial research firm with $200 million in annual revenue. In addition to his role at Royalty Exchange, Matt coaches and mentors entrepreneurs both individually and as an instructor at an entrepreneurial boot camp held overseas every year. He’s also a co-founder of The Atlas 400, an exclusive international social club.

Gary Young serves as our Secretary and has held such position since our founding in May 2017. Mr. Young also serves on our board of directors. Mr. Young has served as Chief of Staff of Royalty Exchange since February 2016. Mr. Young previously worked at a $150 million financial publisher from September 2015 to February 2016, where he drove revenue on the marketing team. Prior to that, Mr. Young was the founder and owner of a marketing analytics firm, Prime Analytics. Mr. Young began his career at Early to Rise Publishing as a copywriter in August 2012.

Non-Employee Directors

John Simson will serve as an independent director effective upon the closing of the offering. John Simson has been in the music industry since his signing in 1971 as a recording artist and songwriter. Mr. Simson’s career has included stints as a manager, handling the career of 5-time Grammy winner, Mary-Chapin Carpenter, special advisor to Harry Belafonte for music and television projects, and a 30-year career as an entertainment lawyer advising clients on copyright and business issues in film, television, music and the visual arts. He co-founded and served as the Executive Director of SoundExchange from 2001-2010. SoundExchange collects royalties from internet and satellite radio services on behalf of recording artists and record labels. Mr. Simson was at the forefront of the battle for artist’s rights and their ability to be paid for their work online. Mr. Simson is currently Of Counsel at Fox Rothschild and teaches the Business of Entertainment at the Kogod School of Business at American University.

David R. Hanson will serve as an independent director effective upon the closing of the offering. Mr. Hanson is Managing Partner of Hillgreen, a private investment platform, and is Managing Partner of Stearman Fund (Stearman), a private family office. In his roles at Hillgreen and Stearman, Mr. Hanson sources, evaluates, funds, and manages private- and public-investments. Prior to joining Stearman, Mr. Hanson was a Founder, Managing Partner, and Portfolio Manager of Hanson Wells Partners (“HWP”), a contrarian-oriented long-short value investing partnership, where he invested in companies in the consumer, energy, financial services, industrial, media, technology, and telecommunications industries, among others. Prior to launching HWP, Mr. Hanson was a Vice President in Investment Banking at Deutsche Bank Securities in New York. During his career at Deutsche Bank , Mr. Hanson advised public and private companies on over $5 billion of securities issuance and merger and acquisition transactions. Prior to his time at Deutsche Bank, Mr. Hanson was an investment banker at PNC Capital Markets, where he provided investment banking advisory services to consumer and commercial finance companies, among others. Mr. Hanson began his career on the mezzanine private equity team at Salem Capital Partners. He is a graduate of Wake Forest University.

Christopher D. Maxwell will serve as an independent director effective upon the closing of the offering. Mr. Maxwell is a certified public accountant. From 2002 to 2004 and 2005 to 2017, Mr. Maxwell worked at Deloitte & Touche LLP, where he was a partner from 2007 until his retirement in 2017. From 2004 to 2005 he was the corporate controller of a publicly traded real estate investment trust. From 1993 to 2002 he worked at Arthur Andersen & Co. He is a graduate of Colorado State University with a Bachelor’s of Science degree in business administration, with an emphasis in accounting. Mr. Maxwell currently teaches various accounting courses at Colorado State University and the University of Denver.

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We are in the process of recruiting an additional qualified independent, non-employee director who will also serve as a member of our Audit, Compensation and Nominating and Corporate Governance Committees.

Board Composition

Our business and affairs are organized under the direction of our board of directors, which currently consists of two members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis and on an ad hoc basis as required.

In accordance with the terms of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to and upon the completion of the offering, respectively, our board of directors will be elected annually to a one-year term.

The authorized size of our board of directors is currently two members and, effective as of the day immediately prior to the closing of the offering, will be increased to five members. The authorized number of directors may be changed only by resolution of our board of directors.

Director Independence

Our board of directors currently consists of two members. Our board of directors has determined that neither current member qualifies as “independent” in accordance with the Nasdaq listing standards because each current member is an executive officer of the Company. We intend to identify and appoint three independent directors prior to consummation of the offering, consisting of Mr. Simson , Mr. Hanson and Mr. Maxwell .

There are no family relationships among any of our directors or executive officers.

Board Committees

Immediately prior to the closing of the offering, our board of directors will establish an audit committee, a compensation committee and a nominating and corporate governance committee. Copies of the committee charters may be found on our website at www.royaltyflow.com and will be provided in print, free of charge, to any investor who requests a copy by submitting a written request to our Secretary at 1550 Larimer St. Suite 769, Denver, CO 80202.

The Audit Committee

Messrs . Hanson , Maxwell and Simson will serve on the audit committee effective upon the closing of the offering . Each of Mr. Hanson and Mr. Maxwell qualifies as an “audit committee financial expert.” The audit committee’s primary responsibilities will be to assist the board of directors in overseeing:

· the Company’s accounting and financial reporting processes and internal controls as well as the audit and integrity of the Company’s financial statements;

· the qualifications, independence and performance of the Company’s independent auditor; and

· the Company’s compliance with applicable law, including U.S. federal securities laws and other legal and regulatory requirements

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We expect that both our independent registered public accounting firm and management will periodically meet privately with our audit committee.

We believe that the composition and functioning of our audit committee will comply with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

The Compensation Committee

Messrs . Hanson , Maxwell and Simson will serve on the compensation committee effective upon the closing of the offering. Each member of the compensation committee will be a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code (the “Code”) , and will satisfy the Nasdaq independence requirements. The compensation committee will assist the board of directors in setting the compensation of our directors and executive officers and administering and implementing our incentive compensation plans and equity based plans. The compensation committee’s duties and responsibilities will include:

· providing oversight of the compensation of our Chief Executive Officer and other executive officers;

· administering our equity compensation plans and granting equity awards pursuant to such plans or outside of such plans; and

· providing oversight of the Company’s compensation policies and plans and benefits programs and overall compensation philosophy.

The compensation committee will also review and discusses the Compensation Discussion and Analysis appearing in our periodic reporting documents with our management. Under our Compensation Committee Charter, the compensation committee will have the authority to retain compensation consultants. The compensation committee also will have the authority to obtain advice and assistance from our executives, internal or external legal, accounting or other advisors as it determines necessary to carry out its duties.

The compensation committee may delegate its authority to determine the amount and form of compensation paid to our non-executive employees and consultants to officers and other appropriate supervisory personnel. It may also delegate its authority (other than its authority to determine the compensation of our Chief Executive Officer) to a subcommittee of the compensation committee. Finally, to the extent permitted by applicable law, the compensation committee may delegate to one or more officers of the Company (or other appropriate personnel) the authority to recommend stock options and other stock awards for employees who are not executive officers or members of our board of directors.

The Nominating and Corporate Governance Committee

Messrs. Hanson, Maxwell and Simson will serve on the nominating and corporate governance committee effective upon the closing of the offering. The nominating and corporate governance committee’s duties and responsibilities include:

· assisting the board of directors in identifying individuals who are qualified to become members of the board and selecting, or recommending to the board that the board select, specified individuals as director nominees;

· developing and maintaining corporate governance policies applicable to the Company; and

· overseeing evaluations of the board.

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The nominating and corporate governance committee will identify director candidates based on input provided by a number of sources, including members of the committee, other directors, our stockholders, members of management and third parties. The nominating and corporate governance committee will not distinguish between nominees recommended by our stockholders and those recommended by other parties. Any stockholder recommendation must be sent to the secretary of Royalty Flow Inc. at 1550 Larimer St. Suite 769, Denver, CO 80202, and must include detailed background information regarding the suggested candidate that demonstrates how the individual meets the board membership criteria discussed below. The nominating and corporate governance committee also has the authority to consult with or retain advisors or search firms to assist in the identification of qualified director candidates.

As part of the identification process, the nominating and corporate governance committee will also take into account each candidate’s business and professional skills, experience serving in management or on the board of directors of companies similar to the Company, financial literacy, independence, personal integrity and judgment. In conducting this assessment, the nominating and corporate governance committee will, in connection with its assessment and recommendation of candidates for director, consider diversity (including, but not limited to, gender, race, ethnicity, age, experience and skills) and such other factors as it deems appropriate given the then-current and anticipated future needs of the board and the Company, and to maintain a balance of perspectives, qualifications, qualities and skills on the board. The board of directors does not have a formal diversity policy for directors. However, the board of directors is committed to an inclusive membership. Although the nominating and corporate governance committee may seek candidates that have different qualities and experiences at different times in order to maximize the aggregate experience, qualities and strengths of the board members, nominees for each election or appointment of directors will be evaluated using a substantially similar process. Incumbent directors who are being considered for re-nomination are re-evaluated both on their performance as directors and their continued ability to meet the required qualifications.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics, which outlines the principles of legal and ethical business conduct under which we do business. The code is applicable to all of our directors, officers and employees and is available on our corporate website. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act to the extent required by applicable rules and exchange requirements.

Limitation of Liability and Indemnification

Our certificate of incorporation and bylaws provide the indemnification of our directors and officers to the fullest extent permitted under the DGCL. In addition, the certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director and that if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

As permitted by the DGCL, we have entered into or plan to enter into separate indemnification agreements with each of our directors and certain of our officers that require us, among other things, to indemnify them against certain liabilities which may arise by reason of their status as directors, officers or certain other employees. We expect to obtain and maintain insurance policies under which our directors and officers are insured, within the limits and subject to the limitations of those policies, against certain expenses in connection with the defense of, and certain liabilities that might be imposed as a result of, actions, suits or proceedings to which they are parties by reason of being or having been directors or officers. The coverage provided by these policies may apply whether or not we would have the power to indemnify such person against such liability under the provisions of the DGCL.

We believe that these provisions and agreements are necessary to attract and retain qualified persons as our officers and directors. At present, there is no pending litigation or proceeding involving our directors or officers for whom indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

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EXECUTIVE COMPENSATION

We are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year. Our reporting obligations extend only to our “named executive officers,” who are those individuals serving as our principal executive officer and our two other most highly compensated executive officers who were serving as executive officers at the end of the last completed fiscal year. We began operations in May 2017 and, consequently, we do not have prior fiscal year data.

Employment, Severance or Change in Control Agreements

We currently do not maintain any employment, severance or change in control agreements with our officers. In addition, our officers are not entitled to any payments or other benefits in connection with a termination of employment or a change in control.

Effective upon the closing of the offering, we anticipate granting 50,000 shares of restricted common stock to each of our executive officers under our 2017 Plan (defined below), which shares will vest after six months if the executive officer remains employed by the Company. Such awards will be subject to approval by our compensation committee.

Retirement Benefits

We have not maintained, and do not currently intend to maintain, a defined benefit pension plan or nonqualified deferred compensation plan.

Compensation of Directors

Our board of directors was formed in May 2017. No obligations with respect to compensation for directors have been accrued or paid for any periods prior to such formation date or to date in 2017.

Going forward, our board of directors believes that attracting and retaining qualified non-employee directors will be critical to the future value growth and governance of our company. Our board of directors also believes that a significant portion of the total compensation package for our non-employee directors should be equity-based to align the interest of these directors with our stockholders.

We are reviewing the non-employee director compensation packages provided by certain peer companies and intend to implement a non-employee director compensation program in connection with this offering. Currently, we anticipate issuing restricted stock units to our non-employee directors relating to 5,000 shares of our common stock upon the closing of the offering, all of which restricted stock units will be settleable solely in shares of our common stock .

Directors who are also our employees will not receive any additional compensation for their service on our board of directors.

We expect that each director will be reimbursed for (i) travel and miscellaneous expenses to attend meetings and activities of our board of directors or its committees; (ii) travel and miscellaneous expenses related to such director’s participation in general education and orientation programs for directors; and (iii) travel and miscellaneous expenses for each director’s spouse who accompanies a director to attend meetings and activities of our board of directors or any of our committees.

2017 Equity Incentive Plan

Effective upon the closing of the offering, we anticipate that our board of directors and stockholders will adopt the Royalty Flow Inc. 2017  Omnibus Incentive Plan (the “2017 Plan”) pursuant to which our employees, consultants and directors, including our named executive officers, will be eligible to receive awards. We anticipate reserving 500,000 shares of our Class A common stock for issuance under the 2017 Plan.

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Description of Awards under the 2017 Plan

Awards to Employees. Under the 2017 Plan, the compensation committee, which will administer the plan, may award to eligible employees incentive and nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units and performance shares.

Awards to Non-Employees. The compensation committee may award to eligible non-employees, including non-employee directors, non-qualified stock options, SARs, restricted stock and restricted stock units.

Stock Options

The compensation committee has discretion to award incentive stock options (“ISOs”), which are intended to comply with Section 422 of the Code, or nonqualified stock options (“NQSOs”), which are not intended to comply with Section 422 of the Code. The exercise price of an option may not be less than the fair market value of the underlying shares of common stock on the date of grant. The 2017 Plan defines “fair market value” as the closing sale price at which shares of our common stock have been sold on the principal securities exchange on which the shares are traded or, if there is no such sale on the relevant date, then on the last previous day on which there was such a sale.  The maximum number of shares which may be subject to stock options granted in any  fiscal year to any one participant is 200,000 .

Options granted to employees under the 2017 Plan will expire at such times as the compensation committee determines at the time of the grant; provided, however, that no option will be exercisable later than ten years after the date of grant. Each option award agreement will set forth the extent to which the participant will have the right to exercise the option following termination of the participant’s employment with the Company. The termination provisions will be determined within the discretion of the compensation committee, might not be uniform among all participants and might reflect distinctions based on the reasons for termination of employment. Notwithstanding the preceding sentences, unless the terms of the award agreement or the compensation committee  otherwise provide for a shorter exercise period,  options must be exercised within  90 days  after an employee’s termination of employment. However, if the termination is due to death or disability,  the options must be exercised within one year after an employee’s termination of employment. If the termination is due to death, the ISOs may be exercised at any time during the option term. Subject to the specific terms of the 2017 Plan, the compensation committee will have discretion to set such additional limitations on such grants as it deems appropriate. The award agreement will reflect these limitations.

Upon the exercise of an option granted under the 2017 Plan, the option price is payable in full to the Company, either: (a) in cash or its equivalent, (b) if permitted in the award agreement, by tendering shares having a fair market value at the time of exercise equal to the total option price (provided that such shares have been held by the optionee for at least six months prior to their tender) or (c) by any combination of the foregoing methods of payment. The compensation committee may also allow options granted under the 2017 Plan to be exercised by a cashless exercise through a broker, as permitted under Federal Reserve Board Regulation T, by delivery of property having a fair market value equal to the exercise price,  or any other means the compensation committee determines to be consistent with the 2017 Plan’s purpose and applicable law, including by cashless exercise directly with the Company whereby the Company, following its receipt of the participant’s notice of exercise, would withhold the proper number of Company shares which would have a fair market value on the date of exercise equal to the option exercise price.

Stock Appreciation Rights

The compensation committee may award SARs under the 2017 Plan upon such terms and conditions as it may establish. At the discretion of the compensation committee, the payment upon SAR exercise may be in cash, in shares of common stock of equivalent value, or in some combination thereof. The compensation committee’s determination regarding the form of payment for the exercised SAR will be set forth in the award agreement. The compensation committee may award either (i) freestanding SARs, which are SARs granted as an independent instrument and are not granted in conjunction with any stock options, or (ii) SARs in tandem with stock options (a “tandem SAR”). The election of one type of exercise prevents it from being exercised as the other type. A tandem SAR may not be granted to a non-employee director unless the related option is a NQSO. The exercise price of a freestanding SAR will equal the fair market value of a share of common stock on the date of grant, whereas the exercise price of a tandem SAR issued in connection with a stock option will equal the option price of the related option. The maximum number of shares which may be subject to SARs awarded in any  fiscal year to any one participant is 200,000.

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The compensation committee will determine in its discretion the term of an SAR granted under the 2017 Plan. Each award agreement will set forth the extent to which the participant will have the right to exercise the SAR following termination of the participant’s employment with the Company. The termination provisions will be determined by the compensation committee in its sole discretion, need not be uniform among all participants and may reflect distinctions based on the reasons for termination of employment. The term of an SAR may not exceed ten years from the date of grant. Therefore, no SAR may be exercisable later than ten years after the date of award.

Except as otherwise limited by the 2017 Plan, freestanding SARs may be exercised upon whatever terms and conditions the compensation committee, in its sole discretion, imposes upon them. The compensation committee will determine the number of shares of common stock covered by and the exercise period of the SAR. Upon exercise of a freestanding SAR, the participant will receive an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price, multiplied by the number of shares of stock exercised under the SAR.

In the case of a tandem SAR, the compensation committee may determine the exercise period of the SAR, except that the exercise period may not exceed that of the related option. The participant may exercise the tandem SAR when the option is exercisable and receive on exercise an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the option purchase price, multiplied by the number of shares of stock covered by the surrendered option. Upon exercise of an SAR awarded in tandem with a stock option, the number of shares of our common stock for which the related option was exercisable will be reduced by the number of shares for which the SAR was exercised.

Notwithstanding any other provision of this 2017 Plan to the contrary, with respect to a tandem SAR granted in connection with an ISO (i) the tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the tandem SAR may be for no more than 100% of the difference between the option price of the underlying ISO and the fair market value of the shares subject to the underlying ISO at the time the tandem SAR is exercised; and (iii) the tandem SAR may be exercised only when the fair market value of the shares subject to the ISO exceeds the option price of the ISO.

Restricted Stock

The compensation committee may impose restrictions and conditions as to awards of shares of restricted stock as it deems advisable. As specified in the relevant award agreement, restrictions may include a requirement that participants pay a stipulated purchase price for each share of restricted stock, restrictions based upon the achievement of specific performance goals (Company-wide, divisional and/or individual), time-based restrictions on vesting following the attainment of the performance goals and/or restrictions under applicable federal or state securities laws.

We may retain in our possession the certificates representing shares of restricted stock until the time when all conditions and/or restrictions applicable to those shares awarded under the 2017 Plan have been satisfied. Generally, shares of restricted stock covered by each restricted stock grant made under the 2017 Plan will become freely transferable by the participant following the last day of the applicable period of restriction. However, even after the satisfaction of the restrictions and conditions imposed by the 2017 Plan and the particular award agreement, shares owned by an affiliate of the Company will be subject to restrictions on transfer under the Securities Act of 1933, as amended.

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The compensation committee may choose to award shares of restricted stock under the 2017 Plan upon such terms and conditions as it may establish.  The maximum number of shares which may be granted in the form of restricted stock in any one  fiscal year to any one participant is 200,000. The award agreement will specify the period(s) of restriction, the number of shares of restricted stock granted, requirements that a participant pay a stipulated purchase price for each share, restrictions based upon the achievement of specific performance objectives, other restrictions governing the subject award and/or restrictions under applicable federal or state securities laws. Recipients may have the right to vote these shares from the date of grant, as determined by the compensation committee on the date of award. As determined by the compensation committee on the date of award, participants may receive dividends on their shares of restricted stock. Dividends accrued on restricted stock will be paid only if the restricted stock vests.

Each award agreement for restricted stock will specify the extent to which the participant will have the right, if any, to retain unvested restricted stock following termination of the participant’s employment with the Company. In its sole discretion, the compensation committee will make these determinations; these provisions need not be uniform among all awards of restricted stock issued under the 2017 Plan and may reflect distinctions based on reasons for termination of employment. Except in the case of terminations by reason of death or disability, restricted stock, which is intended to qualify for performance-based compensation under Section 162(m) and which is held by “covered employees” under Section 162(m), will be forfeited by the participant to the Company upon termination of employment.

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Restricted Stock Units

The compensation committee may award restricted stock units (“RSUs”). Each RSU will have a value equal to the fair market value of a share of the Company’s common stock on the date of grant. The maximum aggregate award of RSUs to any one participant during any one fiscal year will be equal to the fair market value of 200,000 shares; provided, further, that the maximum aggregate award of restricted stock and RSUs for any one fiscal year will be coordinated so that in no event will any one participant be awarded more than the fair market value of 200,000 shares taking into account all such awards. In its discretion, the compensation committee may impose conditions and restrictions on RSUs, as specified in the RSU award agreement, including restrictions based upon the achievement of specific performance goals and time-based restrictions on vesting. As determined by the compensation committee at the time of the award, settlement of vested RSUs may be made in the form of cash, shares of common stock, or a combination of cash and common stock. Settlement of vested RSUs will be in a lump sum as soon as practicable after the vesting date. The amount of the settlement will equal the fair market value of the RSUs on the vesting date. Each RSU will be credited with an amount equal to the dividends paid on a share of common stock between the date of award and the date the RSU is paid to the participant, if at all. Dividend equivalents will vest, if at all, upon the same terms and conditions governing the vesting of the RSUs under the 2017 Plan. Payment of the dividend equivalent will be paid at the same time as payment of the RSU. The holders of RSUs will have no voting rights.

Each award agreement for RSUs will specify the extent to which the participant will have the right, if any, to retain unvested RSUs following termination of the participant’s employment with the Company or, in the case of a non-employee director, service with the board. In its sole discretion, the compensation committee will make these determinations; these provisions need not be uniform among all awards of RSUs issued under the 2017 Plan and may reflect distinctions based on reasons for termination of employment or, in the case of a non-employee director, service with the board. Except in the case of terminations by reason of death or disability, RSUs awarded to participants who are “covered employees” and which are intended to qualify as performance-based compensation under Section 162(m), will be forfeited by the participant to the Company.

Performance Units/Performance Shares

The compensation committee has the discretion to award performance units and performance shares under the 2017 Plan upon such terms and conditions as it may establish, as evidenced in the relevant award agreement.  The maximum aggregate payout for awards of performance shares which may be granted in any one  fiscal year to any one participant will be the fair market value of 200,000 shares, whereas the maximum aggregate payout for awards of performance units which may be granted in any one  fiscal year to any one participant will be $1,500,000. Performance units will have an initial value as determined by the compensation committee, whereas performance shares will have an initial value equal to one share of common stock on the date of award. At the time of the award of the performance units or shares, the compensation committee in its discretion will establish performance goals which, depending on the extent to which they are met, will determine the number and/or value of performance units or shares that will be paid out to the participant. Under the terms of the 2017 Plan, after the applicable performance period has ended, the holder of performance units or shares will be entitled to receive payout on the number and value of performance units or shares earned by the participant over the performance period. The payout on the number and value of the performance units and performance shares will be a function of the extent to which corresponding performance goals are met.

Payment of performance shares and performance units will be made in a single lump sum following the close of the applicable performance period. Upon satisfaction of the specified performance goals, the compensation committee will pay the earned performance shares in shares of Company common stock. In its discretion, the compensation committee may pay earned performance units in cash, in shares of Company stock or in a combination of cash and stock, which will have an aggregate fair market value equal to the value of the earned performance share or performance unit at the close of the applicable performance period. Participants will not be entitled to dividend or voting rights with respect to any performance shares or performance units earned but not yet distributed to a participant. Unless otherwise determined by the compensation committee, in the case of death or disability during the performance period, the participant, or his or her estate, will not be entitled to receive any payout of the performance shares or performance units. In the case of any other termination of the participant’s employment during the performance period, all performance shares and performance units intended to qualify as performance-based compensation will be forfeited by the participant.

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Adjustment and Amendments

The 2017 Plan provides for appropriate adjustments in the number of shares of Company stock subject to awards and available for future awards in the event of changes in outstanding common stock by reason of a merger, stock split, stock dividend, or certain other events.

The 2017 Plan may be modified or amended by the board at any time and for any purpose which the board deems appropriate. However, no such amendment may adversely affect any outstanding awards without the affected holder’s consent. No amendment may, without stockholder approval, (i) materially increase the benefits earned by participants under the 2017 Plan, (ii) materially increase the number of shares which may be issued under the 2017 Plan or (iii) materially modify the requirements for participation in the 2017 Plan.

Change in Control

In the event of a change in control, as defined in the 2017 Plan, generally all options and SARs granted under the 2017 Plan will become immediately exercisable; and restriction periods and other restrictions imposed on restricted stock and RSUs which are not intended to qualify as performance-based compensation under Section 162(m) under the Code will lapse. Any award intended to qualify as performance-based under Section 162(m) must be earned in accordance with the applicable award agreement.

Non-transferability

No award under the 2017 Plan may be sold, transferred, pledged, assigned or otherwise transferred in any manner by a participant except by will or by the laws of descent and distribution; and any award will be exercisable during a participant’s lifetime only by the participant or by the participant’s guardian or legal representative. These limitations may be waived by the compensation committee, subject to restrictions imposed under the SEC’s short-swing trading rules and federal tax requirements relating to incentive stock options.

Duration of the 2017 Plan

The 2017 Plan will remain in effect until all shares subject to the 2017 Plan have been purchased or acquired under the terms of the 2017 Plan, and all performance periods for performance-based awards granted under the 2017 Plan have been completed. However, no award is permitted to be granted under the 2017 Plan on or after the day prior to the tenth anniversary of the date the board approved the 2017 Plan. The board, upon recommendation of the compensation committee, may at any time amend, suspend or terminate the 2017 Plan in whole or in part for any purpose the compensation committee deems appropriate, subject, however, to the limitations referenced in “Adjustment and Amendments,” above.

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

The following table sets forth information known to us regarding the beneficial ownership of our common stock as of October 10 , 2017, and as adjusted to reflect the common stock to be issued and sold by us in the offering, for:

· each person, or group of affiliated persons, known to us to beneficially own more than 5% of our Class A common stock;

· each of our directors and named executive officers; and

· all of our directors and executive officers as a group.

Beneficial ownership of shares is determined under the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as indicated by footnote, and subject to applicable community property laws, we believe each person identified in the table has sole voting and investment power with respect to all shares of common stock beneficially owned by them.

Applicable percentage ownership in the following table is based on 1,666,667 shares of Class B common stock outstanding as of October 10 , 2017, all of which are convertible into shares of our Class A common stock on a one-for-one basis. We have based our calculation of the percentage of beneficial ownership and voting power after the offering on 1,466,667 shares of Class A common stock in the case of the minimum offering and 6,666,666 in the case of the maximum offering. No options or warrants were outstanding to purchase our common stock as of October 10 , 2017. We intend to conduct a forward stock split in which we will issue an additional 1,666,567 shares of our Class B common stock to Royalty Exchange before the consummation of the offering, which additional shares are reflected in the table below. Unless otherwise noted below, the address of each person listed on the table is c/o Royalty Exchange, Inc., 1550 Larimer Street #769, Denver, Colorado 80202.

	Shares Beneficially Owned Before this Offering							Shares beneficially owned after this offering (assuming minimum offering)						Shares beneficially owned after this offering (assuming maximum offering)
Name of Beneficial Owner	Number		%		Voting Power %			Number		%		Voting Power %		Number		%		Voting Power %
Royalty Exchange, Inc. (1)(2)		1,666,667		100		100			1,666,667		50.8		91.2		1,666,667		19.6		71.0
Jeff Schneider(2)(3)		1,666,667		100		100			1,716,667		52.3		91.4		1,716,667		20.2		71.2
Matthew Smith(2)(3)		1,666,667		100		100			1,716,667		52.3		91.4		1,716,667		20.2		71.2
Gary Young(3)		—		—		—			50,000		3.1	*			50,000	*		*
Directors and executive officers as a group (3 persons)		1,666,667		100		100	*		1,816,667		55.3		92.0		1,816,667		21.4		71.6

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* Less than 1%.

(1) As of October 10 , 2017, Royalty Exchange holds 100 shares of our Class B common stock, which is convertible at any time at Royalty Exchange’s option into shares of our Class A common stock on a one-for-one basis. The table reflects our intention to conduct a forward stock split in which we will issue an additional 1,666,567 shares of our Class B common stock to Royalty Exchange before the consummation of the offering.

(2) Royalty Exchange is controlled by Matthew Smith, who serves as Royalty Exchange’s Chief Executive Officer as well as the Executive Chairman of our board of directors, and Jeff Schneider, who serves as Royalty Exchange’s President and Chief Financial Officer as well as our Chief Executive Officer and Chief Financial Officer.

(3) Reflects the issuance of 50,000 restricted shares of our Class A common stock to each of Jeff Schneider, Matthew Smith and Gary Young effective as of the closing of the offering.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Policies and Procedures for Related Party Transactions

We currently do not have a formal policy concerning transactions with related persons. In connection with the offering, we plan to adopt a written policy, effective upon completion of the offering, that requires all future transactions between us and any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of, or entities affiliated with, any of them, or any other related persons (as defined in Item 404 of Regulation S-K) or their affiliates, in which the amount involved is equal to or greater than $120,000.00, be approved in advance by our audit committee. Any request for such a transaction must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, the extent of the related party’s interest in the transaction, and whether the transaction is on terms no less favorable to us than terms we could have generally obtained from an unaffiliated third party under the same or similar circumstances.

Related Party Transactions

Described below are the transactions, and series of similar transactions, since our inception in May 2017, to which we were a party or will be a party, in which:

· the amounts involved exceeded or will exceed $ 120,000 ; and

· any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.

Anticipated Agreements with Royalty Exchange

Royalty Exchange currently owns 100% of our voting securities. We intend to enter into an agreement with our controlling stockholder, Royalty Exchange, whereby Royalty Exchange will assign its interests in the Option Agreement to us.

Following the consummation of the offering, Royalty Exchange will continue to have a majority of the voting power. In addition, each of our current officers and directors, Jeff Schneider, Matthew Smith and Gary Young, serves as an executive officer of Royalty Exchange.

In the immediate future, we do not plan to establish independent infrastructure that is dedicated to our business and we will continue to rely on Royalty Exchange for these services in accordance with the services agreement. Therefore, we intend to enter into a services agreement with Royalty Exchange (“Shared Services Agreement”) pursuant to which Royalty Exchange will provide to us management and administrative services, including providing our executive management and other personnel as well as services relating to information technology support, brand management and other support operations, facilities, human resources, tax planning and administration, accounting, treasury and insurance. Initially, the service fee will be equal to 5% of the gross cash received by us related to our royalty portfolio (the “Service Fee”). The parties may negotiate changes to the Shared Services Agreement in good faith from time to time to the extent that the parties believe that the Service Fee is not reasonably related to the actual cost of Services in any fiscal year.

Indemnity Agreements

We plan to enter into indemnification agreements with each of our directors and executive officers, the form of which is attached as an exhibit to the offering statement of which this offering circular forms a part. The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws will require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of the rights of our Class A common stock, Class B common stock and preferred stock. This summary is not complete. For more detailed information, please see our certificate of incorporation and bylaws, which are filed as exhibits to the offering statement of which this offering circular is a part.

Upon the closing of the offering and the filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of 12,000,000 shares of Class A common stock, par value of $0.001 per share, 2,000,000 shares of Class B common stock, par value $0.001 per share, and 1,000,000 shares of preferred stock, par value $0.001 per share.

Common Stock

Outstanding Shares

As of October 10 , 2017, 100 shares of our Class B common stock were outstanding and no shares of our Class A common stock or preferred stock were outstanding. Following the completion of the offering, there will be (i) 1,616,667 outstanding shares of Class A common stock, assuming the minimum number of shares is sold in the offering, or 6,816,666 outstanding shares of Class A common stock, assuming the maximum number of shares is sold in the offering, (ii) 1,666,667 outstanding shares of Class B common stock and (iii) zero outstanding shares of preferred stock.

Voting Rights

The holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to ten votes per share. The holders of Class A common stock and Class B common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders, unless otherwise required by Delaware law or our certificate of incorporation. Delaware law could require holders of Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:

· if we were to seek to amend our certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and

· if we were to seek to amend our certificate of incorporation in a manner that alters or changes the powers, preferences or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.

Our certificate of incorporation and bylaws do not provide for cumulative voting rights. Because of this, the holders of a plurality of the voting power of our shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose. With respect to matters other than the election of directors, at any meeting of the stockholders at which a quorum is present or represented, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at such meeting and entitled to vote on the subject matter shall be the act of the stockholders, except as otherwise required by law. The holders of a majority of the voting power of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders.

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Conversion

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in our certificate of incorporation, including, without limitation, transfers for tax and estate planning purposes, so long as the transferring holder of Class B common stock continues to hold exclusive voting and dispositive power with respect to the shares transferred.

Once converted into a share of Class A common stock, a converted share of Class B common stock will not be reissued. Following the conversion of all outstanding shares of Class B common stock, no further shares of Class B common stock will be issued.

Dividends

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of Class A common stock and Class B common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds on a pari passu basis. For more information see the section of this offering circular captioned “Dividend Policy.” If a dividend is paid in the form of Class A common stock or Class B common stock, then holders of Class A common stock shall receive Class A common stock and holders of Class B common stock shall receive Class B common stock.

Liquidation

In the event of our liquidation, dissolution or winding up, holders of Class A common stock and Class B common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.

Rights and Preferences

Holders of Class A common stock and Class B common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to Class A common stock or Class B common stock. The rights, preferences and privileges of the holders of Class A common stock and Class B common stock are subject to and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Fully Paid and Nonassessable

All of our outstanding shares of Class B common stock are, and the shares of Class A common stock to be issued pursuant to the offering, when paid for, will be fully paid and nonassessable.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A.

Preferred Stock

Upon the closing of the offering, our board of directors will have the authority, without further action by the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of Class A common stock or Class B common stock. The issuance of preferred stock could adversely affect the voting power of holders of Class A common stock and Class B common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing change in our control or other corporate action. Upon closing of the offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

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PLAN OF DISTRIBUTION

The Offering

We are offering a minimum of 1,466,667 shares and a maximum of 6,666,666 shares on a best efforts basis (the “Offered Shares”). This offering will start on or after the date that the offering is qualified by the SEC and will terminate at the earliest of: (i) the date on which 6,666,666 shares have been sold, (ii) April 25, 2018, or (iii) the date on which this offering is earlier terminated by us in our sole discretion (the “Termination Date”). The offering will only close if we have at least $11,000,000 in funded subscriptions for Offered Shares on the Folio platform on or before April 25, 2018 . We have no right to receive investor funds before the first closing.

We may decide to close the offering early or cancel it, in our sole discretion. If we extend the offering, we will provide that information in an amendment to this offering circular. If we close the offering early or cancel it, we may do so without notice to you.

As described under “Business—Acquired Interests—Option Agreement,” the Option is exercisable in our sole and absolute discretion on or before November 15, 2017, which expiration date may only be extended with the consent of the Counterparties . The Option Agreement provides that we may raise capital from sources other than a public offering in order to fund the purchase price for the Option before the November 15, 2017 expiration date, as may be extended. If we raise capital for the purchase price from sources other than this offering, we will provide that information in an amendment to this offering circular. In the event we do raise capital other than in a public offering to fund the purchase price, the Option Agreement provides that we must conduct an initial public offering prior to April 27, 2018 and provides penalties if we do not conduct an initial public offering by that date.

This offering circular will be furnished to prospective investors via download 24 hours per day, 7 days per week on the www.royaltyflow.com website.

Exchange Listing

Prior to this offering, there has been no public market for our common stock. We have applied to the Nasdaq Capital Market to list shares of our common stock under the symbol “RLTY.” Our common stock will not commence trading on the Nasdaq Capital Market until each of the following conditions are met: (i) the offering is terminated; and (ii) we have filed a post-qualification amendment to the offering statement of which this offering circular forms a part and a registration statement on Form 8-A; and such post-qualification amendment is qualified by the SEC and the Form 8-A has become effective. Pursuant to applicable rules under Regulation A, the Form 8-A will not become effective until the SEC qualifies the post-qualification amendment. We intend to file the post-qualification amendment and request its qualification immediately prior to the termination of the offering in order that the Form 8-A may become effective as soon as practicable. Even if we meet the minimum requirements for listing on the Nasdaq Capital Market, we may wait before terminating the offering and commencing the trading of our common stock on the Nasdaq Capital Market in order to raise additional proceeds. As a result, you may experience a delay between the closing of your purchase of shares of our common stock and the commencement of exchange trading of our common stock on the Nasdaq Capital Market.

If we fail to meet the minimum requirements for listing on the Nasdaq Capital Market, we will seek quotation of our common stock on an OTC market and would anticipate quotation on the OTC market to begin following the termination of this offering.

Procedures for Subscribing

We will use our existing website, www.royaltyflow.com, to provide notification of the offering. We are utilizing an online platform operated by Folio Investments, Inc. (“Folio”), a Financial Industry Regulatory Authority (“FINRA”) member and SEC-registered clearing broker-dealer, in connection with the offering. Folio is not affiliated with the Company. Investors who are purchasing Offered Shares will be required to open an account with Folio and deposit funds into such account to subscribe to the offering. We are not selling the shares through commissioned sales agents or underwriters, other than commissions payable to Folio.

To purchase Offered Shares in the offering through the Folio platform, a prospective investor must have a brokerage account with Folio. Using the online Folio platform, prospective investors will be able to access and view offering materials, including the offering circular, and submit subscription requests to purchase Offered Shares in the offering. When submitting a subscription request, a prospective investor will be required to agree to various terms and conditions and will be required to review and electronically sign any necessary documents.

Prospective investors utilizing the Folio platform must deposit the funds intended for the purchase of Offered Shares in the offering in their Folio accounts. The funds can be provided by check, wire, Automated Clearing House (“ACH”) push, ACH pull, direct deposit, Automated Customer Account Transfer Service (“ACATS”) or non-ACATS transfer. The funds that are deposited will remain at Folio in the investors’ accounts pending instructions to release the funds when all conditions and contingencies relating to the offering have been met. Until such conditions and contingencies have been met and a closing occurs, the funds are owned and controlled by the prospective investors. The funds in the prospective investors’ Folio accounts are swept into FDIC-insured bank accounts on a daily basis as part of Folio’s cash sweep program until the conditions and contingencies of the offering are satisfied and the offering closes. This process, under which the prospective investors’ funds remain in accounts at Folio until closing of the offering occurs, complies with Exchange Act Rule 15c2-4 pursuant to a no-action letter provided to Folio by the staff of the SEC dated July 15, 2015. We shall pay Folio escrow-less closing and book entry fees equal to 0.9% of the gross proceeds from the sale of Offered Shares through Folio and a platform fee equal to 0.1% of the gross proceeds from the sale of Offered Shares through Folio.

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After all conditions and contingencies for a closing have been met, the Company will notify Folio when it wishes to conduct such closing. Pursuant to Rule 15c2-4, unless there is a closing with respect to proceeds in the offering, we will not have any access to such proceeds. We may begin accepting investment proceeds at any time beginning two days after this offering circular has been qualified by the SEC . After closing, Folio will send trade confirmations to the investors.

Under Rule 251 of Regulation A, if our common stock will not trade on a national securities exchange, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). If our common stock will not trade on a national securities exchange, a non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).

How to Calculate Net Worth: For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the Offered Shares.

In order to purchase the Offered Shares and prior to the acceptance of any funds from an investor, an investor will be required to represent, to the Company’s satisfaction, that he or she is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this offering , if applicable .

Investment Limitations if We Do Not Obtain a Listing on a National Securities Exchange

As set forth in Title IV of the JOBS Act, there are no limits on how many shares an investor may purchase if the offering results in a listing of our common stock on the Nasdaq Capital Market or other national securities exchange. The following would apply only if we are unable to obtain a listing on a national securities exchange and we seek for our common stock to trade on a platform of the OTC markets.

Generally, in the case of trading on the over-the-counter markets, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see “How to Calculate Net Worth” above). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

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Because this is a Tier 2, Regulation A offering, most investors in the case of trading on the over-the-counter markets must comply with the 10% limitation on investment in the offering. The only type of investor in this offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited Investor:

(i)	You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year;
(ii)	You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase Offered Shares;
(iii)	You are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer;
(iv)	You are an organization described in Section 501(c)(3) of the Internal Revenue Code, or the Code, a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the Offered Shares, with total assets in excess of $5,000,000;
(v)	You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development company as defined in the Investment Advisers Act of 1940;
(vi)	You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;
(vii)	You are a trust with total assets in excess of $5,000,000, your purchase of Offered Shares is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the Offered Shares; or
(viii)	You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000.

If we are unable to obtain a listing on a national securities exchange, the subscription agreement will include a representation by the investor to the effect that, if you are not an Accredited Investor, you are investing an amount that does not exceed the greater of 10% of your annual income or 10% of your net worth (excluding your principal residence).

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to the offering, there has been no public market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after the offering. Future sales of our common stock in the public markets, or the availability of such shares for sale in the public markets, could adversely affect market prices prevailing from time to time. Furthermore, only a limited number of shares of our common stock may be available for sale in the public markets after the closing of the offering due to contractual, legal and other restrictions on resale. All of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless such shares are held by any of our “affiliates” as such term is defined in Rule 144 under the Securities Act.

Omnibus  Incentive Plan

Before the completion of the offering, we intend to adopt an  omnibus incentive plan. See “Executive Compensation—2017  Omnibus Incentive Plan.” We also intend to register the shares to be issued under such plan, and such shares will eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates and any lock-up agreements.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of the material U.S. federal income tax considerations applicable to non-U.S. holders (as defined herein) with respect to their ownership and disposition of shares of our common stock issued pursuant to this offering. All prospective non-U.S. holders of our common stock should consult their tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock. In general, a non-U.S. holder means a beneficial owner of our common stock (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not, for U.S. federal income tax purposes:

· an individual who is a citizen or resident of the United States;

· a corporation, or an entity treated as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States or of any state thereof or the District of Columbia;

· an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

· a trust if (1) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (2) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.

This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing U.S. Treasury Regulations promulgated thereunder, published administrative pronouncements and rulings of the U.S. Internal Revenue Service, which we refer to as the IRS, and judicial decisions, all as in effect as of the date of this offering circular. These authorities are subject to change and to differing interpretation, possibly with retroactive effect. Any change or differing interpretation could alter the tax consequences to non-U.S. holders described in this offering circular.

We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances, nor does it address any alternative minimum, Medicare contribution, estate or gift tax consequences, or any aspects of U.S. state, local or non-U.S. taxes. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder and does not address the special tax rules applicable to particular non-U.S. holders, such as holders that own, or are deemed to own, more than 5% of our capital stock (except to the extent specifically set forth below), corporations that accumulate earnings to avoid U.S. federal income tax, tax-exempt organizations, banks, financial institutions, insurance companies, brokers, dealers or traders in securities, commodities or currencies, tax-qualified retirement plans, holders who hold or receive our common stock pursuant to the exercise of employee stock options or otherwise as compensation, holders holding our common stock as part of a hedge, straddle or other risk reduction strategy, conversion transaction or other integrated investment, holders deemed to sell our common stock under the constructive sale provisions of the Code, controlled foreign corporations, passive foreign investment companies and certain former U.S. citizens or long-term residents.

In addition, this discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as partnerships for U.S. federal income tax purposes) or persons that hold their common stock through partnerships. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds shares of our common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Such partners and partnerships should consult their tax advisors regarding the tax consequences of the purchase, ownership and disposition of our common stock.

There can be no assurance that a court or the IRS will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling with respect to the U.S. federal income tax consequences to a non-U.S. holder of the purchase, ownership or disposition of our common stock.

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Distributions on Our Common Stock

Distributions, if any, on our common stock generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the non-U.S. holder’s investment, up to such holder’s adjusted tax basis in the common stock. Any remaining excess will be treated as capital gain from the sale or exchange of such common stock, subject to the tax treatment described below in “Gain on Sale, Exchange or Other Disposition of Our Common Stock.” Any such distribution will also be subject to the discussion below under the heading “Foreign Accounts.”

Dividends paid to a non-U.S. holder will generally be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence.

Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States and, if an applicable income tax treaty so provides, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and disclosure requirements. However, such U.S. effectively connected income, net of specified deductions and credits, is taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code). Any U.S. effectively connected income received by a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence.

To claim a reduction or exemption from withholding, a non-U.S. holder of our common stock generally will be required to provide (a) a properly executed IRS Form W-8BEN or W-8BEN-E (or successor form) and satisfy applicable certification and other requirements to claim the benefit of an applicable income tax treaty between the United States and such holder’s country of residence, or (b) a properly executed IRS Form W-8ECI stating that dividends are not subject to withholding because they are effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

A non-U.S. holder that is eligible for a reduced rate of U.S. withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

Gain on Sale, Exchange or Other Disposition of Our Common Stock

Subject to the discussion below regarding backup withholding and foreign accounts, in general, a non-U.S. holder will not be subject to any U.S. federal income tax on any gain realized upon such holder’s sale, exchange or other disposition of shares of our common stock unless:

· the gain is effectively connected with a U.S. trade or business of the non-U.S. holder and, if an applicable income tax treaty so provides, is attributable to a permanent establishment or a fixed base maintained in the United States by such non-U.S. holder, in which case the non-U.S. holder generally will be taxed at the graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code) and, if the non-U.S. holder is a foreign corporation, the branch profits tax described above in “Distributions on Our Common Stock” also may apply;

· the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the non-U.S. holder will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty) on the net gain derived from the disposition, which may be offset by U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States); or

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· our common stock constitutes a U.S. real property interest because we are, or have been, at any time during the five-year period preceding such disposition (or the non-U.S. holder’s holding period, if shorter) a “U.S. real property holding corporation.” Generally, a corporation is a U.S. real property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we do not believe that we are, or have been, a U.S. real property holding corporation, or that we are likely to become one in the future. Even if we are or become a U.S. real property holding corporation, provided that our common stock is regularly traded, as defined by applicable Treasury Regulations, on an established securities market, our common stock will be treated as a U.S. real property interest only with respect to a non-U.S. holder that holds more than 5% of our outstanding common stock, directly or indirectly, actually or constructively, during the shorter of the 5-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock. In such case, such non-U.S. holder generally will be taxed on its net gain derived from the disposition at the graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code). No assurance can be provided that our common stock is or will in the future be regularly traded on an established securities market for purposes of the rules described above.

Backup Withholding and Information Reporting

We must report annually to the IRS and to each non-U.S. holder the gross amount of the dividends on our common stock paid to such holder and the tax withheld, if any, with respect to such dividends. Non-U.S. holders will have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup withholding at the applicable rate with respect to dividends on our common stock. A non-U.S. holder generally will not be subject to U.S. backup withholding with respect to payments of dividends on our common stock if it certifies its non-U.S. status by providing a valid IRS Form W-8BEN or W-8BEN-E (or successor form) or W-8ECI, or otherwise establishes an exemption; provided we do not have actual knowledge or reason to know such non-U.S. holder is a U.S. person, as defined in the Code. Dividends paid to non-U.S. holders subject to the U.S. withholding tax, as described above in “Distributions on Our Common Stock,” generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.

Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder may be allowed as a credit against the non-U.S. holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

60

Foreign Accounts

The Foreign Account Tax Compliance Act, which we refer to as FATCA, generally imposes a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid to a “foreign financial institution” (as specifically defined for this purpose), unless such institution enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise qualifies for an exemption from these rules. A U.S. federal withholding tax of 30% also applies to dividends and will apply to the gross proceeds of a disposition of our common stock paid to a non-financial foreign entity (as defined in the Code), unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding substantial direct and indirect U.S. owners of the entity, or otherwise qualifies for an exemption from these rules. The withholding provisions described above currently apply to dividends paid on our common stock and will generally apply with respect to gross proceeds of a sale or other disposition of our common stock on or after January 1, 2019.

If withholding is imposed under FATCA on a payment related to our common stock, a beneficial owner that is not a foreign financial institution and that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally may obtain a refund from the IRS by filing a U.S. federal income tax return (which may entail significant administrative burden). An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

61

LEGAL MATTERS

The validity of the securities we are offering has been passed upon by Hogan Lovells US LLP, Denver, Colorado.

EXPERTS

The Statements of Cash Receipts from Royalty Interests included in this offering circular have been audited by Hein & Associates LLP, independent registered public accounting firm, as set forth in their report appearing herein, and are so included in reliance upon that report given on the authority of Hein & Associates LLP as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the Offered Shares. This offering circular, which constitutes a part of the offering statement, does not contain all of the information set forth in the offering statement or the exhibits and schedules filed therewith. For further information about us and the Offered Shares, we refer you to the offering statement and the exhibits and schedules filed therewith. Statements contained in this offering circular regarding the contents of any contract or other document that is filed as an exhibit to the offering statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the offering statement. Upon the completion of the offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.

62

Index to Financial Statements

Royalty Flow Inc.

	Page
Royalty Flow Inc.
Audited financial statements for Royalty Flow Inc. are not presented as the Company is recently formed, has nominal assets and liabilities and has not yet commenced operations.
Eminem Royalty Interests
Report of Independent Registered Public Accounting Firm	F-2
Statements of Revenue and Recoveries	F-3
Notes to Statements of Revenue and Recoveries	F-4
Unaudited Pro Forma Condensed Financial Information	F-7
Unaudited Pro Forma Condensed Balance Sheet	F-8
Unaudited Pro Forma Condensed Statement of Operations For the Eight Months Ended May 31, 2017	F-9
Unaudited Pro Forma Condensed Statement of Operations For the Year Ended September 30, 2016	F-10
Notes to Unaudited Pro Forma Condensed Financial Information	F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Royalty Flow Inc.

We have audited the accompanying Statements of Revenue and Recoveries related to the Eminem Royalty Interests available for partial purchase by Royalty Flow Inc. (the “Company”) for each of the years in the periods ended September 30, 2011 through September 30, 2016 and for the six months ended March 31, 2017 (the “Statements”). The Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the Statements referred to above present fairly, in all material respects, the Revenue and Recoveries of the Eminem Royalty Interests available for partial purchase by Royalty Flow Inc. for each of the years in the periods ended September 30, 2011 through September 30, 2016, and for the six months ended March 31, 2017 in conformity with U.S. generally accepted accounting principles.

/s/ Hein & Associates LLP                    

Denver, Colorado

June 26, 2017

F-2

Eminem Royalty Interests

Statements of Revenue and Recoveries

Revenue and Recoveries for 100% Ownership Interest

Year Ended September 30:	Total
2011	$	9,800,897
2012		3,718,323
2013		14,530,426
2014		10,144,374
2015		4,232,731
2016		4,760,556
Six Months Ended March 31:
2017	$	1,942,408

The Accompanying Notes are an Integral Part of the Statements of Revenue and Recoveries.

F-3

Eminem Royalty Interests

Notes to Statements of Revenue and Recoveries

1. Overview and Basis of Presentation

Overview. On April 27, 2017, Royalty Exchange, Inc. (the “Stockholder”) entered into an Option Agreement (the “Option”) with F.B.T. Productions LLC and Em2M LLC (collectively, the “Sellers”). The Sellers are parties to certain royalty agreements between Marshall B. Mathers III (“Eminem”) and Universal Music Group (“UMG”), a major record label specializing in marketing of music recordings and music videos (the “Royalty Agreements”). Under the Royalty Agreements, the Sellers are entitled to receive royalties and related payments that result from the use and exploitation of audio and audio-visual recordings embodying Eminem’s performances (“Performances”). The Sellers’ rights under the Royalty Agreements are referred to herein as the “Eminem Royalty Interests”.

On May 22, 2017, Stockholder formed Royalty Flow Inc. (the “Company”) as its wholly-owned subsidiary. The Option is expected to be assigned from Stockholder to the Company, and in connection with the transfer, the Company will reflect a related-party payable to Stockholder for repayment of the Option deposit . Pursuant to the Option, the Company has the right to acquire a passive interest in the Royalty Agreements , whereby the Company may elect to acquire either a 15% interest for $9,750,000, or a 25% interest for $18,750,000. The Option provided for a non-refundable holding payment of $50,000 that will be applied against the purchase price if the Option is exercised. The Option provides the right to exercise on or before November 15, 2017, subject to earlier termination by the Sellers if certain milestones toward completion of an initial public offering are not achieved. Upon the closing of the Option, the Company will be entitled to receive its share of Sellers’ interest under the Royalty Agreements, including future audit recoveries, beginning immediately after the Option is exercised.

Basis of Presentation. Under the Royalty Agreements, UMG accumulates world-wide transaction information that gives rise to royalty obligations based on the Performances and the contractual rates in effect. UMG reports royalties earned for semi-annual periods ending on the last day of June and December of each year (referred to as “Recurring Royalties”). The royalty reports and related payments are generally submitted by UMG within three months after the end of such periods.

The Sellers have the right to conduct audits of UMG’s calculations to ensure that all Performances are included and that the appropriate royalty rates are utilized.

The Sellers have historically entered into litigation to assert claims of copyright infringement to protect their rights to receive the full amount of royalties they are entitled to under the Royalty Agreements .  A significant litigation settlement was received in 2012 and reflected in the year ended September 30, 2013, and the Sellers continue to assert claims through litigation through June 2017. However, no assurance can be provided that the Sellers will continue to receive net proceeds from future litigation settlements.

Due to the industry practice of reporting royalties on a semi-annual basis and due to a wide variation in the amounts reported each period, it is not practicable to accurately estimate royalties and recoveries using the accrual basis of accounting. Accordingly, the Eminem Royalty Interests are reported by the Sellers using the cash basis of accounting whereby Recurring Royalties, audit recoveries and litigation settlements are recognized in the period that cash is received.

F-4

2. Semi-Annual Royalty Reporting

The table below presents the semi-annual cash receipts by reporting period for royalties and recoveries related to the 100% ownership interest of Sellers which is the basis for the amounts presented in the accompanying Statements of Revenue and Recoveries:

Revenue and Recoveries for 100% Ownership Interest
Cash Received During Six Months Ended	Universal Music Group Reporting Period for Six Months Ended	Total
March 31, 2011	June 30, 2010	$	3,407,891
March 31, 2011	December 31, 2010		4,032,402
September 30, 2011	June 30, 2011		2,360,604
March 31, 2012	December 31, 2011		1,568,774
September 30, 2012	June 30, 2012		2,149,549
September 30, 2013	December 31, 2012		12,969,711
September 30, 2013	June 30, 2013		1,560,715
March 31, 2014	December 31, 2013		2,034,003
September 30, 2014	June 30, 2014		8,110,371
March 31, 2015	December 31, 2014		2,317,429
September 30, 2015	June 30, 2015		1,915,302
March 31, 2016	December 31, 2015		1,631,102
September 30, 2016	June 30, 2016		3,129,454
March 31, 2017	December 31, 2016		1,942,408

3. Option Exercise Scenario for 15% Ownership Interest

Assuming the Company exercises the alternative to acquire a 15% ownership interest, the following represents the pro rata share of revenue and other recoveries associated with Sellers’ interest shown in Note 2:

Revenue and Recoveries for 15% Ownership Interest
Cash Received During Six Months Ended	Universal Music Group Reporting Period for Six Months Ended	Total
March 31, 2011	June 30, 2010	$	511,184
March 31, 2011	December 31, 2010		604,860
September 30, 2011	June 30, 2011		354,091
March 31, 2012	December 31, 2011		235,316
September 30, 2012	June 30, 2012		322,432
September 30, 2013	December 31, 2012		1,945,457
September 30, 2013	June 30, 2013		234,107
March 31, 2014	December 31, 2013		305,100
September 30, 2014	June 30, 2014		1,216,556
March 31, 2015	December 31, 2014		347,614
September 30, 2015	June 30, 2015		287,295
March 31, 2016	December 31, 2015		244,665
September 30, 2016	June 30, 2016		469,418
March 31, 2017	December 31, 2016		291,361

F-5

4. Option Exercise Scenario for 25% Ownership Interest

Assuming the Company exercises the alternative to acquire a 25% ownership interest, the following represents the pro rata share of revenue and other recoveries associated with Seller’s interest shown in Note 2:

Revenue and Recoveries for 25% Ownership Interest
Cash Received During Six Months Ended	Universal Music Group Reporting Period for Six Months Ended	Total
March 31, 2011	June 30, 2010	$	851,973
March 31, 2011	December 31, 2010		1,008,101
September 30, 2011	June 30, 2011		590,151
March 31, 2012	December 31, 2011		392,193
September 30, 2012	June 30, 2012		537,387
September 30, 2013	December 31, 2012		3,242,428
September 30, 2013	June 30, 2013		390,179
March 31, 2014	December 31, 2013		508,501
September 30, 2014	June 30, 2014		2,027,593
March 31, 2015	December 31, 2014		579,357
September 30, 2015	June 30, 2015		478,826
March 31, 2016	December 31, 2015		407,775
September 30, 2016	June 30, 2016		782,364
March 31, 2017	December 31, 2016		485,602

F-6

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

ROYALTY FLOW INC.

On April 27, 2017, Royalty Exchange, Inc. (the “Stockholder”) entered into an Option Agreement (the “Option”) with F.B.T. Productions LLC and Em2M LLC (collectively, the “Sellers”). The Sellers are parties to certain royalty agreements between Marshall B. Mathers III (“Eminem”) and Universal Music Group (“UMG”), a major record label specializing in marketing of music recordings and music videos (the “Royalty Agreements”). Under the Royalty Agreements, the Sellers are entitled to receive royalties and related payments that result from the use and exploitation of audio and audio-visual recordings embodying Eminem’s performances (“Performances”). Under the Royalty Agreements, UMG accumulates world-wide transaction information that gives rise to royalty obligations based on the Performances and the contractual rates in effect. UMG reports royalties earned for semi-annual periods ending on the last day of June and December of each year. The royalty reports and related payments are generally submitted by UMG within three months after the end of such periods.

Royalty Flow Inc. (the “Company” or “RF”) was incorporated on May 22, 2017. The Option is expected to be assigned by the Stockholder to the Company for a payable to a related party for $50,000, the amount of Option deposit as discussed below . Pursuant to the Option, the Company has the right to acquire a passive interest in the Royalty Agreements, whereby the Company may elect either a 15% interest for $9,750,000 or a 25% interest for $18,750,000. The Option provides for a non-refundable holding payment of $50,000, which was paid by Stockholder at the time the Option was executed and that will be applied against the purchase price if the Option is exercised. The Option provides the right to exercise on or before November 15, 2017, subject to earlier termination by the Sellers if certain milestones toward completion of an initial public offering are not achieved. Upon the closing of the Option, the Company will be entitled to receive the 15% or 25% share, as applicable, of Sellers’ interest under the Royalty Agreements beginning with the first payment date that occurs after the Option is exercised. Upon the closing of the Option, Royalty Flow’s interest in the Royalty Agreements is referred to herein as the “Royalty Interests.”

The pro forma financial information gives effect to the consummation of the offering for the issuance of a minimum of 1,466,667 shares of common stock at the estimated offering price of $ 7.50 per share. Since the offering is on a best efforts basis, the accompanying pro forma financial information does not give effect to the maximum offering proceeds or to the closing of the Option to acquire 25% of the Royalty Interests. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed financial information are described in the accompanying notes. The unaudited pro forma condensed financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Royalty Interests been acquired on the dates indicated. Further, the unaudited pro forma condensed financial information does not purport to project the future operating results or financial position of the Company. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed financial information and are subject to change as additional information becomes available and analyses are performed.

The Company was formed on May 22, 2017, and will be a public company upon consummation of the equity offering described above. Except for a nominal amount of formation costs, the Company has not incurred any general and administrative expenses to date. Management expects to incur general and administrative expense, including public company costs, ranging from $150,000 to $300,000 after completion of the equity offering. However, since these costs are to be incurred in the future and are not factually supportable, the Company has not given pro forma effect to such costs in the accompanying unaudited condensed pro forma information.

As discussed above, the Company was only recently formed and has not commenced operations and has nominal assets and liabilities. Accordingly, the Company’s financial statements as of May 31, 2017, and for the period from inception on May 22, 2017 through May 31, 2017, have not been included herein and have been excluded from the accompanying pro forma financial information.

F-7

ROYALTY FLOW INC.

Unaudited Pro Forma Condensed Balance Sheet

May 31, 2017

(Dollars in Thousands)

	Pro Forma Adjustments
	Equity Issuances			Acquisition			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	10,590	(B)	$	(9,700	)	$	890
Long-term assets:
Option deposit		50	(A)		(50	)		—
Royalty Interests					9,750			9,750
Total assets							$	10,640
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	$	50	(A)				$	50
Stockholders’ equity:
Common Stock		1	(B)					1
Additional paid-in capital		10,589	(B)					10,589
Total stockholders’ equity								10,590
Total liabilities and stockholders’ equity							$	10,640

See accompanying notes to unaudited pro forma condensed financial information.

F-8

ROYALTY FLOW INC.

Unaudited Pro Forma Condensed Statement of Operations

For the Eight Months Ended May 31, 2017

(Dollars in Thousands, Except Per Share Amounts)

	Pro Forma Adjustments			Pro Forma
Revenue from Royalty Interests	$	291	(AA)	$	291
Amortization of Royalty Interests		433	(BB)		433
Loss before income taxes					(142	)
Income tax benefit		10	(CC)		10
Net loss				$	(132	)
Earnings (loss) per share (basic and diluted)				$	(0.09	)
Weighted average number of shares outstanding (basic and diluted)		1,466, 667	(DD)		1,466,667

See accompanying notes to unaudited pro forma condensed financial information.

F-9

ROYALTY FLOW INC.

Unaudited Pro Forma Condensed Statement of Operations

For the Year Ended September 30, 2016

(Dollars in Thousands, Except Per Share Amounts)

	Pro Forma Adjustments			Pro Forma
Revenue from Royalty Interests	$	714	(AA)	$	714
Amortization of Royalty Interests		650	(BB)		650
Income before income taxes					64
Income tax expense		(10	(CC)		(10	)
Net income				$	54
Earnings per share (basic and diluted)				$	0.04
Weighted average number of shares outstanding (basic and diluted)		1,466,667	(DD)		1,466,667

See accompanying notes to unaudited pro forma condensed financial information.

F-10

ROYALTY FLOW INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION 

1. Basis of Pro Forma Presentation

The unaudited pro forma condensed balance sheet at May 31, 2017 gives effect to the (i) minimum net equity offering proceeds of $10,590,000 after deduction of estimated offering costs of $410,000, (ii) contribution by Stockholder of the Option, and (iii) exercise of the Option to acquire 15% of the Royalty Interests for $9,750,000. The pro forma adjustments are given effect as if such transactions had been consummated on May 31, 2017.

The unaudited pro forma condensed statements of operations give effect to the transactions discussed above as if such transactions had been consummated on October 1, 2015, for each of (i) the eight months ended May 31, 2017, and (ii) the year ended September 30, 2016. The pro forma condensed statements of operations and balance sheet conform to the accounting policies expected to be adopted by the Company. The unaudited pro forma condensed financial information has been prepared by accounting for the Royalty Interests as an acquisition of an asset. Significant accounting policies expected to be adopted with respect to the Royalty Interests are set forth in Note 2.

The historical financial statements have been adjusted in the unaudited pro forma condensed financial information to give pro forma effect to events that are: (1) directly attributable to the acquisition of the Royalty Interests; (2) factually supportable; and (3) with respect to the statement of operations, expected to have a continuing impact on the future results of operations.

2. Significant Accounting Policies

In connection with the acquisition of the Royalty Interests, the Company expects to adopt the following significant accounting policies that have been implemented in the preparation of these pro forma financial statements:

Revenue Recognition

The Company intends to recognize revenue upon cash receipt of the Royalty Interest. Due to the industry practice of reporting royalties earned on a semi-annual basis by the major record label to the Sellers, the Company only obtains reports from the Sellers on a semi-annual basis to report the amount of royalties. Based on historical records of the Sellers, there is a wide variation in the amount of semi-annual royalties and, accordingly, management believes the recording revenue upon receipt of cash is preferable for future reporting.

The Sellers have the right to conduct audits of the major record label’s calculations to ensure that all Performances are included and that the appropriate royalty rates are utilized. The Sellers have audited royalty calculations for Performances through December 2011. Additional royalty recoveries based on audits will be recognized in the period in which the audit results are resolved and agreed to by the parties.

F-11

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new guidance provides a five-step process for recognizing revenue that depicts 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. The new guidance also requires expanded qualitative and quantitative disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for public companies with annual reporting periods beginning after December 31, 2017, and is to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial adoption. Early adoption is permitted for all entities but not before the original effective date for public entities. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. Under ASU 2014-09, the Company will be required to estimate the amount of royalties on the accrual basis. The Company has elected to delay the application of new accounting standards under the provisions of its status as an emerging growth company as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). The Company will adopt this standard using the full retrospective methodology for its annual period ending on September 30, 2019 as allowed by the JOBS Act. Adoption will have a material effect on the Company’s financial statements.

Royalty Interests

The Company intends to adopt the policy of amortizing the cost of the Royalty Interests using the straight-line method over a period of 15 years. The Royalty Interests are considered a long-lived asset that is required to be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists for the Royalty Interests if the carrying amount exceeds the estimates of future net undiscounted cash flows expected to be generated by such assets. An impairment charge is required to be recognized if the carrying amount of the asset, or asset group, exceeds its fair value.

3. Adjustments to Unaudited Pro Forma Condensed Balance Sheet

(A) Transfer of Option from Stockholder. Gives effect to the anticipated assignment of the Option from Stockholder to the Company as if it occurred on May 31, 2017. In connection with the transfer, the Company will reflect a related-party payable to Stockholder for repayment of the Option deposit . Accordingly, a pro forma adjustment reflects the historical cost of the Option of $50,000.

(B) Minimum Net Proceeds from Equity Offering. A pro forma adjustment assumes the minimum equity offering is completed as if it occurred on May 31, 2017, whereby the Company issues 1,466,667 shares of the Company’s common stock at the Offering Price of $ 7.50 per share, resulting in gross proceeds from the offering of $11,000,000. Estimated costs of the offering of $410,000 are assumed to be paid from the gross proceeds, resulting in net proceeds of $10,590,000. After reflecting a pro forma adjustment for the par value of the common stock of $ 1,467 , the remainder of the net proceeds of $ 10,588,533 is allocated to additional paid-in capital.

(C) Exercise of Option to Acquire a 15% Interest in the Royalty Agreements. A pro forma adjustment assumes that the Company exercises the Option to acquire a 15% interest for $9,750,000. The pro forma adjustment reflects an offset of the Option consideration of $50,000, resulting in a net cash payment for $9,700,000 as required under the Option to purchase a 15% interest in the Royalty Agreements as if it occured on May 31, 2017. Due to the Company’s adoption of the cash basis of reporting royalty revenue, none of the purchase price for the 15% interest in the Royalty Agreements is allocated to receivables for royalties earned before the acquisition date.

F-12

4. Adjustments to Unaudited Pro Forma Condensed Statements of Operations

(AA) Revenue from Royalty Interests. Revenue from Royalty Interests is derived from the historical records obtained from the Sellers as set forth in Note 2 of the Statements of Cash Receipts from Royalty Agreements appearing elsewhere herein. Such historical records report royalties earned on a semi-annual basis with payments generally received by the Sellers within three months after the close of the reporting period. With respect to 15% ownership of the Royalty Interests, the table below summarizes the historical semi-annual payments as if the option was exercised on October 1, 2015 along with the Company’s revenue recognition calculations (in thousands):

	15% Ownership of the Royalty Interests
Revenue Reporting Period	Cash Receipt Details				Eight Months Ended May 31,		Year Ended September 30,
For Six Months Ended	Month	Amount			2017		2016
December 31, 2015	March 2016	$	245	(1)	$	—	$	245
June 30, 2016	September 2016		469	(1)		—		469
December 31, 2016	March 2017		291	(1)		291		—
Total					$	291	$	714

____________

(1) Represents prorated revenue based on a 15% ownership interest in the Royalty Interests for this reporting period.

(BB) Amortization of Acquisition Cost of Royalty Interests. The cost of the 15% ownership of the Royalty Interests discussed in Note 3(C) is being amortized using the straight-line method over 15 years. Accordingly, a pro forma adjustment for $433,000 is recognized for the eight months ended May 31, 2017, and $650,000 is recognized for the year ended September 30, 2016, as if the option was exercised on October 1, 2015. 

(CC) Income Tax Expense. A pro forma adjustment for income tax expense, as if the option was exercised on October 1, 2015, is recognized based on the U.S. Federal statutory corporate tax rates that range from 15% to 34%, and estimated state income tax rates of 5%. For the year ended September 30, 2016, the effective tax rate was 16% due to the impact of lower graduated rates applicable to income before income taxes of $64,000. Based on a loss before income taxes of $142,000 for the eight months ended May 31, 2017, the tax benefit was limited to the amount of income tax expense of $10,000 recognized for the year ended September 30, 2016. Due to the Company’s limited operating history, further income tax benefits were not considered realizable for the eight months ended May 31, 2017.

(DD) Weighted Average Shares Outstanding. The calculation of pro forma weighted average number of shares outstanding gives effect to 1,466,667 shares of common stock issued based on the minimum net proceeds from the equity offering as discussed in Note 3(B), as if the offering occurred on October 1, 2015.

F-13

Royalty Flow Inc.

Minimum Offering of 1,466,667 Shares

Maximum Offering of 6,666,666 Shares

              , 2017

Part III - Exhibits

EXHIBIT INDEX

Exhibit No.	Description
2.1*	Certificate of Incorporation of Royalty Flow Inc.
2.2*	Bylaws of Royalty Flow Inc.
2.3*	Form of Amended and Restated Certificate of Incorporation of Royalty Flow Inc. (to be effective upon the closing of this offering).
2.4*	Form of Amended and Restated Bylaws of Royalty Flow Inc. (to be effective upon the closing of this offering).
3.1*	Form of Stock Certificate for Class A Common Stock.
3.2*	Form of Stock Certificate for Class B Common Stock.
6.1+	Option Agreement, dated April 27, 2017, by and between Royalty Exchange, Inc., F.B.T. Productions LLC and Em2M LLC .
6.2+	Form of Shared Services Agreement by and between Royalty Exchange, Inc. and Royalty Flow Inc.
6.3*	Form of Royalty Flow Inc. 2017 Omnibus Incentive Plan.
6.4*	Form of Restricted Stock Award Agreement for 2017 Omnibus Incentive Plan.
6.5*	Form of Restricted Stock Unit Award Agreement for 2017 Omnibus Incentive Plan.
6.6+	Form of Indemnification Agreement for Non-Employee Directors .
11.1*	Consent of Hein & Associates LLP.
11.2*	Consent of Hogan Lovells US LLP (included in Exhibit 12.1) .
12.1*	Opinion of Hogan Lovells US LLP .
13.1*	“Testing the waters” materials.
15.1+	Draft offering statement previously submitted pursuant to Rule 252(d).
15.2+	Correspondence previously submitted pursuant to Rule 252(d).

________

* Filed herewith.

+ Previously filed.

III-1

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on  October 11 , 2017.

Royalty Flow Inc.
By:	/s/ Jeff Schneider
Name:	Jeff Schneider
Title:	Chief Executive Officer and Chief Financial Officer

This offering statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Jeff Schneider	Chief Executive Officer and Chief Financial Officer	October 11 , 2017
Jeff Schneider	(Principal Executive, Financial and Accounting Officer)
/s/ Matthew Smith	Executive Chairman	October 11 , 2017
Matthew Smith
/s/ Gary Young	Director	October 11 , 2017
Gary Young

III-2

EX1A-2A CHARTER.1

EXHIBIT 2.1

ROYALTY FLOW INC.

CERTIFICATE OF INCORPORATION

ARTICLE I

The name of the Corporation is Royalty Flow Inc.

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is 704 N. King St., Suite 500, Wilmington, Delaware 19899, in the County of Newcastle. The name of its registered agent at such address is Global Corporate Services, Inc.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

A. Classes of Stock.  The total number of shares of capital stock that the Corporation shall have authority to issue is 210, consisting of the following: 100 shares of Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), 100 shares of Class B Common Stock, par value $0.001 per share (“Class B Common Stock”), and 10 shares of undesignated Preferred Stock, par value $0.001 per share (“Preferred Stock”).

Immediately upon the acceptance of this Amended and Restated Certificate of Incorporation for filing by the Secretary of State of the State of Delaware (the “Effective Time”), each share of the Corporation’s capital stock issued and outstanding or held as treasury stock immediately prior to the Effective Time, shall, automatically and without further action by any stockholder, be reclassified as, and shall become, one share of Class B Common Stock.

B. Rights of Preferred Stock.  The Board of Directors of the Corporation (the “Board of Directors”) is authorized, subject to any limitations prescribed by law but to the fullest extent permitted by law, to provide by resolution for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable laws of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers (which may include, without limitation, full, limited or no voting powers), preferences, and relative, participating, optional or other rights of the shares of each such series and any qualifications, limitations or restrictions thereof.

C. Vote to Increase or Decrease Authorized Shares of Preferred Stock.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL, without a separate class vote of the holders of Preferred Stock, or any separate series votes of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.  

 

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D. Rights of Class A Common Stock and Class B Common Stock.  The relative powers, rights, qualifications, limitations and restrictions granted to or imposed on the shares of Class A Common Stock and Class B Common Stock are as follows:

1. Voting Rights.

(a) General Right to Vote Together; Exception. Except as otherwise expressly provided herein or required by applicable law, the holders of Class A Common Stock and Class B Common Stock shall vote together as one class on all matters submitted to a vote of the stockholders; provided, subject to the terms of any Preferred Stock Designation, the number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

(b) Votes Per Share.  Except as otherwise expressly provided herein or required by applicable law, on any matter that is submitted to a vote of the stockholders, each holder of Class A Common Stock shall be entitled to one (1) vote for each such share, and each holder of Class B Common Stock shall be entitled to ten (10) votes for each such share.  

2. Identical Rights.  Except as otherwise expressly provided herein or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters, including, without limitation:

(a) Dividends and Distributions.  Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any Distribution paid or distributed by the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class; provided, that in the event a Distribution is paid in the form of Class A Common Stock or Class B Common Stock (or Rights to acquire such stock), then holders of Class A Common Stock shall receive Class A Common Stock (or Rights to acquire such stock, as the case may be) and holders of Class B Common Stock shall receive Class B Common Stock (or Rights to acquire such stock, as the case may be).

(b) Subdivision or Combination. If the Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock or Class B Common Stock, the outstanding shares of the other such class will be subdivided or combined in the same proportion and manner, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class. 

(c) Equal Treatment in a Change of Control or any Merger Transaction.  In connection with any Change of Control Transaction, shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any consideration into which such shares are converted or any consideration paid or otherwise distributed to stockholders of the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class. Any merger or consolidation of the Corporation with or into any other entity, which is not a Change of Control Transaction, shall require approval by the affirmative vote of the holders of a majority of the voting power of the Corporation entitled to vote.

 

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3. Conversion of Class B Common Stock.

(a) Voluntary Conversion. Each one (1) share of Class B Common Stock shall be convertible into one (1) share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the transfer agent of the Corporation.

(b) Automatic Conversion.  Shares of Class B Common Stock shall automatically, without any further action, convert into an equal number of shares of Class A Common Stock upon a Transfer of such shares; provided that no such automatic conversion shall occur in the case of a Transfer by a Class B Stockholder to any of the following persons or entities (each, a “Permitted Transferee”) and from any such Permitted Transferee back to such Class B Stockholder and/or any other Permitted Transferee established by or for such Class B Stockholder: any corporation, partnership or limited liability company in which such Class B Stockholder directly, or indirectly through one or more Permitted Transferees, owns shares, partnership interests or membership interests, as applicable, with sufficient voting control in the corporation, partnership or limited liability company, as applicable, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive voting control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company; provided that in the event the Class B Stockholder no longer owns sufficient shares, partnership interests or membership interests, as applicable, or no longer has sufficient legally enforceable rights to ensure the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company, as applicable, each share of Class B Common Stock then held by such corporation, partnership or limited liability company, as applicable, shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.

(c) Automatic Conversion of all Outstanding Class B Common Stock. Each one (1) issued and outstanding share of Class B Common Stock shall automatically, without any further action, convert into one (1) share of Class A Common Stock upon the date specified by affirmative vote of the holders of at least a majority of the then outstanding shares of Class B Common Stock, voting as a single class.

(d) Procedures.  The Corporation may, from time to time, establish such policies and procedures relating to the conversion of Class B Common Stock to Class A Common Stock and the general administration of this dual class stock structure, including the issuance of stock certificates (or the establishment of book-entry positions) with respect thereto, as it may deem reasonably necessary or advisable, and may from time to time request that holders of shares of Class B Common Stock furnish certifications, affidavits or other proof to the Corporation as it deems necessary to verify the ownership of Class B Common Stock and to confirm that a conversion to Class A Common Stock has not occurred.  A determination by the Secretary of the Corporation that a Transfer results in a conversion to Class A Common Stock shall be conclusive and binding.

(e) Immediate Effect.  In the event of a conversion of shares of Class B Common Stock to shares of Class A Common Stock pursuant to this Section D.3, such conversion(s) shall be deemed to have been made at the time that the Transfer of shares occurred or immediately upon notice of conversion, as applicable. Upon any conversion of Class B Common Stock to Class A Common Stock, all rights of the holder of shares of Class B Common Stock shall cease and the person or persons in whose names or names the certificate or certificates (or book-entry position(s)) representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock. Shares of Class B Common Stock that are converted into shares of Class A Common Stock as provided in this Section D.3 shall be retired and may not be reissued.

 

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(f) Reservation of Stock.  The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.

E. No Further Issuances.  Except for Class B Common Stock outstanding immediately following the Effective Time or issuable pursuant to a dividend payable in accordance with Article IV, Section D.2(a), the Corporation shall not at any time after the Effective Time issue any additional shares of Class B Common Stock, unless such issuance is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock.

ARTICLE V

The following terms, where capitalized in this Amended and Restated Certificate of Incorporation, shall have the meanings ascribed to them in this Article V:

“Change of Control Transaction” means (i) the sale, lease, exchange, or other disposition (other than liens and encumbrances created in the ordinary course of business, including liens or encumbrances to secure indebtedness for borrowed money that are approved by the Corporation’s Board of Directors, so long as no foreclosure occurs in respect of any such lien or encumbrance) of all or substantially all of the Corporation’s property and assets (which shall for such purpose include the property and assets of any direct or indirect subsidiary of the Corporation), provided that any sale, lease, exchange or other disposition of property or assets exclusively between or among the Corporation and any direct or indirect subsidiary or subsidiaries of the Corporation shall not be deemed a “Change of Control Transaction”; (ii) the merger, consolidation, business combination, or other similar transaction of the Corporation with any other entity, other than a merger, consolidation, business combination, or other similar transaction that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation and more than fifty percent (50%) of the total number of outstanding shares of the Corporation’s capital stock, in each case as outstanding immediately after such merger, consolidation, business combination, or other similar transaction, and the stockholders of the Corporation immediately prior to the merger, consolidation, business combination, or other similar transaction own voting securities of the Corporation, the surviving entity or its parent immediately following the merger, consolidation, business combination, or other similar transaction in substantially the same proportions (vis a vis each other) as such stockholders owned the voting securities of the Corporation immediately prior to the transaction; (iii) a recapitalization, liquidation, dissolution, or other similar transaction involving the Corporation, other than a recapitalization, liquidation, dissolution, or other similar transaction that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation and more than fifty percent (50%) of the total number of outstanding shares of the Corporation’s capital stock, in each case as outstanding immediately after such recapitalization, liquidation, dissolution or other similar transaction, and the stockholders of the Corporation immediately prior to the recapitalization, liquidation, dissolution or other similar transaction own voting securities of the Corporation, the surviving entity or its parent immediately following the recapitalization, liquidation, dissolution or other similar transaction in substantially the same proportions (vis a vis each other) as such stockholders owned the voting securities of the Corporation immediately prior to the transaction; and (iv) any Change of Control Share Issuance.

 

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“Class B Stockholder” means (i) the registered holder of a share of Class B Common Stock at the Effective Time and (ii) the initial registered holder of any shares of Class B Common Stock that are originally issued by the Corporation after the Effective Time.

“Distribution” means (i) any dividend or distribution of cash, property or shares of the Corporation’s capital stock; and (ii) any distribution following or in connection with any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Rights” means any option, warrant, conversion right or contractual right of any kind to acquire shares of the Corporation’s authorized but unissued capital stock.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Securities Exchange” means, at any time, the registered national securities exchange on which the Corporation’s equity securities are then principally listed or traded, and over-the-counter markets.

“Trading Day” means any day on which the Securities Exchange is open for trading.

“Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law. A “Transfer” shall also include, without limitation, (i) a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether or not there is a corresponding change in beneficial ownership) or (ii) the transfer of, or entering into a binding agreement with respect to, Voting Control over a share of Class B Common Stock by proxy or otherwise subsequent to the Effective Date; provided, that the following shall not be considered a “Transfer”: (a) the grant of a proxy to officers or directors of the Corporation at the request of the Board of Directors of the Corporation in connection with actions to be taken at an annual or special meeting of stockholders; or (b) the pledge of shares of Class B Common Stock by a Class B Stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction so long as the Class B Stockholder continues to exercise Voting Control over such pledged shares; provided, that a foreclosure on such shares of Class B Common Stock or other similar action by the pledgee shall constitute a “Transfer”.

“Voting Control” with respect to a share of Class B Common Stock means the exclusive power (whether directly or indirectly) to vote or direct the voting of such share of Class B Common Stock by proxy, voting agreement, or otherwise.

 

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ARTICLE VI

A. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

B. Number of Directors; Election.  Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, the number of directors that constitutes the entire Board of Directors of the Corporation shall be fixed solely by resolution of the Board of Directors. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director of the Corporation shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been duly elected and qualified or until his or her earlier resignation, death or removal.

Notwithstanding the foregoing provisions of this Article VI, and subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal.

D. Removal; Vacancies.  Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, any director may be removed from office, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock. Vacancies occurring on the Board of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director, and not by stockholders. A person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be duly elected and qualified.

ARTICLE VII

A. Written Ballot.  Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

B. Amendment of Bylaws. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation; provided, that a Bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board of Directors.

C. Special Meetings. Special meetings of the stockholders may be called only by (i) the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors (after giving effect to vacancies and previously authorized but unfilled directorships); (ii) the chairman of the Board of Directors; (iii) the chief executive officer of the Corporation; or (iv) the president of the Corporation (in the absence of a chief executive officer).  

D. No Cumulative Voting. No stockholder will be permitted to cumulate votes at any election of directors.

 

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ARTICLE VIII

To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

Neither any amendment nor repeal of this Article VIII, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article VIII, shall eliminate or reduce the effect of this Article VIII in respect of any matter occurring, or any cause of action, suit or proceeding accruing or arising or that, but for this Article VIII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE IX

Subject to any provisions in the Bylaws of the Corporation related to indemnification of directors or officers of the Corporation, the Corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors.

The Corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the Corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

A right to indemnification or to advancement of expenses arising under a provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation shall not be eliminated or impaired by an amendment to this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

 

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ARTICLE X

Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL or this Certificate of Incorporation or the Bylaws (as either may be amended from time to time), or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Article X with respect to any current or future action or claim. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

ARTICLE XI

If any provision of this Amended and Restated Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Amended and Restated Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Amended and Restated Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Amended and Restated Certificate of Incorporation shall be enforceable in accordance with its terms.

Except as provided in ARTICLE VIII and ARTICLE IX above, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, that, notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation inconsistent with ARTICLE VI, ARTICLE VII, ARTICLE VIII, ARTICLE IX, ARTICLE X or this ARTICLE XI.

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EX1A-2A CHARTER.2

EXHIBIT 2.2

BYLAWS

OF

ROYALTY FLOW INC.

(Effective as of May 22, 2017)

ARTICLE I

OFFICES, CORPORATE SEAL

Section 1.01. Registered Office. The registered office of the corporation in Delaware shall be that set forth in the Certificate of Incorporation or in the most recent amendment of the Certificate of Incorporation or in a certificate filed with the Secretary of State of Delaware changing the registered office.

Section 1.02. Other Offices. The corporation may have such other offices, within or without the State of Delaware, as the directors shall, from time to time, determine.

Section 1.03. Corporate Seal. The corporation shall have no seal.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01. Place and Time of Meetings. All meetings of the stockholders shall be held at such place as may be designated from time to time by the Board of Directors and, in the absence of such designation, shall be held at the principal executive office of the corporation. The directors shall designate the time of day for each meeting of the stockholders and, in the absence of such designation, every meeting of stockholders shall be held at ten o’clock a.m. local time at the place of such meeting. Notwithstanding the foregoing, the Board of Directors may determine that the meeting shall not be held at any place, but may instead be held by means of remote communication.

Section 2.02. Annual Meetings. Unless directors are elected by written consent in lieu of an annual meeting, the corporation shall hold annual meetings of stockholders on such date and at such time as shall be designated from time to time by the Board of Directors. If an annual meeting is held, then at such meeting the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. If a written consent electing directors is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

Section 2.03. Special Meetings. Special meetings of the stockholders, called by the Board of Directors or the Chief Executive Officer, may be held at any time and for any purpose or purposes, unless otherwise prescribed by statute. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice thereof (except to the extent that such notice is waived or is not required as provided in the Delaware General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) or these Bylaws).

 

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Section 2.04. Quorum, Adjourned Meetings. Stockholders may take action on a matter at a meeting only if a quorum exists with respect to that matter. Except as otherwise provided by statute or by the Certificate of Incorporation, the holders of a majority of the shares entitled to vote at the meeting, and who are present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. Once a share is represented for any purpose at a meeting (other than solely to object (1) to holding the meeting or transacting business at the meeting, or (2) (if it is a special meeting) to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice), it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time.

Section 2.05. Voting. Unless otherwise provided in the Delaware General Corporation Law or in the corporation’s Certificate of Incorporation, and subject to the other provisions of these Bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the corporation’s capital stock that has voting power and that is held by such stockholder. Cumulative voting shall not be allowed in the election of directors or for any other reason. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed appointment of proxy shall be irrevocable if the appointment form states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power.

Section 2.06. Required Vote. When a quorum is present at any meeting of stockholders, all matters shall be determined, adopted and approved by the affirmative vote (which need not be by ballot) of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote with respect to the matter, unless the proposed action is one upon which, by express provision of statutes or of the Certificate of Incorporation, a different vote is specified and required, in which case such express provision shall govern and control with respect to that vote on that matter. If the Certificate of Incorporation provides for more or less than one vote for any share, on any matter, every reference in these Bylaws to a majority or other proportion of stock, voting stock or shares shall refer to a majority or other proportion of the votes of such stock, voting stock or shares. Where a separate vote by a class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. Notwithstanding the foregoing, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

Section 2.07. Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date for the adjourned meeting.

 

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In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Delaware General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in the manner prescribed by Section 213(b) of the Delaware General Corporation Law. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Delaware General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

Section 2.08. List of Stockholders. After the record date for a meeting of stockholders has been fixed, at least ten days before such meeting, the officer who has charge of the stock ledger of the corporation shall make a list of all stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder (but not the electronic mail address or other electronic contact information, unless the Board of Directors so directs) and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (1) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (2) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then such list shall also, for the duration of the meeting, be produced and kept open to the examination of any stockholder who is present at the time and place of the meeting. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

Section 2.09. Notice of Meetings. Notice of any meeting of stockholders, stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and (if it is a special meeting) the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting (except to the extent that such notice is waived or is not required as provided in the Delaware General Corporation Law or these Bylaws). Such notice shall be given in accordance with, and shall be deemed effective as set forth in, Sections 222 and 232 (or any successor section or sections) of the Delaware General Corporation Law.

Section 2.10. Waiver of Notice. Whenever the giving of any notice is required by statute, the Certificate of Incorporation or these Bylaws, a written waiver thereof signed by the person or persons entitled to said notice, or a waiver thereof by electronic transmission by the person entitled to said notice, delivered to the corporation, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice (1) of such meeting, except when the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (2) (if it is a special meeting) of consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter at the beginning of the meeting.

 

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Section 2.11. Written Action. Any action required or permitted to be taken at a stockholders’ meeting may be taken without a meeting, without prior notice and without a vote, if the action is taken by persons who would be entitled to vote at a meeting and who hold shares having voting power equal to not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by the stockholders entitled to take action without a meeting, and delivered to the corporation in the manner prescribed by the Delaware General Corporation Law for inclusion in the minute book. No consent shall be effective to take the corporate action specified unless the number of consents required to take such action are delivered to the corporation within sixty days of the delivery of the earliest-dated consent. A telegram, cablegram or other electronic transmission, including e-mail, consenting to such action and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section 2.11, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is delivered to the corporation in accordance with Section 228(d)(1) of the Delaware General Corporation Law. Written notice of the action taken shall be given in accordance with the Delaware General Corporation Law to all stockholders who do not participate in taking the action who would have been entitled to notice if such action had been taken at a meeting having a record date on the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation.

Section 2.12. Remote Communication. If authorized by the Board of Directors, and subject to such guidelines as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, participate in a meeting of stockholders and be deemed present in person and vote at such meeting whether such meeting is held at a designated place or solely by means of remote communication, provided that (1) the corporation implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (2) the corporation implements reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (3) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action is maintained by the corporation.

ARTICLE III

DIRECTORS

Section 3.01. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, subject to any limitation set forth in the Certificate of Incorporation or as otherwise may be required by the Delaware General Corporation Law.

 

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Section 3.02. Number. The number of directors of the corporation be determined from time to time by the Board of Directors but in no case shall the number of directors be less than one.

Section 3.03. Nomination and Term of Office. The Board of Directors shall nominate candidates to stand for election as directors; and other candidates also may be nominated by any corporation stockholder, provided such other nomination(s) are submitted in writing to the Secretary of the corporation, or such other officer of the corporation as may be designated by the Board of Directors, no later than ninety days prior to the meeting of stockholders at which such directors are to be elected, together with the identity of the nominator and the number of shares of the corporation’s stock owned, directly or indirectly, by the nominator. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.09 hereof, and each director elected shall hold office until such director’s successor is elected and qualified or until the director’s earlier death, resignation or removal. Directors need not be stockholders.

Section 3.04. Chairman of the Board of Directors. The Board of Directors shall appoint a member of the Board of Directors to serve as Chairman of the Board of Directors. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors, or, in the absence thereof, such person as the Chairman of the Board of Directors shall appoint shall preside at any such meeting.

Section 3.05. Board Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by any director on one day’s notice to each other director, either personally or by telephone, express delivery service (so that the scheduled delivery date of the notice is at least one day in advance of the meeting), telegram, facsimile transmission, electronic mail (effective when directed to an electronic mail address of the director), or other electronic transmission, as defined in Section 232(c) (or any successor section) of the Delaware General Corporation Law (effective when directed to the director), and on five days’ notice by mail (effective upon deposit of such notice in the mail). The notice need not describe the purpose of a special meeting.

Section 3.06. Waiver of Notice. A director may waive any notice required by statute, the Certificate of Incorporation or these Bylaws before or after the date and time stated in the notice. Except as set forth below, the waiver must be in writing, signed by the director entitled to the notice, or made by electronic transmission by the director entitled to the notice, and delivered to the corporation for inclusion in the minute book. Notwithstanding the foregoing, a director’s attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director, at the beginning of the meeting, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

Section 3.07. Quorum. A majority of the directors holding office immediately prior to a meeting of the Board of Directors shall constitute quorum for the transaction of business at such meeting. The vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these Bylaws.

 

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Section 3.08. Remote Communications. Members of the Board of Directors may participate in a meeting of the Board of Directors by any communication by means of which all participating directors can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

Section 3.09. Vacancies; Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the directors then in office, although fewer than a quorum, or by a sole remaining director. The previous sentence notwithstanding, whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by the affirmative vote of a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Each director so chosen shall hold office until the next election of directors of the class to which such director was appointed, and until such director’s successor is elected and qualified, or until the director’s earlier death, resignation or removal. In the event that one or more directors resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election of directors, and until such director’s successor is elected and qualified, or until the director’s earlier death, resignation or removal.

Section 3.10. Removal. Any or all of the directors may be removed from office at any time, with or without cause, in accordance with Section 141(k) of the Delaware General Corporation Law.

Section 3.11. Written Action. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board of Directors. The action must be evidenced by one or more consents in writing or by electronic transmission describing the action taken, signed by each director, and delivered to the corporation for inclusion in the minute book.

Section 3.12. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by unanimous vote, appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation; but no such committee shall have the power or authority in reference to approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval or adopting, amending or repealing any Bylaw of the corporation; and unless the resolution designating the committee, these Bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors, when required. Unless otherwise specified in the resolution of the Board of Directors appointing the committee, all provisions of the Delaware General Corporation Law and these Bylaws relating to meetings, action without meetings, notice (and waiver thereof), and quorum and voting requirements of the Board of Directors apply, as well, to such committees and their members. Unless otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

Section 3.13. Compensation. The Board of Directors shall from time to time determine the amount and type of compensation, if any, to be paid to directors for their service on the Board of Directors and its committees. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

 

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ARTICLE IV

OFFICERS

Section 4.01. Offices Created; Election. The corporation shall have such officers as the Board of Directors, the Chief Executive Officer, if any, or the President, if any, from time to time may elect; provided, however, that the Chief Executive Officer and the President shall be elected by the Board of Directors. Any number of offices or functions of those offices may be held or exercised by the same person. The Board of Directors, the Chief Executive Officer or the President may elect officers at any time.

Section 4.02. Term of Office. Each officer shall hold office until his or her successor has been elected and qualified, unless a different term is specified at the time such officer is elected, or until his or her earlier death, resignation or removal.

Section 4.03. Removal of Officers. Any officer may be removed from office at any time, with or without cause, by the Board of Directors, the Chief Executive Officer or the President; provided, however, that the Chief Executive Officer or the President shall be removed only by the Board of Directors.

Section 4.04. Resignation. An officer may resign at any time by giving written notice to the corporation. A resignation will be effective upon its receipt by the corporation unless the resignation specifies that it is to be effective at some later time or upon the occurrence of some specified later event.

Section 4.05. Vacancies. A vacancy in any office may be filled by the Board of Directors, the Chief Executive Officer or the President; provided, however, that any vacancy in the office of Chief Executive Officer shall be filled, if at all, by the Board of Directors.

Section 4.06. Powers. Unless otherwise specified by the Board of Directors, each officer shall have those powers and shall perform those duties that are (i) set forth in these Bylaws (if any are so set forth), (ii) specified at the time such officer is elected or in any subsequent resolution or document with respect to such officer’s duties authorized by the Board of Directors, the Chief Executive Officer or the President or (iii) commonly incident to the office held. An officer elected or appointed pursuant to Section 4.01 may, without the approval of the Board of Directors, the Chief Executive Officer or the President, as applicable, delegate some or all of the duties and powers of an office to other persons.

Section 4.07. Chief Executive Officer. Unless provided otherwise by a resolution adopted by the Board of Directors, the Chief Executive Officer, if any: (i) shall have general active management of the business of the corporation; (ii) shall see that all orders and resolutions of the Board of Directors are carried into effect; and (iii) shall perform such other duties as from time to time may be assigned by the Board of Directors. If at any time the corporation does not have a President, or the President is absent, disqualified from acting, unable to act or refuses to act, then the Chief Executive Officer shall have the powers and authority of the President under the Delaware General Corporation Law and these Bylaws.

 

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Section 4.08. Chief Financial Officer. Unless provided otherwise by a resolution adopted by the Board of Directors, the Chief Financial Officer, if any: (i) shall cause to be kept accurate financial records for the corporation; (ii) shall render to the Chief Executive Officer, the President and the Board of Directors, whenever requested, an account of all the transactions and of the financial condition of the corporation; and (iii) shall perform such other duties as may be prescribed by the Board of Directors, the Chief Executive Officer or the President from time to time.

Section 4.09. President. The President, if any, shall be subject to the direction and control of the Chief Executive Officer and the Board of Directors and shall have such powers and duties as the Board of Directors or the Chief Executive Officer may assign to the President. If the Chief Executive Officer is absent, disqualified from acting, unable to act or refuses to act, then the President shall have the powers of, and shall perform the duties of, the Chief Executive Officer.

Section 4.10. Vice Presidents. The Vice Presidents, if any, shall be subject to the direction and control of the Board of Directors, the Chief Executive Officer and the President and shall have such powers and duties as the Board of Directors, the Chief Executive Officer or the President may assign to them.

Section 4.11. Treasurer. The Treasurer, if any, shall be subject to the direction and control of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer and the President, and shall have such powers and duties as the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the President may assign to the Treasurer.

Section 4.12. Secretary. The Secretary, if any, shall be subject to the direction and control of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer and the President, and shall have such powers and duties as the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the President may assign to the Secretary.

Section 4.13. Other Officers. Any other officer elected by the Board of Directors, the Chief Executive Officer or the President shall have those powers and shall perform those duties that are (a) specified at the time such officer is elected or in any subsequent resolution or document with respect to such officer’s duties authorized by the Board of Directors, the Chief Executive Officer or the President and (b) commonly incident to the office held.

Section 4.14. Fidelity Bonds. The corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

 

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ARTICLE V

CAPITAL STOCK

Section 5.01. Certificate for Shares. The shares of the corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of the corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented by certificates, and, if stock is issued in uncertificated form, each holder thereof, shall be entitled upon request to have a certificate (representing the number of shares registered in certificate form) signed in the name of the corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

Section 5.02. Issuance of Shares. The Board of Directors is authorized to cause to be issued shares of the corporation up to the full amount authorized by the Certificate of Incorporation in such amounts as may be determined by the Board of Directors and as may be permitted by law. No shares shall be allotted except in consideration of cash or other property, tangible or intangible, received or to be received by the corporation under a written agreement, of services rendered, or of other consideration as may be allowed under Section 152 of the Delaware General Corporation Law.

Section 5.03. Transfer of Shares. The shares of stock of the corporation shall be transferable on the books of the corporation by the holder thereof in person or by his or her attorney upon surrender for cancellation of a certificate or certificates for the same number of shares, or other evidence of ownership if no certificates shall have been issued, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the validity of the signature as the corporation or its agents may reasonably require. The Board of Directors may appoint one or more transfer agents and registrars to maintain the share records of the corporation and to effect share transfers on its behalf.

Section 5.04. Stockholders of Record. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner, and to exercise all the rights and powers of an owner. The corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise may be provided by the Delaware General Corporation Law.

Section 5.05. Loss of Certificates. Any stockholder claiming a certificate for shares to be lost, stolen or destroyed shall make an affidavit of that fact in such form as the Board of Directors shall require and shall, if the Board of Directors so requires, give the corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the corporation against any claim which may be made against it on account of the certificate alleged to have been lost, stolen or destroyed or on account of the reissue of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed.

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ARTICLE VI

DIVIDENDS

Section 6.01. Declaration of Dividends. Subject to the provisions of the Certificate of Incorporation, of these Bylaws, and of law, the Board of Directors may declare dividends whenever, and in such amounts as, in its opinion, are deemed advisable.

Section 6.02. Entitled Stockholders. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

ARTICLE VII
INDEMNIFICATION AND INSURANCE

Section 7.01. Authorization of Indemnification. Each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether by or in the right of the corporation or otherwise (a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to an employee benefit plan, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the corporation (and any successor to the corporation by merger or otherwise) to the fullest extent authorized by, and subject to the conditions and (except as provided herein) procedures set forth in the Delaware General Corporation Law, as the same exists or may hereafter be amended (but any such amendment shall not be deemed to limit or prohibit the rights of indemnification hereunder for past acts or omissions of any such person insofar as such amendment limits or prohibits the indemnification rights that said law permitted the corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys’ fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person (except for a suit or action pursuant to Section 7.02 hereof) only if such proceeding (or part thereof) was authorized by the Board of Directors. Persons who are not directors or officers of the corporation and are not so serving at the request of the corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors. The indemnification conferred in this Section 7.01 also shall include the right to be paid by the corporation (and such successor) the expenses (including attorneys’ fees) incurred in the defense of or other involvement in any such proceeding in advance of its final disposition; provided, however, that, if and to the extent the Delaware General Corporation Law requires, the payment of such expenses (including attorneys’ fees) incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 7.01 or otherwise; and provided further, that, such expenses incurred by other employees and agents may be so paid in advance upon such terms and conditions, if any, as the Board of Directors deems appropriate.

 

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Section 7.02. Right of Claimant to Bring Action Against the Corporation. In order for any claimant to seek indemnification from the corporation under this Article VII, the claimant shall deliver a written claim to the corporation specifying in reasonable detail the amount of indemnification sought and a description of the persons, dates and circumstances giving rise to the indemnification claim. If a claim under this Section 7.02 is not paid in full by the corporation within sixty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring an action against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed or is otherwise not entitled to indemnification under Section 7.01, but the burden of proving such defense shall be on the corporation. The failure of the corporation (in the manner provided under the Delaware General Corporation Law) to have made a determination prior to or after the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law shall not be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Unless otherwise specified in an agreement with the claimant, an actual determination by the corporation (in the manner provided under the Delaware General Corporation Law) after the commencement of such action that the claimant has not met such applicable standard of conduct shall not be a defense to the action, but shall create a presumption that the claimant has not met the applicable standard of conduct.

Section 7.03. Non-exclusivity. The rights to indemnification and advance payment of expenses provided by Section 7.01 hereof shall not be deemed exclusive of any other rights to which those seeking indemnification and advance payment of expenses may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

Section 7.04. Survival of Indemnification. The indemnification and advance payment of expenses and rights thereto provided by, or granted pursuant to, Section 7.01 hereof shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, partner or agent and shall inure to the benefit of the personal representatives, heirs, executors and administrators of such person.

Section 7.05. Insurance. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person’s status as such, and related expenses, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the Delaware General Corporation Law.

 

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ARTICLE VIII

AMENDMENTS

Section 8.01. Amendment. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors, at any special meeting of the stockholders or of the Board of Directors or by written action by the stockholders or by the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such meeting or any notice required for such written action. The power of the Board of Directors to adopt, amend or repeal Bylaws shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws, and a Bylaw amendment adopted by the stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board of Directors.

Any action taken or authorized by the stockholders or by the Board of Directors, which would be inconsistent with the Bylaws then in effect but is taken or authorized by a vote or written action that would be sufficient to amend the Bylaws so that the Bylaws would be consistent with such action, shall be given the same effect as though the Bylaws had been temporarily amended or suspended so far, but only so far, as is necessary to permit the specific action so taken or authorized.

ARTICLE IX

SECURITIES OF OTHER CORPORATIONS

Section 9.01. Voting Securities Held by the Corporation. Unless otherwise ordered by the Board of Directors, and subject to any limitations imposed by the Chief Executive Officer of the corporation, any elected or appointed officer of the corporation shall have full power and authority on behalf of this corporation (i) to attend any meeting of security holders of other corporations or legal entities in which this corporation may hold securities and to vote such securities on behalf of this corporation; (ii) to execute any proxy for such meeting on behalf of this corporation; or (iii) to execute a written consent or a written action in lieu of a meeting of such other corporation or legal entity on behalf of this corporation. The elected or appointed officer acting on behalf of this corporation shall possess and may exercise any and all rights and powers incident to the ownership of such securities that this corporation possesses. The Board of Directors or the Chief Executive Officer may, from time to time, grant such power and authority to one or more other persons. The corporation may rely on any instrument signed by an officer of any stockholder of the corporation as the act of such stockholder of the corporation, unless the Board of Directors or the Chief Executive Officer has knowledge that such reliance is not reasonable.

Section 9.02. Purchase and Sale of Securities. Unless otherwise ordered by the Board of Directors, and subject to any limitations imposed by the Chief Executive Officer of the corporation, any elected or appointed officer of the corporation shall have full power and authority on behalf of this corporation to purchase, sell, transfer or encumber any and all securities of any other corporation or legal entity, and may execute and deliver such documents as may be necessary to effectuate such purchase, sale, transfer or encumbrance. The Board of Directors or the Chief Executive Officer may, from time to time, confer like powers upon any other person or persons.

 

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ARTICLE X

GENERAL PROVISIONS

Section 10.01. Inspection of Books and Records. Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies or extracts from: (1) the corporation’s stock ledger, a list of its stockholders, and its other books and records; and (2) other documents as required by law. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office or at its principal place of business.

Section 10.02. Reserve. The directors of the corporation may set apart, out of the funds of the corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve.

Section 10.03. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

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EX1A-2A CHARTER.3

EXHIBIT 2.3

ROYALTY FLOW INC.

FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I

The name of the Corporation is Royalty Flow Inc.

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is 704 N. King St., Suite 500, Wilmington, Delaware 19899, in the County of Newcastle. The name of its registered agent at such address is Global Corporate Services, Inc.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

A. Classes of Stock. The total number of shares of capital stock that the Corporation shall have authority to issue is 15,000,000, consisting of the following: 12,000,000 shares of Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), 2,000,000 shares of Class B Common Stock, par value $0.001 per share (“Class B Common Stock”), and 1,000,000 shares of undesignated Preferred Stock, par value $0.001 per share (“Preferred Stock”).

B. Rights of Preferred Stock. The Board of Directors of the Corporation (the “Board of Directors”) is authorized, subject to any limitations prescribed by law but to the fullest extent permitted by law, to provide by resolution for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable laws of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers (which may include, without limitation, full, limited or no voting powers), preferences, and relative, participating, optional or other rights of the shares of each such series and any qualifications, limitations or restrictions thereof.

C. Vote to Increase or Decrease Authorized Shares of Preferred Stock. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL, without a separate class vote of the holders of Preferred Stock, or any separate series votes of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.

D. Rights of Class A Common Stock and Class B Common Stock. The relative powers, rights, qualifications, limitations and restrictions granted to or imposed on the shares of Class A Common Stock and Class B Common Stock are as follows:

 

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1. Voting Rights.

(a) General Right to Vote Together; Exception. Except as otherwise expressly provided herein or required by applicable law, the holders of Class A Common Stock and Class B Common Stock shall vote together as one class on all matters submitted to a vote of the stockholders; provided, subject to the terms of any Preferred Stock Designation, the number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

(b) Votes Per Share. Except as otherwise expressly provided herein or required by applicable law, on any matter that is submitted to a vote of the stockholders, each holder of Class A Common Stock shall be entitled to one (1) vote for each such share, and each holder of Class B Common Stock shall be entitled to ten (10) votes for each such share.

2. Identical Rights. Except as otherwise expressly provided herein or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters, including, without limitation:

(a) Dividends and Distributions. Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any Distribution paid or distributed by the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class; provided, that in the event a Distribution is paid in the form of Class A Common Stock or Class B Common Stock (or Rights to acquire such stock), then holders of Class A Common Stock shall receive Class A Common Stock (or Rights to acquire such stock, as the case may be) and holders of Class B Common Stock shall receive Class B Common Stock (or Rights to acquire such stock, as the case may be).

(b) Subdivision or Combination. If the Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock or Class B Common Stock, the outstanding shares of the other such class will be subdivided or combined in the same proportion and manner, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class. 

(c) Equal Treatment in a Change of Control or any Merger Transaction. In connection with any Change of Control Transaction, shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any consideration into which such shares are converted or any consideration paid or otherwise distributed to stockholders of the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class. Any merger or consolidation of the Corporation with or into any other entity, which is not a Change of Control Transaction, shall require approval by the affirmative vote of the holders of a majority of the voting power of the Corporation entitled to vote.

 

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3. Conversion of Class B Common Stock.

(a) Voluntary Conversion. Each one (1) share of Class B Common Stock shall be convertible into one (1) share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the transfer agent of the Corporation.

(b) Automatic Conversion. Shares of Class B Common Stock shall automatically, without any further action, convert into an equal number of shares of Class A Common Stock upon a Transfer of such shares; provided that no such automatic conversion shall occur in the case of a Transfer by a Class B Stockholder to any of the following persons or entities (each, a “Permitted Transferee”) and from any such Permitted Transferee back to such Class B Stockholder and/or any other Permitted Transferee established by or for such Class B Stockholder: any corporation, partnership or limited liability company in which such Class B Stockholder directly, or indirectly through one or more Permitted Transferees, owns shares, partnership interests or membership interests, as applicable, with sufficient voting control in the corporation, partnership or limited liability company, as applicable, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive voting control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company; provided that in the event the Class B Stockholder no longer owns sufficient shares, partnership interests or membership interests, as applicable, or no longer has sufficient legally enforceable rights to ensure the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company, as applicable, each share of Class B Common Stock then held by such corporation, partnership or limited liability company, as applicable, shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.

(c) Automatic Conversion of all Outstanding Class B Common Stock. Each one (1) issued and outstanding share of Class B Common Stock shall automatically, without any further action, convert into one (1) share of Class A Common Stock upon the date specified by affirmative vote of the holders of at least a majority of the then outstanding shares of Class B Common Stock, voting as a single class.

(d) Procedures. The Corporation may, from time to time, establish such policies and procedures relating to the conversion of Class B Common Stock to Class A Common Stock and the general administration of this dual class stock structure, including the issuance of stock certificates (or the establishment of book-entry positions) with respect thereto, as it may deem reasonably necessary or advisable, and may from time to time request that holders of shares of Class B Common Stock furnish certifications, affidavits or other proof to the Corporation as it deems necessary to verify the ownership of Class B Common Stock and to confirm that a conversion to Class A Common Stock has not occurred. A determination by the Secretary of the Corporation that a Transfer results in a conversion to Class A Common Stock shall be conclusive and binding.

(e) Immediate Effect. In the event of a conversion of shares of Class B Common Stock to shares of Class A Common Stock pursuant to this Section D.3, such conversion(s) shall be deemed to have been made at the time that the Transfer of shares occurred or immediately upon notice of conversion, as applicable. Upon any conversion of Class B Common Stock to Class A Common Stock, all rights of the holder of shares of Class B Common Stock shall cease and the person or persons in whose names or names the certificate or certificates (or book-entry position(s)) representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock. Shares of Class B Common Stock that are converted into shares of Class A Common Stock as provided in this Section D.3 shall be retired and may not be reissued.

(f) Reservation of Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.

E. No Further Issuances. Except for outstanding shares of Class B Common Stock or shares of Class B Common Stock issuable pursuant to a dividend payable in accordance with Article IV, Section D.2(a), the Corporation shall not at any time issue any additional shares of Class B Common Stock, unless such issuance is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock.

 

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ARTICLE V

The following terms, where capitalized in this Amended and Restated Certificate of Incorporation, shall have the meanings ascribed to them in this Article V:

“Change of Control Transaction” means (i) the sale, lease, exchange, or other disposition (other than liens and encumbrances created in the ordinary course of business, including liens or encumbrances to secure indebtedness for borrowed money that are approved by the Corporation’s Board of Directors, so long as no foreclosure occurs in respect of any such lien or encumbrance) of all or substantially all of the Corporation’s property and assets (which shall for such purpose include the property and assets of any direct or indirect subsidiary of the Corporation), provided that any sale, lease, exchange or other disposition of property or assets exclusively between or among the Corporation and any direct or indirect subsidiary or subsidiaries of the Corporation shall not be deemed a “Change of Control Transaction”; (ii) the merger, consolidation, business combination, or other similar transaction of the Corporation with any other entity, other than a merger, consolidation, business combination, or other similar transaction that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation and more than fifty percent (50%) of the total number of outstanding shares of the Corporation’s capital stock, in each case as outstanding immediately after such merger, consolidation, business combination, or other similar transaction, and the stockholders of the Corporation immediately prior to the merger, consolidation, business combination, or other similar transaction own voting securities of the Corporation, the surviving entity or its parent immediately following the merger, consolidation, business combination, or other similar transaction in substantially the same proportions (vis a vis each other) as such stockholders owned the voting securities of the Corporation immediately prior to the transaction; (iii) a recapitalization, liquidation, dissolution, or other similar transaction involving the Corporation, other than a recapitalization, liquidation, dissolution, or other similar transaction that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation and more than fifty percent (50%) of the total number of outstanding shares of the Corporation’s capital stock, in each case as outstanding immediately after such recapitalization, liquidation, dissolution or other similar transaction, and the stockholders of the Corporation immediately prior to the recapitalization, liquidation, dissolution or other similar transaction own voting securities of the Corporation, the surviving entity or its parent immediately following the recapitalization, liquidation, dissolution or other similar transaction in substantially the same proportions (vis a vis each other) as such stockholders owned the voting securities of the Corporation immediately prior to the transaction; and (iv) any Change of Control Share Issuance.

“Class B Stockholder” means (i) the registered holder of a share of Class B Common Stock at the Effective Time and (ii) the initial registered holder of any shares of Class B Common Stock that are originally issued by the Corporation after the Effective Time.

 

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“Distribution” means (i) any dividend or distribution of cash, property or shares of the Corporation’s capital stock; and (ii) any distribution following or in connection with any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Rights” means any option, warrant, conversion right or contractual right of any kind to acquire shares of the Corporation’s authorized but unissued capital stock.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Securities Exchange” means, at any time, the registered national securities exchange on which the Corporation’s equity securities are then principally listed or traded, and over-the-counter markets.

“Trading Day” means any day on which the Securities Exchange is open for trading.

“Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law. A “Transfer” shall also include, without limitation, (i) a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether or not there is a corresponding change in beneficial ownership) or (ii) the transfer of, or entering into a binding agreement with respect to, Voting Control over a share of Class B Common Stock by proxy or otherwise subsequent to the Effective Date; provided, that the following shall not be considered a “Transfer”: (a) the grant of a proxy to officers or directors of the Corporation at the request of the Board of Directors of the Corporation in connection with actions to be taken at an annual or special meeting of stockholders; or (b) the pledge of shares of Class B Common Stock by a Class B Stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction so long as the Class B Stockholder continues to exercise Voting Control over such pledged shares; provided, that a foreclosure on such shares of Class B Common Stock or other similar action by the pledgee shall constitute a “Transfer”.

“Voting Control” with respect to a share of Class B Common Stock means the exclusive power (whether directly or indirectly) to vote or direct the voting of such share of Class B Common Stock by proxy, voting agreement, or otherwise.

 

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ARTICLE VI

A. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

B. Number of Directors; Election. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, the number of directors that constitutes the entire Board of Directors of the Corporation shall be fixed solely by resolution of the Board of Directors. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director of the Corporation shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been duly elected and qualified or until his or her earlier resignation, death or removal.

Notwithstanding the foregoing provisions of this Article VI, and subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal.

D. Removal; Vacancies. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, any director may be removed from office, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock. Vacancies occurring on the Board of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director, and not by stockholders. A person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be duly elected and qualified.

ARTICLE VII

A. Written Ballot. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

B. Amendment of Bylaws. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation; provided, that a Bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board of Directors.

C. Special Meetings. Special meetings of the stockholders may be called only by (i) the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors (after giving effect to vacancies and previously authorized but unfilled directorships); (ii) the chairman of the Board of Directors; (iii) the chief executive officer of the Corporation; or (iv) the president of the Corporation (in the absence of a chief executive officer).

D. No Cumulative Voting. No stockholder will be permitted to cumulate votes at any election of directors.

 

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ARTICLE VIII

To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

Neither any amendment nor repeal of this Article VIII, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article VIII, shall eliminate or reduce the effect of this Article VIII in respect of any matter occurring, or any cause of action, suit or proceeding accruing or arising or that, but for this Article VIII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE IX

Subject to any provisions in the Bylaws of the Corporation related to indemnification of directors or officers of the Corporation, the Corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors.

The Corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the Corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

A right to indemnification or to advancement of expenses arising under a provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation shall not be eliminated or impaired by an amendment to this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

 

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ARTICLE X

Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL or this Certificate of Incorporation or the Bylaws (as either may be amended from time to time), or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Article X with respect to any current or future action or claim. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

ARTICLE XI

A. Scope. The provisions of this Article XI are set forth to define, to the extent permitted by applicable law, the duties of Exempted Persons (as defined below) to the Corporation with respect to certain classes or categories of business opportunities. “Exempted Persons” means each of Royalty Exchange, Inc. and all of its principals, directors, officers, members, managers and/or employees, including any of the foregoing who serve as officers or directors of the Corporation.

B. Competition and Allocation of Corporate Opportunities. The Exempted Persons shall not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries. To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time available to the Exempted Persons, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Exempted Person shall have no duty to communicate or offer such business opportunity to the Corporation (and there shall be no restriction on the Exempted Persons using the general knowledge and understanding of the Corporation and the industry in which it operates that it has gained as an Exempted Person in considering and pursuing such opportunities or in making investment, voting, monitoring, governance or other decisions relating to other entities or securities) and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Exempted Person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries, or uses such knowledge and understanding in the manner described herein.

C. Certain Matters Deemed Not Corporate Opportunities. In addition to and notwithstanding the foregoing provisions of this Article XI, a corporate opportunity shall not be deemed to belong to the Corporation if it is a business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy.

D. Amendment of this Article. No amendment or repeal of this Article XI in accordance with the provisions of Article XII shall apply to or have any effect on the liability or alleged liability of any Exempted Person for or with respect to any activities or opportunities of which such Exempted Person becomes aware prior to such amendment or repeal. This Article XI shall not limit any protections or defenses available to, or indemnification or advancement rights of, any director or officer of the Corporation under this Certificate of Incorporation, the Bylaws or applicable law.

ARTICLE XII

If any provision of this Amended and Restated Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Amended and Restated Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Amended and Restated Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Amended and Restated Certificate of Incorporation shall be enforceable in accordance with its terms.

Except as provided in ARTICLE VIII and ARTICLE IX above, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, that, notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation inconsistent with ARTICLE VI, ARTICLE VII, ARTICLE VIII, ARTICLE IX, ARTICLE X, ARTICLE XI or this ARTICLE XII.

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EX1A-2A CHARTER.4

EXHIBIT 2.4

FORM OF AMENDED AND RESTATED BYLAWS

OF ROYALTY FLOW INC.

(adopted effective as of [●])

ARTICLE I - CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of Royalty Flow Inc. shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.

1.2 OTHER OFFICES

The corporation’s board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. The board of directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held on such date, at such time, and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the corporation’s notice of the meeting. At the annual meeting, directors shall be elected and any other proper business, brought in accordance with Section 2.4 of these bylaws, may be transacted. The board of directors may cancel, postpone or reschedule any previously scheduled annual meeting at any time, before or after the notice for such meeting has been sent to the stockholders.

2.3 SPECIAL MEETING

(i) A special meeting of the stockholders, other than those required by statute, may be called at any time by (A) the board of directors, (B) the chairperson of the board of directors, (C) the chief executive officer or (D) the president (in the absence of a chief executive officer), but a special meeting may not be called by any other person or persons. The board of directors may cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders.

(ii) The notice of a special meeting shall include the purpose for which the meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the board of directors, chairperson of the board of directors, chief executive officer or president (in the absence of a chief executive officer). Nothing contained in this Section 2.3(ii) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.

 

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2.4 ADVANCE NOTICE PROCEDURES

(i) Advance Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (A) pursuant to the corporation’s proxy materials with respect to such meeting, (B) by or at the direction of the board of directors, or (C) by a stockholder of the corporation who (1) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(i) and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has timely complied in proper written form with the notice procedures set forth in this Section 2.4(i). In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. For the avoidance of doubt, except for proposals properly made in accordance with Rule 14a-8 under the Securities and Exchange Act of 1934, as amended, or any successor thereto (the “1934 Act”), and the regulations thereunder (or any successor rule and in any case as so amended), clause (C) above shall be the exclusive means for a stockholder to bring business before an annual meeting of stockholders.

(a) To comply with clause (C) of Section 2.4(i) above, a stockholder’s notice must set forth all information required under this Section 2.4(i) and must be timely received by the secretary of the corporation. To be timely, a stockholder’s notice must be received by the secretary at the principal executive offices of the corporation not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the stockholder to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment, rescheduling or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described in this Section 2.4(i)(a). “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

(b) To be in proper written form, a stockholder’s notice to the secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting: (1) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (5) any material interest of the stockholder or a Stockholder Associated Person in such business, and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the voting power of the corporation’s voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (1) through (6), a “Business Solicitation Statement”). In addition, to be in proper written form, a stockholder’s notice to the secretary must be supplemented not later than ten days following the record date for the determination of stockholders entitled to notice of the meeting to disclose the information contained in clauses (3) and (4) above as of the record date. For purposes of this Section 2.4, a “Stockholder Associated Person” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (i) and (ii).

 

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(c) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 2.4(i) and, if applicable, Section 2.4(ii). In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 2.4(i), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.

(ii) Advance Notice of Director Nominations at Annual Meetings. Notwithstanding anything in these bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.4(ii) shall be eligible for election or re-election as directors at an annual meeting of stockholders. Nominations of persons for election to the board of directors of the corporation shall be made at an annual meeting of stockholders only (A) by or at the direction of the board of directors or (B) by a stockholder of the corporation who (1) was a stockholder of record at the time of the giving of the notice required by this Section 2.4(ii) and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 2.4(ii). In addition to any other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation.

(a) To comply with clause (B) of Section 2.4(ii) above, a nomination to be made by a stockholder must set forth all information required under this Section 2.4(ii) and must be received by the secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 2.4(i)(a) above; provided additionally, however, that in the event that the number of directors to be elected to the board of directors is increased and there is no Public Announcement naming all of the nominees for director or specifying the size of the increased board made by the corporation at least ten days before the last day a stockholder may deliver a notice of nomination pursuant to the foregoing provisions, a stockholder’s notice required by this Section 2.4(ii) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the secretary of the corporation at the principal executive offices of the corporation not later than the close of business on the tenth day following the day on which such Public Announcement is first made by the corporation.

 

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(b) To be in proper written form, such stockholder’s notice to the secretary must set forth:

(1) as to each person (a “nominee”) whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between or among any of the stockholder, each nominee and/or any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder or relating to the nominee’s potential service on the board of directors, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and

(2) as to such stockholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above (except that the references to “business” in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders at least the percentage of the corporation’s voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect such nominee(s) (such information provided and statements made as required by clauses (A) and (B) above, a “Nominee Solicitation Statement”).

(c) At the request of the board of directors, any person nominated by a stockholder for election as a director must furnish to the secretary of the corporation (1) that information required to be set forth in the stockholder’s notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nomination was given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such stockholder’s nomination shall not be considered in proper form pursuant to this Section 2.4(ii).

(d) Without exception, no person shall be eligible for election or re-election as a director of the corporation at an annual meeting of stockholders unless nominated in accordance with the provisions set forth in this Section 2.4(ii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.

 

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(iii) Advance Notice of Director Nominations for Special Meetings.

(a) For a special meeting of stockholders at which directors are to be elected pursuant to Section 2.3, nominations of persons for election to the board of directors shall be made only (1) by or at the direction of the board of directors or (2) by any stockholder of the corporation who (A) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(iii) and on the record date for the determination of stockholders entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the secretary of the corporation that includes the information set forth in Sections 2.4(ii)(b) and (ii)(c) above. To be timely, such notice must be received by the secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. In no event shall any adjournment, rescheduling or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice. A person shall not be eligible for election or re-election as a director at a special meeting unless the person is nominated (i) by or at the direction of the board of directors or (ii) by a stockholder in accordance with the notice procedures set forth in this Section 2.4(iii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.

(b) The chairperson of the special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.

(iv) Other Requirements and Rights. In addition to the foregoing provisions of this Section 2.4, a stockholder must also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.4, including, with respect to business such stockholder intends to bring before the annual meeting that involves a proposal that such stockholder requests to be included in the corporation’s proxy statement, the requirements of Rule 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 2.4 shall be deemed to affect any right of the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the 1934 Act.

2.5 NOTICE OF STOCKHOLDERS’ MEETINGS

Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

 

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2.6 QUORUM

The holders of a majority of the voting power of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders, unless otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange. Where a separate vote by a class or series or classes or series is required, a majority of the voting power of the issued and outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange.

Whether or not a quorum is present at a meeting of stockholders, the chairperson of the meeting shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the original meeting.

2.7 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the board of directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

2.8 CONDUCT OF BUSINESS

The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. The chairperson of any meeting of stockholders shall be designated by the board of directors; in the absence of such designation, the chairperson of the board, if any, the chief executive officer (in the absence of the chairperson) or the president (in the absence of the chairperson of the board and the chief executive officer), or in their absence any other executive officer of the corporation, shall serve as chairperson of the stockholder meeting.

2.9 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of the voting power of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange.

 

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2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

2.11 RECORD DATES

In order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the board of directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.

If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting.

In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

 

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2.12 PROXIES

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the stockholder.

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal place of business. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

2.14 INSPECTORS OF ELECTION

Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder's proxy shall, appoint a person to fill that vacancy; provided further that, in any case, if no inspector or alternate is able to act at a meeting of stockholders, the chairperson of the meeting shall appoint at least one (1) inspector to act at the meeting.

Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. Such inspectors shall:

(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

 

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(ii) receive votes, ballots or consents;

(iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;

(iv) count and tabulate all votes or consents;

(v) determine when the polls shall close;

(vi) determine the result; and

(vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

ARTICLE III - DIRECTORS

3.1 POWERS

The business and affairs of the corporation shall be managed by or under the direction of the board of directors, except as may be otherwise provided in the DGCL or the certificate of incorporation.

3.2 NUMBER OF DIRECTORS

The board of directors shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the board of directors. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.

 

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3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Delaware Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting power of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The board of directors may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.

 

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3.7 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairperson of the board of directors, the chief executive officer, the president, the secretary or a majority of the authorized number of directors, at such times and places as he or she or they shall designate.

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile; or

(iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.

3.8 QUORUM; VOTING

At all meetings of the board of directors, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

 

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3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board of directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this Section 3.9 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective.

3.10 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.

3.11 REMOVAL OF DIRECTORS

Unless otherwise provided in the certificate of incorporation, any director may be removed from office, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV - COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in these bylaws, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

 

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4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) Section 3.5 (place of meetings and meetings by telephone);

(ii) Section 3.6 (regular meetings);

(iii) Section 3.7 (special meetings and notice);

(iv) Section 3.8 (quorum; voting);

(v) Section 7.5 (waiver of notice); and

(vi) Section 3.9 (action without a meeting)

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members. However:

(i) the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the board of directors; and

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors or a committee may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.

4.4 SUBCOMMITTEES

Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the board of directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

 

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ARTICLE V - OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the board of directors, a chairperson of the board of directors, a vice chairperson of the board of directors, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

5.2 APPOINTMENT OF OFFICERS

The board of directors shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS

The board of directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board of directors or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

 

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5.5 VACANCIES IN OFFICES

Any vacancy occurring in any office of the corporation shall be filled by the board of directors or as provided in Section 5.3.

5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairperson of the board of directors, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares or other equity interests of any other corporation or corporations or entity or entities standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7 AUTHORITY AND DUTIES OF OFFICERS

All officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the board of directors.

ARTICLE VI - STOCK

6.1 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of the corporation shall be represented by certificates, provided that the board of directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson of the board of directors or vice-chairperson of the board of directors, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation shall not have power to issue a certificate in bearer form.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, or upon the books and records of the corporation in the case of uncertificated partly-paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the corporation shall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

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6.2 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section 6.2 or Sections 151, 156, 202(a) or 218(a) of the DGCL or with respect to this section 6.2 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

6.3 LOST CERTIFICATES

Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

6.4 DIVIDENDS

The board of directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the corporation’s capital stock.

The board of directors may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

 

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6.5 TRANSFER OF STOCK

Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, subject to Section 6.3 of these bylaws, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.

6.6 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

6.7 REGISTERED STOCKHOLDERS

The corporation:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER

7.1 NOTICE OF STOCKHOLDERS’ MEETINGS

Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the corporation’s records. An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 

7.2 NOTICE BY ELECTRONIC TRANSMISSION

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:

(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and

 

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(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv) if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Notice by a form of electronic transmission shall not apply with respect to Sections 164, 296, 311, 312 or 324 of the DGCL.

7.3 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS

Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been given written notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

7.4 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL

Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

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7.5 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII - INDEMNIFICATION

8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS

Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

8.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION

Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

 

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8.3 SUCCESSFUL DEFENSE

To the extent that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

8.4 INDEMNIFICATION OF OTHERS

Subject to the other provisions of this Article VIII, the corporation shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The board of directors shall have the power to delegate to such person or persons as the board shall in its discretion determine the determination of whether employees or agents shall be indemnified.

8.5 ADVANCE PAYMENT OF EXPENSES

Expenses (including attorneys’ fees) actually and reasonably incurred by an officer or director of the corporation in defending any Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. The right to advancement of expenses shall not apply to any claim for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding referenced in Section 8.6(ii) or 8.6(iii) prior to a determination that the person is not entitled to be indemnified by the corporation.

8.6 LIMITATION ON INDEMNIFICATION

Subject to the requirements in Section 8.3 and the DGCL, the corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):

(i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);

(iii) for any reimbursement of the corporation by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the corporation, as required in each case under the 1934 Act (including any such reimbursements that arise from an accounting restatement of the corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the corporation of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);

 

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(iv) initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the corporation or its directors, officers, employees, agents or other indemnitees, unless (a) the board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the corporation under applicable law, (c) otherwise required to be made under Section 8.7 or (d) otherwise required by applicable law; or

(v) if prohibited by applicable law; provided, however, that if any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

8.7 DETERMINATION; CLAIM

If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 90 days after receipt by the corporation of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The corporation shall indemnify such person against any and all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses from the corporation under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.

8.8 NON-EXCLUSIVITY OF RIGHTS

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

8.9 INSURANCE

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the DGCL.

 

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8.10 SURVIVAL

The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

8.11 EFFECT OF REPEAL OR MODIFICATION

A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to the certificate of incorporation or these bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

8.12 CERTAIN DEFINITIONS

For purposes of this Article VIII, references to the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VIII.

ARTICLE IX - GENERAL MATTERS

9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

Except as otherwise provided by law, the certificate of incorporation or these bylaws, the board of directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

9.2 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.

 

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9.3 SEAL

The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

9.4 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE X - AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the affirmative vote of the holders of at least the majority of the total voting power of outstanding voting securities, voting together as a single class, shall be required for the stockholders of the corporation to alter, amend or repeal, or adopt any provision of these bylaws. The board of directors shall also have the power to adopt, amend or repeal bylaws.

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the board of directors.

* * * *

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EX1A-3 HLDRS RTS.1

EXHIBIT 3.1

FORM OF CLASS A COMMON STOCK CERTIFICATE

CERTIFICATE NUMBER XXXXXX	SHARES XXXXXX
CLASS A COMMON	CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS

ROYALTY FLOW INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

This certifies that XXXXXX

is the owner of XXXXXX

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF

Royalty Flow Inc.

transferable on the books of the Corporation by the holder thereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the certificate of incorporation and bylaws of the Corporation, as now or hereafter amended (copies of which are on file with the Corporation and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

________________________ Chief Executive Officer	[Corporate seal]	Dated: DD-MM-YYYY COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR,
________________________		By _________________
Secretary
		AUTHORIZED SIGNATURE

1

ROYALTY FLOW INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE CORPORATION, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE CORPORATION A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	– as tenants in common	UNIF GIFT MIN ACT -	___________ Custodian __________ (Cost)                                       (Minor)
			under Uniform Gifts to Minors Act of _______________ (State)
TEN ENT	– as tenants by the entireties	UNIF TRF MIN ACT	________ Custodian ___________ (Cost)                                   (Minor)
			under Uniform Transfers to Minors Act of _______________ (State)
JT TEN	– as joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list.

For value received, ________________________________ hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
_________________________	Shares of the Class A Common Stock represented by the within Certificate,

and do hereby irrevocably constitute and appoint

_______________________________________,

Attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.

Dated ______________________________20 _____

Signature _______________________

Signature	________________________
	Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement or any change whatever.	Signature(s) Guaranteed: Medallion Guarantee Stamp The SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO SEC RULE 17Ad-15

2

EX1A-3 HLDRS RTS.2

EXHIBIT 3.2

FORM OF CLASS B COMMON STOCK CERTIFICATE

CERTIFICATE NUMBER XXXXXX	SHARES XXXXXX
CLASS B COMMON	CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS

ROYALTY FLOW INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

This certifies that XXXXXX

is the owner of XXXXXX

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS B COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF

Royalty Flow Inc.

transferable on the books of the Corporation by the holder thereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the certificate of incorporation and bylaws of the Corporation, as now or hereafter amended (copies of which are on file with the Corporation and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

_________________________ Chief Executive Officer	[Corporate seal]	Dated: DD-MM-YYYY COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR,
		By ______________
_________________________
Secretary		AUTHORIZED SIGNATURE

1

ROYALTY FLOW INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE CORPORATION, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE CORPORATION A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	– as tenants in common	UNIF GIFT MIN ACT -	_________Custodian __________   (Cost)                               (Minor)
			under Uniform Gifts to Minors Act of _____________                       (State)
TEN ENT	– as tenants by the entireties	UNIF TRF MIN ACT	_________Custodian _________    (Cost)                                (Minor)
			under Uniform Transfers to Minors Act of ______________                         (State)
JT TEN	– as joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list.

For value received, _________________________ hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
_____________________________	Shares of the Class B Common Stock represented by the within Certificate,

and do hereby irrevocably constitute and appoint

______________________________________________________________,

Attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.

Dated _____________20 ______

Signature __________________

Signature	________________________
	Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement or any change whatever.	Signature(s) Guaranteed: Medallion Guarantee Stamp The SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO SEC RULE 17Ad-15

2

EX1A-6 MAT CTRCT.3

EXHIBIT 6.3

FORM OF
ROYALTY FLOW INC.
2017 OMNIBUS INCENTIVE PLAN

1. Purpose. The purpose of the Royalty Flow Inc. 2017 Omnibus Incentive Plan is to provide a means through which the Company and the other members of the Company Group, if any, may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s stockholders.

2. Definitions. The following definitions shall be applicable throughout the Plan.

(a) “Absolute Share Limit” has the meaning given such term in Section 5(b) of the Plan.

(b) “Adjustment Event” has the meaning given such term in Section 12(a) of the Plan.

(c) “Affiliate” means any Person that directly or indirectly controls, is controlled by or is under common control with the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise.

(d) “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, Other Cash-Based Award and Performance Compensation Award granted under the Plan.

(e) “Award Agreement” means the document or documents by which each Award (other than an Other Cash-Based Award) is evidenced, which may be in written or electronic form.

(f) “Board” means the Board of Directors of the Company.

(g) “Cause” means, unless the applicable Award Agreement states otherwise, as to any Participant who is party to an effective employment, change in control or consulting agreement with the Company or an Affiliate of the Company that contains a definition of “Cause,” the definition set forth in such agreement with respect to such Participant under the Plan for so long as such agreement is in effect. In the case of any other Participant, unless the applicable Award Agreement states otherwise, “Cause” means, as determined by the Committee or its designee in its reasonable judgment, (i) a substantial failure of the Participant to perform the Participant’s duties and responsibilities to the Company or Affiliates or substantial negligence in the performance of such duties and responsibilities; (ii) the commission by the Participant of a felony or a crime involving moral turpitude; (iii) the commission by the Participant of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or any of its Affiliates; (iv) a significant violation by the Participant of the code of conduct of the Company or its Affiliates or of any other material policy of the Company or its Affiliates; (v) material breach of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between the Company or Affiliates and the Participant; or (vi) other conduct by the Participant that could be expected to be harmful to the business, interests or reputation of the Company or its Affiliates. A termination by the Company or another Service Recipient for Cause shall be deemed to include a determination by the Committee or its designee following a Participant’s Termination that circumstances existing prior to such Termination would have entitled the Company or another Service Recipient to have terminated the Participant’s employment for Cause. All rights a Participant has or may have under the Plan shall be suspended automatically during the pendency of any investigation by the Committee or its designee, or during any negotiations between the Committee or its designee and the Participant, regarding any actual or alleged act or omission by the Participant of the type described in the applicable definition of Cause.

 

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(h) “Change in Control” means:

(1) the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate, including without limitation Royalty Exchange, Inc.; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant);

(2) during any period of twelve (12) months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

(3) the sale, transfer or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate of the Company.

(i) “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.

(j) “Committee” means the Compensation Committee of the Board or any properly delegated subcommittee thereof or, if no such committee or subcommittee thereof exists, the Board.

 

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(k) “Common Stock” means the Class A common stock of the Company, par value $0.001 per share (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).

(l) “Company” means Royalty Flow Inc., a Delaware corporation, and any successor thereto.

(m) “Company Group” means, collectively, the Company and its Subsidiaries, if any.

(n) “Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(o) “Disability” means, as to any Participant, unless the applicable Award Agreement states otherwise, (1) “Disability”, as defined in any employment, change in control or consulting agreement between the Participant and the Service Recipient in effect at the time of the Participant’s Termination; or (2) in the absence of any such employment, change in control or consulting agreement (or the absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of the Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the occupation at which the Participant was employed or served when such disability commenced. Any determination of whether Disability exists in the absence of a long-term disability plan shall be made by the Committee (or its designee) in its sole and absolute discretion.

(p) “Effective Date” means [insert effective date], 2017.

(q) “Eligible Director” means a person who is (1) with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, (2) with respect to actions intended to obtain the exception for performance-based compensation under 162(m) of the Code, an “outside director” within the meaning of Section 162(m) of the Code, and (3) with respect to actions undertaken to comply with the rules of Nasdaq or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, an “independent director” under the rules of Nasdaq or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation.

(r) “Eligible Person” means any (1) individual employed by any member of the Company Group; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto, (2) director or officer of any member of the Company Group, or (3) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, who, in the case of each of clauses (1) through (3) above has entered into an Award Agreement or who has received written notification from the Committee or its designee that such individual has been selected to participate in the Plan.

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

 

3

(t) “Exercise Price” has the meaning given such term in Section 7(b) of the Plan.

(u) “Fair Market Value” means, on a given date, (1) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported, (2) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported, or (3) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock; provided, however, as to any Awards granted on or with a Date of Grant of the date of the pricing of the Company’s initial public offering, “Fair Market Value” shall be equal to the per share price at which the Common Stock is offered to the public in connection with such initial public offering.

(v) “GAAP” has the meaning given such term in Section 7(d) of the Plan.

(w) “Immediate Family Members” has the meaning given such term in Section 14(b)(2) of the Plan.

(x) “Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

(y) “Indemnifiable Person” has the meaning given such term in Section 4(e) of the Plan.

(z) “Negative Discretion” means the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.

(aa) “Nonqualified Stock Option” means an Option which is not designated by the Committee as an Incentive Stock Option.

(bb) “Non-Employee Director” means a member of the Board who is not an employee of any member of the Company Group.

(cc) “Nasdaq” means the Nasdaq Stock Market.

(dd) “Option” means an Award granted under Section 7 of the Plan.

(ee) “Option Period” has the meaning given such term in Section 7(c)(1) of the Plan.

(ff) “Other Cash-Based Award” means an Award that is not a Stock Appreciation Right or Restricted Stock Unit granted under Section 10 of the Plan that is denominated and/or payable in cash.

(gg) “Other Stock-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Performance Compensation Award, that is granted under Section 10 of the Plan and is (1) payable by delivery of Common Stock and/or (2) measured by reference to the value of Common Stock.

(hh) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.

 

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(ii) “Performance Compensation Award” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.

(jj) “Performance Criteria” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Compensation Award under the Plan.

(kk) “Performance Formula” means, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

(ll) “Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

(mm) “Performance Period” means the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

(nn) “Permitted Transferee” has the meaning given such term in Section 14(b)(2) of the Plan.

(oo) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

(pp) “Plan” means this Royalty Flow Inc. 2017 Omnibus Incentive Plan, as it may be amended and restated from time to time.

(qq) “Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions, including vesting conditions.

(rr) “Restricted Stock” means Common Stock, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(ss) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(tt) “SAR Period” has the meaning given such term in Section 8(c)(1) of the Plan.

(uu) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(vv) “Service Recipient” means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.

 

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(ww) “Share Pool” has the meaning given such term in Section 5(b) of the Plan.

(xx) “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.

(yy) “Strike Price” has the meaning given such term in Section 8(b) of the Plan.

(zz) “Subsidiary” means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

(aaa) “Substitute Award” has the meaning given such term in Section 5(f) of the Plan.

(bbb) “Termination” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient for any reason (including death or Disability).

3. Effective Date; Duration. The Plan shall be effective as of [the Effective Date], 2017. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

4. Administration.

(a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time such member takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3 promulgated under the Exchange Act or to qualify as performance-based compensation under Section 162(m) of the Code, as applicable, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

 

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(b) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (1) designate Participants; (2) determine the type or types of Awards to be granted to a Participant; (3) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (4) determine the terms and conditions of any Award; (5) determine whether, to what extent, and under what circumstances Awards may be settled in, or exercised for, cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (6) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (7) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (8) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; and (9) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of any member of the Company Group, the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to Non-Employee Directors. Notwithstanding the foregoing in this Section 4(c), it is intended that any action under the Plan intended to qualify for an exemption provided by Rule 16b-3 promulgated under the Exchange Act, and/or the exception under Section 162(m) of the Code related to persons who are subject to Section 16 of the Exchange Act and/or who are, or who are reasonably expected to be, “covered employees” for purposes of Section 162(m) of the Code, will be taken only by the Board or by a committee or subcommittee of two or more Eligible Directors. However, the fact that any member of such committee or subcommittee shall fail to qualify as an Eligible Director shall not invalidate any action that is otherwise valid under the Plan.

(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan, any Award or any Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including, without limitation, any member of the Company Group, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

 

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(e) No member of the Board, the Committee or any employee or agent of any member of the Company Group (each such Person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the organizational documents of any member of the Company Group. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Person may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Person or hold such Indemnifiable Person harmless.

(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of Nasdaq or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan.

5. Grant of Awards; Shares Subject to the Plan; Limitations.

(a) The Committee may, from time to time, grant Awards to one or more Eligible Persons.

(b) Subject to adjustment as provided in Section 12, the maximum number of shares of Common Stock that may be delivered in satisfaction of Awards under the Plan is 500,000 shares (such aggregate number of shares, the “Absolute Share Limit” and such shares, the “Share Pool”). Up to the total number of shares available for Awards to employee Participants may be issued in satisfaction of ISOs, but nothing in this Section 5(b) will be construed as requiring that any, or any fixed number of, ISOs be awarded under the Plan. The limits set forth in this Section 5(b) shall be construed to comply with Section 422 of the Code. The following additional limits will apply to Awards of the specified type granted or, in the case of Other Cash-Based Awards, payable to any person in any fiscal year: (i) Options: 200,000 shares of Common Stock; (ii) SARs: 200,000 shares of Common Stock; (iii) awards other than Options, SARs or Other Cash-Based Award: 200,000 shares of Common Stock in the aggregate; and (iv) Other Cash-Based Award: $1,500,000. In applying the foregoing limits, (1) all Awards of the specified type granted to the same Person in the same fiscal year will be aggregated and made subject to one limit; (2) the limits applicable to Options and SARs refer to the number of shares of Common Stock subject to those Awards; (3) the share limit under clause (iii) refers to the maximum number of shares of Common Stock that may be delivered, or the value of which could be paid in cash or other property, under an Award or Awards of the type specified in clause (iii) assuming a maximum payout; and (4) the dollar limit under clause (iv) refers to the maximum dollar amount payable under an Award or Awards of the type specified in clause (iv) assuming a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m) of the Code, including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards.

 

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(c) Awards granted under the Plan shall also be subject to the following limitation: the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $750,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes).

(d) Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, terminated, settled in cash, or otherwise is settled without delivery to the Participant of the full number of shares of Common Stock to which the Award related, the undelivered shares will again be available for grant from the Share Pool. Shares of Common Stock withheld in payment of the Exercise Price or taxes relating to an Award and shares equal to the number of shares surrendered in payment of any Exercise Price or taxes relating to an Award, shall be deemed to constitute shares not issued to the Participant and shall be deemed to again be available for Awards from the Share Pool under the Plan; provided, however, that such shares shall not become available for issuance hereunder if either: (1) the applicable shares are withheld or surrendered following the termination of the Plan; or (2) at the time the applicable shares are withheld or surrendered, it would constitute a material revision of the Plan subject to stockholder approval under any then-applicable rules of the national securities exchange on which the Common Stock is listed.

(e) Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing.

(f) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards shall not be counted against the Absolute Share Limit and the Share Pool; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan.

6. Eligibility. Participation in the Plan shall be limited to Eligible Persons.

7. Options.

(a) General. Each Option granted under the Plan shall be evidenced by an Award Agreement, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of a member of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

 

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(b) Exercise Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant.

(c) Vesting and Expiration; Termination.

(1) Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee; provided, however, that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “Option Period”); provided, that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the 30th day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group.

(2) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of: (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the Option Period).

(d) Method of Exercise and Form of Payment. No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable: (1) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual issuance of such shares to the Company); provided, that such shares of Common Stock are not subject to any pledge or other security interest and have been held by the Participant for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles (“GAAP”)); or (2) unless otherwise provided by the Committee, whether in an Award Agreement or otherwise: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; (C) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price; or (D) by such other method as the Committee may permit, in its sole discretion. Any fractional shares of Common Stock shall be settled in cash.

 

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(e) Notification upon Disqualifying Disposition of an Incentive Stock Option. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date the Participant makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) the date that is two years after the Date of Grant of the Incentive Stock Option or (B) the date that is one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.

(f) Compliance With Laws, etc. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

8. Stock Appreciation Rights.

(a) General. Each SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.

(b) Strike Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“Strike Price”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.

 

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(c) Vesting and Expiration; Termination.

(1) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee; provided, however, that, notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any SAR at any time and for any reason. SARs shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “SAR Period”); provided, that if the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition.

(2) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of: (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding SARs granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the SAR Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the SAR Period).

(d) Method of Exercise. SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.

(e) Payment. Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that is being exercised multiplied by the excess of the Fair Market Value of one (1) share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.

9. Restricted Stock and Restricted Stock Units.

(a) General. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

 

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(b) Stock Certificates and Book-Entry; Escrow or Similar Arrangement. Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (1) an escrow agreement satisfactory to the Committee, if applicable and (2) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder as to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock; provided, that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of performance conditions (other than, or in addition to, the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within fifteen (15) days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. A Participant shall have no rights or privileges as a stockholder as to Restricted Stock Units.

(c) Vesting; Termination.

(1)Restricted Stock and Restricted Stock Units shall vest, and any applicable Restricted Period shall lapse, in such manner and on such date or dates or upon such event or events as determined by the Committee; provided, however, that, notwithstanding any such dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Restricted Stock or Restricted Stock Unit or the lapsing of any applicable Restricted Period at any time and for any reason.

(2) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock or Restricted Stock Units, as applicable, have vested, (A) all vesting with respect to such Participant’s Restricted Stock or Restricted Stock Units, as applicable, shall cease and (B) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.

(d) Issuance of Restricted Stock and Settlement of Restricted Stock Units.

(1) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or the Participant’s beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, in the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

  

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(2) Unless otherwise provided by the Committee in an Award Agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant or the Participant’s beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (B) defer the issuance of shares of Common Stock (or cash or part cash and part shares of Common Stock, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock in respect of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per share of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award Agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, in the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, in the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the date on which the Restricted Period lapses with respect to such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments (or interest thereon, if applicable).

(e) Legends on Restricted Stock. Each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, shall bear a legend or book entry notation substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock:

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE ROYALTY FLOW INC. 2017 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT BETWEEN ROYALTY FLOW INC. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF ROYALTY FLOW INC.

10. Other Stock-Based Awards and Other Cash-Based Awards. The Committee may grant Other Stock-Based Awards and Other Cash-Based Awards under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award Agreement and each Other Cash-Based Award granted under the Plan shall be evidenced in such form as the Committee may determine from time to time. Each Other Stock-Based Award or Other Cash-Based Award, as applicable, so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or other form evidencing such Award, including, without limitation, those set forth in Section 14(c) of the Plan.

 

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11. Performance Compensation Awards.

(a) General. The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a “covered employee” (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan).

(b) Discretion of Committee with Respect to Performance Compensation Awards. With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply and the Performance Formula(e). Within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

(c) Performance Criteria. The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and shall be limited to the following, which may be determined in accordance with GAAP or on a non-GAAP basis: (1) net earnings, net income (before or after taxes) or consolidated net income; (2) basic or diluted earnings per share (before or after taxes); (3) net revenue or net revenue growth; (4) gross revenue or gross revenue growth, gross profit or gross profit growth; (5) net operating profit (before or after taxes); (6) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (7) cash flow measures (including, but not limited to, operating cash flow, free cash flow, or cash flow return on capital), which may but are not required to be measured on a per share basis; (8) actual or adjusted earnings before or after interest, taxes, depreciation and/or amortization (including EBIT and EBITDA); (9) gross or net operating margins (including EBIT and EBITDA margins); (10) productivity ratios; (11) share price (including, but not limited to, growth measures and total stockholder return); (12) expense targets or cost reduction goals, general and administrative expense savings; (13) operating efficiency; (14) growth in the number or value of royalty interests; (15) working capital targets; (16) measures of economic value added or other ‘value creation’ metrics; (17) enterprise value; (18) sales; (19) stockholder return; (20) customer/client retention; (21) competitive market metrics; (22) employee retention; (23) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (24) comparisons of continuing operations to other operations; (25) market share; (26) cost of capital, debt leverage year-end cash position or book value; (27) strategic objectives; or (28) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of one or more members of the Company Group as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of one or more members of the Company Group or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.

 

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(d) Modification of Performance Goal(s). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (1) asset write-downs; (2) litigation or claim judgments or settlements; (3) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (4) any reorganization and restructuring programs; (5) acquisitions or divestitures; (6) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (7) foreign exchange gains and losses; (8) discontinued operations and nonrecurring charges; and (9) a change in the Company’s fiscal year.

(e) Payment of Performance Compensation Awards.

(1) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

(2) Limitation. Unless otherwise provided in the applicable Award Agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.

(3) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.

(4) Use of Negative Discretion. In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion. Unless otherwise provided in the applicable Award Agreement, the Committee shall not have the discretion to: (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.

 

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(f) Timing of Award Payments. Unless otherwise provided in the applicable Award Agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (1) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (2) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(2) of the Plan).

12. Changes in Capital Structure and Similar Events. Notwithstanding any other provision in this Plan to the contrary, the following provisions shall apply to all Awards granted hereunder (other than Other Cash-Based Awards):

(a) General. In the event of (1) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event that affects the shares of Common Stock (including a Change in Control), or (2) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (1) or (2), an “Adjustment Event”), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Absolute Share Limit and the Share Pool, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan, and (C) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award, or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals); provided, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment under this Section 12 (x) shall be conclusive and binding for all purposes and (y) may provide for the elimination of any fractional shares that might otherwise become subject to an Award.

 

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(b) Adjustment Events. Without limiting the foregoing, except as may otherwise be provided in an Award Agreement, in connection with any Adjustment Event, the Committee may, in its sole discretion, provide for any one or more of the following:

(1) a substitution or assumption of Awards (or awards of an acquiring company), acceleration of the exercisability of, lapse of restrictions on, or termination of, Awards, or a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and

(2) subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, cancellation of any one or more outstanding Awards and payment to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for such cancellation or for which vesting is accelerated by the Committee in connection with such event), the value of such Awards, if any, as determined by the Committee (which value, if applicable, may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including, without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor), or, in the case of Restricted Stock, Restricted Stock Units or Other Stock-Based Awards that are not vested as of such cancellation, a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Stock-Based Awards prior to cancellation, or the underlying shares in respect thereof.

Payments to holders pursuant to clause (2) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price).

(c) Other Requirements. Prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to the Participant’s Awards, (B) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, and (C) deliver customary transfer documentation as reasonably determined by the Committee.

 

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13. Amendments and Termination.

(a) Amendment and Termination of the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuance or termination shall be made without stockholder approval if: (1) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (2) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or Section 12 of the Plan); or (3) it would materially modify the requirements for participation in the Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to Section 13(b)(2) of the Plan without stockholder approval.

(b) Amendment of Award Agreements.

(1) The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participant’s Termination); provided, that, other than pursuant to Section 12, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.

(2) Notwithstanding the foregoing, without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (A) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR, (B) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR, and (C) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

14. General.

(a) Award Agreements. Each Award (other than an Other Cash-Based Award) under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom such Award was granted and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award Agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company.

 

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(b) Nontransferability.

(1) Each Award shall be exercisable only by such Participant to whom such Award was granted during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (unless such transfer is specifically required pursuant to a domestic relations order or by applicable law) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against any member of the Company Group; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(2) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and the Participant’s Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

(3) The terms of any Award transferred in accordance with clause (2) above shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that: (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of a Participant’s Termination under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.

(c) Dividends and Dividend Equivalents. The Committee may, in its sole discretion, provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided, that no dividends, dividend equivalents or other similar payments shall be payable in respect of outstanding (1) Options or SARs; or (2) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than, or in addition to, the passage of time) (although dividends, dividend equivalents or other similar payments may be accumulated in respect of unearned Awards and paid within fifteen (15) days after such Awards are earned and become payable or distributable).

 

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(d) Tax Withholding.

(1) A Participant shall be required to pay to the Service Recipient or any other member of the Company Group, and the Service Recipient or any other member of the Company Group shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property issuable or deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, shares of Common Stock, other securities or other property) of any required withholding or any other applicable taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding or any other applicable taxes.

(2) Without limiting the generality of clause (1) above, the Committee may (but is not obligated to), in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) that have been held by the Participant for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying GAAP) having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the minimum required statutory withholding liability unless determined by the Committee not to result in adverse accounting consequences.

(e) Data Protection. By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and the Participant’s participation in the Plan.

(f) No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of any member of the Company Group, or other Person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Service Recipient or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Service Recipient and/or any member of the Company Group and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

 

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(g) International Participants. With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may, in its sole discretion, amend the terms of the Plan or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant or any member of the Company Group.

(h) Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more Persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon the Participant’s death. A Participant may, from time to time, revoke or change the Participant’s beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be the Participant’s spouse or, if the Participant is unmarried at the time of death, the Participant’s estate.

(i) Termination. Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (1) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (2) if a Participant undergoes a Termination, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.

(j) No Rights as a Stockholder. Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such Person.

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(k) Government and Other Regulations.

(1) The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of any member of the Company Group issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of any member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of any member of the Company Group issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that the Committee, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

(2) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (II) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, provide the Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, or the underlying shares in respect thereof.

 

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(l) No Section 83(b) Elections Without Consent of Company. No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

(m) Payments to Persons Other Than Participants. If the Committee shall find that any Person to whom any amount is payable under the Plan is unable to care for the Participant’s affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or the Participant’s estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to the Participant’s spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a proper recipient on behalf of such Person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(n) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of equity-based awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

(o) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between any member of the Company Group, on the one hand, and a Participant or other Person, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law.

(p) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of any member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself or herself.

(q) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law.

 

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(r) Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof. EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF THE PARTICIPANT’S RIGHTS OR OBLIGATIONS HEREUNDER.

(s) Severability. If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(t) Obligations Binding on Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(u) Section 409A of the Code.

(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments.

(ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death. Following any applicable six-month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.

(iii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code.

 

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(v) Clawback/Repayment. All Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (1) any clawback, forfeiture or other similar policy adopted by the Board or the Committee and as in effect from time to time, and (2) applicable law, whether such policy or law becomes effective prior to or following the Effective Date or the Date of Grant of an Award. Further, to the extent that the Participant receives any amount in excess of the amount that the Participant should otherwise have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations or other administrative error), the Participant shall be required to repay any such excess amount to the Company. By accepting an Award under the Plan, a Participant shall thereby be deemed to have acknowledged and consented to the Company’s application, implementation and enforcement of any clawback, forfeiture or other similar policy adopted by the Board or the Committee, whether adopted prior to or following the Date of Grant of the Award, and any provision of applicable law relating to reduction cancellation, forfeiture or recoupment, and to have agreed that the Company may take such actions as may be necessary to effectuate any such policy or applicable law, without further consideration or action.

(w) Right of Offset. The Company will have the right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to any member of the Company Group and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award is “deferred compensation” subject to Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Participant to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.

(x) Expenses; Titles and Headings. The expenses of administering the Plan shall be borne by the Company Group. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

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EX1A-6 MAT CTRCT.4

EXHIBIT 6.4

FORM OF RESTRICTED STOCK AWARD AGREEMENT

ROYALTY FLOW INC.

2017 OMNIBUS INCENTIVE PLAN

Subject to the terms of the Royalty Flow Inc. 2017 Omnibus Incentive Plan (the “Plan”), Royalty Flow Inc. (the “Company”) and the Participant (“you”) agree as follows:

1. Definitions. The term “Grant Date” means the date on specified in the grant notice attached as Exhibit A (Grant Notice). Other capitalized terms that are not defined in this Agreement have the meanings defined in the Plan.

2. Grant of Restricted Shares. The Company grants to you the number of shares of Restricted Stock included on your Grant Notice (Restricted Shares).

3. Vesting. The Restricted Period for the Restricted Shares will lapse and the Restricted Shares will vest as follows:

3.1 Continuous Employment. As long as you have not experienced a Termination before each applicable vesting date, [vesting schedule to be inserted] (each [anniversary], a “Vesting Date”). Upon vesting, the Restricted Shares will be rounded down to the nearest whole share of Common Stock.

3.2 Termination. In the event of your Termination before the last Vesting Date, you will forfeit any unvested Restricted Shares for no consideration. However, if your Termination occurs because of your Disability or death, any outstanding Restricted Shares will become fully vested and the Restricted Period for those Restricted Shares will lapse upon your Termination.

4. Non-Transferability. You may not transfer the Restricted Shares except as permitted under Section 14(b) of the Plan.

5. Stockholder Rights. Subject to the restrictions set forth in Section 9 of the Plan, you generally will have the rights and privileges of a stockholder of Royalty Flow Inc. as to the Restricted Shares on the Grant Date, including the right to vote the Restricted Shares. However, any dividends payable on the Restricted Shares will be held by the Company and delivered to you (without interest) within 15 days after the applicable Restricted Shares vest. You will forfeit the right to any accumulated dividends if you forfeit the Restricted Shares to which the dividends relate. To the extent you forfeit the Restricted Shares, any stock certificates issued to you evidencing the shares must be returned to the Company, and all of your rights to those shares and as a stockholder with respect to those shares will terminate without further obligation on the Company’s part.

6. Tax Withholding. This Award will be subject to all applicable taxes as provided in Section 14(d) of the Plan.

 

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7. Notice. Every notice or other communication relating to this Agreement between the Company and you must be in writing. All notices and communications between you and any third-party Plan administrator must be mailed, delivered, transmitted, or sent according to that administrator’s procedures.

8. Binding Effect. This Agreement will be binding upon and inure to the benefit of the heirs, executors, administrators, and successors of the parties to this Agreement.

9. Waiver and Amendments. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel, or terminate this Agreement, prospectively or retroactively, except that your consent will be required for any waiver, amendment, alteration, suspension, discontinuance, cancellation, or termination that would materially and adversely affect your rights. No waiver by either of the parties to this Agreement of their rights will constitute a waiver of any subsequent occurrences or transactions unless the waiver specifically states that it is to be construed as a continuing waiver. The Committee’s authority under this Section 9 may be subject to stockholder approval as required under Section 13(b) of the Plan.

10. Governing Law; Forum. This Agreement will be construed and interpreted under the laws of the State of Delaware, without regard to the principles of conflicts of law. If any controversy among the parties arises out of, or relates to, this Agreement, you and the Company agree and consent to the exclusive jurisdiction and venue of the state and federal courts of New Castle County in the State of Delaware.

11. Plan. The terms of the Plan are incorporated into this Agreement. In the event of a conflict or inconsistency between the terms of the Plan and this Agreement, the Plan will control. You acknowledge that a copy of the Plan (which is publicly-filed) has been made available to you, as well as a prospectus describing the terms of the Plan.

12. Imposition of Other Requirements. The Company may impose any other requirements on your participation in the Plan, on the Restricted Shares, and on any shares acquired under the Plan if the Company determines it is necessary or advisable for legal or administrative reasons. The Company may also require you to sign any additional agreements that may be necessary to accomplish the foregoing.

13. Entire Agreement. The information on your Grant Notice, this Agreement, and the Plan constitute the entire understanding between you and the Company regarding the Restricted Shares.

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EXHIBIT A — GRANT NOTICE

FOR RESTRICTED STOCK AWARD AGREEMENT

Name: [Name] (“you”)

ID: [Employment ID]

Grant Date: [Date]

Number of Shares of Restricted Stock: [Amount]

Acknowledgement and Acceptance

By signing below, you acknowledge that the Award reflected in this Grant Notice is governed by the Plan and the Restricted Stock Award Agreement terms and conditions, which you have received with this notice. You also accept the grant of the above award under its terms and conditions.

ACCEPTED BY:

___________________________________

Signature

___________________________________

Date

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EX1A-6 MAT CTRCT.5

EXHIBIT 6.5

FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT

ROYALTY FLOW INC.

2017 OMNIBUS INCENTIVE PLAN

Subject to the terms of the Royalty Flow Inc. 2017 Omnibus Incentive Plan (the “Plan”), Royalty Flow Inc. (the “Company”) and the Participant (“you”) agree as follows:

1. Definitions. The term “Grant Date” means the date on specified in the grant notice attached as Exhibit A (Grant Notice). Other capitalized terms that are not defined in this Agreement have the meanings defined in the Plan.

2. Grant of Restricted Stock Units. The Company grants to you Restricted Stock Units relating to the number of shares of Common Stock included on your Grant Notice. [Notwithstanding Section 9(d)(2) of the Plan, the Restricted Stock Units shall be settled solely through the issuance of shares of Common Stock.]

3. Vesting. The Restricted Period for the Restricted Stock Units will lapse and the shares of Common Stock underlying the Restricted Stock Units will be issued to you as follows:

3.1 Continuous Employment. As long as you have not experienced a Termination before each applicable vesting date, [vesting schedule to be inserted] (each [anniversary], a “Vesting Date”). Upon vesting, the shares of Common Stock underlying the Restricted Stock Units will be rounded down to the nearest whole share of Common Stock.

3.2 Termination. In the event of your Termination before the last Vesting Date, you will forfeit any unvested Restricted Stock Units for no consideration. However, if your Termination occurs because of your Disability or death, any outstanding Restricted Stock Units will become fully vested and the Restricted Period for those Restricted Stock Units will lapse upon your Termination.

4. Non-Transferability. You may not transfer the Restricted Stock Units except as permitted under Section 14(b) of the Plan.

5. No Stockholder Rights. You do not have any of the rights of a stockholder with respect to the Restricted Stock Units unless and until the Common Stock relating to the Restricted Stock Units has been delivered to you. You will, however, be entitled to be credited with dividend equivalent payments upon the payment by the Company of dividends on shares of Common Stock, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, without interest, which accumulated dividend equivalents shall be payable at the same time as the underlying Restricted Stock Units are settled following the date on which the Restricted Period lapses with respect to the Restricted Stock Units. If the Restricted Stock Units are forfeited, you shall have no right to such dividend equivalent payments.

 

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6. Tax Withholding. This Award will be subject to all applicable taxes as provided in Section 14(d) of the Plan.

7. Notice. Every notice or other communication relating to this Agreement between the Company and you must be in writing. All notices and communications between you and any third-party Plan administrator must be mailed, delivered, transmitted, or sent according to that administrator’s procedures.

8. Binding Effect. This Agreement will be binding upon and inure to the benefit of the heirs, executors, administrators, and successors of the parties to this Agreement.

9. Waiver and Amendments. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel, or terminate this Agreement, prospectively or retroactively, except that your consent will be required for any waiver, amendment, alteration, suspension, discontinuance, cancellation, or termination that would materially and adversely affect your rights. No waiver by either of the parties to this Agreement of their rights will constitute a waiver of any subsequent occurrences or transactions unless the waiver specifically states that it is to be construed as a continuing waiver. The Committee’s authority under this Section 9 may be subject to stockholder approval as required under Section 13(b) of the Plan.

10. Governing Law; Forum. This Agreement will be construed and interpreted under the laws of the State of Delaware, without regard to the principles of conflicts of law. If any controversy among the parties arises out of, or relates to, this Agreement, you and the Company agree and consent to the exclusive jurisdiction and venue of the state and federal courts of New Castle County in the State of Delaware.

11. Plan. The terms of the Plan are incorporated into this Agreement. In the event of a conflict or inconsistency between the terms of the Plan and this Agreement, the Plan will control. You acknowledge that a copy of the Plan (which is publicly-filed) has been made available to you, as well as a prospectus describing the terms of the Plan.

12. Imposition of Other Requirements. The Company may impose any other requirements on your participation in the Plan, on the Restricted Stock Units, and on any shares acquired under the Plan if the Company determines it is necessary or advisable for legal or administrative reasons. The Company may also require you to sign any additional agreements that may be necessary to accomplish the foregoing.

13. Entire Agreement. The information on your Grant Notice, this Agreement, and the Plan constitute the entire understanding between you and the Company regarding the Restricted Stock Units.

 

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EXHIBIT A — GRANT NOTICE

FOR RESTRICTED STOCK UNIT AWARD AGREEMENT

Name: [Name] (“you”)

ID: [Employment ID]

Grant Date: [Date]

Number of Shares underlying Restricted Stock Units: [Amount]

Acknowledgement and Acceptance

By signing below, you acknowledge that the Award reflected in this Grant Notice is governed by the Plan and the Restricted Stock Unit Award Agreement terms and conditions, which you have received with this notice. You also accept the grant of the above award under its terms and conditions.

ACCEPTED BY:

___________________________________

Signature

___________________________________

Date

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EX1A-11 CONSENT.1

EXHIBIT 11.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form 1-A of Royalty Flow Inc. of our report dated June 26, 2017, relating to the audited Statements of Revenue and Recoveries related to Eminem Royalty Interests available for partial purchase by Royalty Flow, Inc., appearing in this Registration Statement.

We also consent to being named experts in the Registration Statement.

/s/ Hein & Associates LLP

Denver, Colorado

October 10, 2017

EX1A-12 OPN CNSL.1

EXHIBIT 12.1  

Hogan Lovells US LLP 1601 Wewatta, Suite 900 Denver, CO 80202 T +1 303 899 7300 F +1 303 899 7333 www.hoganlovells.com

October 11, 2017

Board of Directors

Royalty Flow Inc.

1550 Larimer St., #769

Denver, CO 80202

Ladies and Gentlemen:

We are acting as counsel to Royalty Flow Inc., a Delaware corporation (the “Company”), in connection with its offering statement on Form 1-A, as amended (the “Offering Statement”), filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”) relating to the proposed public offering of up to 6,666,666 newly issued shares of the Class A common stock, par value $0.001 per share (the “Common Stock”) of the Company (the “Shares”), all of which shares are to be sold by the Company. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Form 1-A, 17 C.F.R. § 239.90, in connection with the Offering Statement.

For purposes of this opinion letter, we have examined copies of such agreements, instruments and documents as we have deemed an appropriate basis on which to render the opinions hereinafter expressed. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including pdfs). As to all matters of fact, we have relied on the representations and statements of fact made in the documents so reviewed, and we have not independently established the facts so relied on. This opinion letter is given, and all statements herein are made, in the context of the foregoing.

This opinion letter is based as to matters of law solely on the Delaware General Corporation Law, as amended. We express no opinion herein as to any other statutes, rules or regulations.

Based upon, subject to and limited by the foregoing, we are of the opinion that following (i) qualification of the Offering Statement, (ii) issuance of the Shares pursuant to the terms of the subscription agreement described in the Offering Statement, and (iii) receipt by the Company of the consideration for the Shares specified in the resolutions of the Board of Directors, the Shares will be validly issued, fully paid, and nonassessable.

Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia. “Hogan Lovells” is an international legal practice that includes Hogan Lovells US LLP and Hogan Lovells International LLP, with offices in: Alicante Amsterdam Baltimore Beijing Birmingham Boston Brussels Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Johannesburg London Los Angeles Luxembourg Madrid Mexico City Miami Milan Minneapolis Monterrey Moscow Munich New York Northern Virginia Paris Perth Philadelphia Rio de Janeiro Rome San Francisco São Paulo Shanghai Silicon Valley Singapore Sydney Tokyo Ulaanbaatar Warsaw Washington DC Associated offices: Budapest Jakarta Shanghai FTZ Zagreb. Business Service Centers: Johannesburg Louisville. For more information see www.hoganlovells.com

Royalty Flow Inc. - 2 - October 11, 2017

This opinion letter has been prepared for use in connection with the Offering Statement. We assume no obligation to advise of any changes in the foregoing subsequent to the effective date of the Offering Statement.

We hereby consent to the filing of this opinion letter as Exhibit 12.1 to the Offering Statement and to the reference to this firm under the caption “Legal Matters” in the offering circular constituting a part of the Offering Statement. In giving this consent, we do not thereby admit that we are an “expert” within the meaning of the Securities Act of 1933, as amended.

Very truly yours,

/s/ HOGAN LOVELLS US LLP                                 

HOGAN LOVELLS US LLP

EX1A-13 TST WTRS.1

EXHIBIT 13

VISUAL GUIDE #1: HOW ROYALTIES WORK

What are music royalties?

Music royalties are a cut off the top of any revenue earned from music in any way. The owner of a royalty gets paid first, before stockholders, company executives, or others.

It's the difference between earning 1-cent for every iPhone sold before expenses, versus earning dividends in Apple stock.

In music, royalties are generated from copyrights. There are two copyrights attached to any given song, which earn royalties in different ways.

The Composition	The Recording
A song as it is written and published on paper	A song as it is performed and recorded.

Example:

“The Christmas Song” (“Chestnuts Roasting On An Open Fire...”).

Mel Torme wrote the song, and therefore owns the composition copyright.

But Nat King Cole recorded it, as did dozens of others over the years.

Nat King Cole and the others own the sound recording of the version they made.

Sometimes the same person both writes and performs a song. In that case, they own both the composition and the sound recording copyright.

Copyrights last for quite a while, typically the lifetime of the musician plus 70 years.

For the most part, any use of a song pays both the composer and the performer. Music sales, streaming, and licensing all pay the songwriter and the recording artist. Rates differ depending on whether it’s on-demand streaming, Internet radio streaming, licensed for a TV show or advertisement, and so on. The only exception is traditional radio, where in the U.S. only the composition copyright is paid.

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Streaming music services, both on-demand and Internet radio services, pay higher rates for the sound recording royalty than they do for the composition.

There are also established entities tasked with tracking, collecting, and distributing royalties to royalty owners. Labels, and digital distributors, typically collect royalties due the sound recording copyright, and pay the artists directly. Publishers and performing rights organizations collected royalties due for the composition, and in turn pay the songwriter.

Disclaimer: No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualifed with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualifcation date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind. The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve signifcant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefnite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue. This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identifed by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

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VISUAL GUIDE #2: WHAT’S INCLUDED IN THE FBT-EMINEM ROYALTIES

ENCORE (EMINEM)

Curtains Up

Evil Deeds

Never Enough

Yellow Brick Road

Like Toy Soldiers

Mosh

Puke

My 1st Single

Paul [Skit]

Rain Man

Big Weenie

Em Calls Paul [Skit]

Just Lose It

Ass Like That

Spend Some Time

Mockingbird

Crazy in Love

One Shot 2 Shot

Final Thought [Skit]

Encore

We as Americans

Love You More

Ricky Ticky Toc

CURTAIN CALL (EMINEM)

Fack

Shake That

When I’m Gone

Intro (Curtain Call)

The Way I Am

My name Is

Stan

Lose Yourself

Shake That

Sing For The Moment

Without Me

Like Toy Soldiers

The Real Slim Shady

Mockingbird

Guilty Conscience

Cleanin Out My Closet

Just Lose It

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RELAPSE (EMINEM)

Dr. West [Skit]

3 A.M.

My Mom

Insane

Bagpipes from Baghdad

Hello

Tonya [Skit]

Same Song & Dance

We Made You

Medicine Ball

Paul [Skit]

Stay Wide Awake

Old Time’s Sake

Must Be the Ganja

Mr. Mathers [Skit]

Déjà Vu

Beautiful

Crack a Bottle

Steve Berman [Skit]

Underground

Careful What You Wish For

My Darling

RELAPSE: REFILL (EMINEM)

Forever

Hell Breaks Loose

Buffalo Bill

Elevator

Taking My Ball

Music Box

Drop the Bomb On ‘Em

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RECOVERY (EMINEM)

Cold Wind Blows

Talkin’ 2 Myself

On Fire

Won’t Back Down

W.T.P.

Going Through Changes

Not Afraid

Seduction

No Love

Space Bound

Cinderella Man

25 to Life

So Bad

Almost Famous

Love the Way You Lie

You’re Never Over

[Untitled Hidden Track]

THE MARSHALL MATHERS LP 2 (EMINEM)

Bad Guy

Parking Lot (Skit)

Rhyme Or Reason

So Much Better

Survival

Legacy

Asshole

Berzerk

Rap God

Brainless

Stronger Than I Was

The Monster

So Far

Love Game

Headlights

Evil Twin

DEVIL’S NIGHT (D-12)

These Drugs

8 MILE SOUNDTRACK (VARIOUS)

Love Me

Lose Yourself

Rabbit Run

8 Mile

Places To Go

Rap Game

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CHEERS (OBIE TRICE)

Hands On You

Lady

Outro

Shit Hits The Fan

We All Die One Day

RESURRECTION (TUPAC)

One Day At A Time

GET RICH OR DIE TRYIN’ (50 CENT)

Don’t Push Me

Patiently Waiting

LOYAL TO THE GAME (2PAC)

Black Cotton

Soldier Like Me

D12 WORLD (D-12)

6 In The Morning

American Psycho 2

Bitch

Get My Gun

Git Up

How Come

Keep Talkin’

Leave Dat Boy Alone

Loyalty

THE HUNGER FOR MORE (LLOYD BANKS)

Warrior Part 2

THE MASSACRE (50 CENT)

Gatman & Robin

KISS OF DEATH (JADAKISS)

Welcome To D-Block

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THE PEOPLE VS. (TRICK TRICK)

No More To Say

Welcome 2 Detroit

THE LONGEST YARD SOUNDTRACK (VARIOUS - D12)

My Ballz

THOUGHTS OF A PREDICATE FELON (TONY YAYO)

Drama Setter

EMINEM PRESENTS THE RE-UP (VARIOUS)

Shady Narcotics

We’re Back

Murder

The Re-Up

You Don’t Know

Jimmy Crack Corn

Whatever You Want

Smack That (Remix)

Public Enemy #1

Cry Now

No Apologies

SECOND ROUND’S ON ME (OBIE TRICE)

Wake Up

There They Go

THE BLUEPRINT (JAY-Z)

Renegade

KONVICTED (AKON)

Smack That

THE COUNTY HOUND (CA$HIS)

Pistol Poppin

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HELL: THE SEQUEL (BAD MEETS EVIL)

Welcome 2 Hell

Fastlane

The Reunion

Above the Law

I’m On Everything

A Kiss

Lighters

Take from Me

Loud Noises

Living Proof

Echo

ALBUM 

THE SLIM SHADY LP (EMINEM)

Public Service Announcement

My Name Is

Guilty Conscience

Brain Damage

Paul

If I Had

‘97 Bonnie & Clyde

Bitch

Role Model

Lounge

My Fault

Ken Kaniff

Cum on Everybody

Rock Bottom

Just Don’t Give a Fuck

Soap

As the World Turns

I’m Shady

Bad Meets Evil

Still Don’t Give a Fuck

THE MARSHALL MATHERS LP (EMINEM)

Public Service Announcement 2000

Kill You

Stan

Paul (Skit)

Who Knew

Steve Berman

The Way I Am

The Real Slim Shady

Remember Me?

I’m Back

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ALBUM 

Marshall Mathers

Ken Kaniff (Skit)

Drug Ballad

Amityville

Bitch Please II

Kim

Under the Influence

Criminal

The Kids

THE EMINEM SHOW (EMINEM)

Curtains Up [Skit]

White America

Business

Cleanin’ Out My Closet

Square Dance

The Kiss [Skit]

Soldier

Say Goodbye Hollywood

Drips

Without Me

Paul Rosenberg (Skit)

Sing for the Moment

Superman

Hailie’s Song

Steve Berman [Skit]

When the Music Stops

Say What You Say

‘Till I Collapse

My Dad’s Gone Crazy

Curtains Close (Skit)

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Disclaimer: No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind. The securities to be offered will be highly speculative.  Investing in shares of Royalty Flow will involve significant risks.  Investment will be suitable only for persons who can afford to lose their entire investment.  Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time.  No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue. This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

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VISUAL GUIDE #3: INVESTMENT CRITERIA

Our Approach To Royalty Acquisitions and Operations

Our criteria for new royalty acquisitions include:

1. A Track Record of Royalty Income

Royalty Flow does not plan to speculate on unproven artists or catalogs. We’re looking for assets with a track record of earnings that we expect will generate substantial income in the future. We want to generate between 7 and 15% income with each asset we acquire.

2. Capital Appreciation Potential

When we evaluate potential royalty acquisitions, we’ll keep an eye towards the future and seek to buy assets that have high potential for capital appreciation.

Thanks to subscription streaming music services, the music business grew for the first time in 15 years in 2015. We believe the bull market for the music business has only just begun, so we believe that many of these assets have high potential for capital appreciation.

3. Passive Interests Only

We plan to acquire non-operating interests in great IP. That means the owners of the assets we buy can take some money off the table but still maintain a substantial economic interest.

As investors, the best way to generate great returns is to get as close as possible to the ownership of an underlying asset. We think Royalty Flow will prove the best way to achieve this.

We’ll keep our interests aligned with the IP owners we partner with. Since we’re not acting as a record label or publisher, our cost base is lower, which allows us to reward shareholders better.

4. Established Operating Partners

Focusing on passive interests means we must partner with excellent active operators .

We’re looking for partners with a track record of great stewardship. This includes demanding regular and consistent earnings audits, vigorously defending rights against infringement, and a proven history of unlocking value.

We must also ensure our interests are aligned with the operators. We will do this through shared incentives and equal treatment clauses in our agreements.    

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Disclaimer: No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind. The securities to be offered will be highly speculative.  Investing in shares of Royalty Flow will involve significant risks.  Investment will be suitable only for persons who can afford to lose their entire investment.  Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time.  No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue. This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

 

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I N V E S T O R     P R E S E N T A T I O N S e p t e m b e r   2 0 1 7

DISCLAIMER

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve significant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue. 

This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

  TABLE OF
  CONTENTS OVERVIEW   INVESTING IN ROYALTIES   MUSIC INDUSTRY RECOVERY   ROYALTLY FLOW: BUSINESS MODEL   ROYALTY FLOW: FIRST ASSET   ROYALTY FLOW: IMPORTANT INFORMATION   APPENDIX

ROYALTY EXCHANGE 4

Mission:	Making quality media royalty streams investable.
Founded:	2011
Full-Time Employees:	16
Registered Users:	21,000+
Focus Since Inception:	Media-Based Intellectual Property Royalties
Location:	Denver, CO

IP assets sold/acquired via 200+ auctions in the last two years at Royalty Exchange include royalties spanning:

Music

Television/Movies

Photography

Video

Publishing (books)

*As of September 2017

ROYALTY EXCHANGE G R O S S    M A R K E T P L A C E    V O L U M E 5

GROSS
MARKETPLACE
VOLUME:   The sum of the gross
dollar value of closed
deals that generated
revenues or
commissions for
Royalty Exchange.

Royalty Exchange GMV by Quarter
	16-Q1*	16-Q2**	16-Q3	16-Q4	17-Q1	17-Q2
Closed GMV	$220,550	$970,000	$1,018,300	$1,080,500	$1,774,900	$2,432,400
% Growth (Q over Q)	N/A	N/A	4.98%	6.11%	64.27%	37.04%

  *Partial data **Excludes 1 abnormal auction

POST-2008: CORRELATIONS STILL INCREASING 6

INTERNATIONAL
MONETARY
FUND (IMF):
Global asset prices have
a higher tendency to
move together now
than at any other time
since the 2008 Financial
Crisis.
·	IMF World Financial Stability Report, October 2015
·	IMF World Financial Stability Report, April 2016

http://www.fa-mag.com/news/global-investment-outlook-27345.html

CASE FOR ALTERNATIVE ASSETS 7

	·	“Broadly speaking,
		alternatives are investments
		in assets other than stocks,
		bonds and cash or
		investments”
	·	“Because alternatives tend to
		behave differently than
		typical stock and bond
		investments, adding them to
		a portfolio may provide
		broader diversification,
		reduce risk, and enhance
		returns.”
	- BlackRock, Inc.
https://www.thestreet.com/story/13383547/1/4-reasons-why- investors-should-consider-alternative-investments.html

https://www.blackrock.com/investing/resources/education/alternative-
investments-education-center/what-are-alternative-investments

MUSIC ROYALTIES: ALTERNATIVE ASSETS 8

L O W    C O R R E L A T I O N

Music consumption has not historically changed with

interest rate movement OR stock market volatility

“The secular influence of new sound-carrier format introductions such as cassettes in 1973, compact discs in 1983, and digital downloading and streaming services (e.g. Napster) has been far more important than the business cycle in affecting demand.”
	- HOWARD VOGEL
		·	Former Merrill Lynch Senior Entertainment Industry Analyst (17 years)
		·	Ranked Top Entertainment Industry Analyst for 10 years by Institutional Investor magazine

THE ASSET CLASS: MUSIC ROYALTIES 9

	Consistent
	Income/
	Cash Flow
Relative Price (NAV) Stability		Capital Appreciation Potential
	Long-Term Assets
	(paid for the live of
	the artist + 70 years)

ROYALTIES 101 10

“THE BEST BUSINESS IS A ROYALTY ON

THE GROWTH OF OTHERS, REQUIRING

VERY LITTLE CAPITAL ITSELF”

	- WARREN BUFFETT
	Warren Buffett quoted in “The Money Masters” by John Train, published 1980

ROYALTIES 101 11

A “royalty” is a monetary compensation paid to the owner of an asset.	·	The owner may license the asset to be used by another party, and will be paid a percentage of the net revenues of the asset based on its usage.
	·	Music royalties are a “cut off the top” of revenue earned from music. The owner of a royalty gets paid before stockholders, company executives, and others at specified intervals like annually, quarterly or monthly.

MUSIC ROYALTY INCOME 12

MUSIC INDUSTRY: TURNING THE CORNER 13

“IT’S FINALLY TURNING THE CORNER. AFTER

15 YEARS OF DESTRUCTION, THE NEXT 15

YEARS ARE ALL ABOUT VALUE CREATION”

- LISA YANG
	·	Goldman Sachs Executive Director of Media and Internet

 http://www.goldmansachs.com/our-thinking/pages/music-in-the-air.html

MUSIC INDUSTRY CRISIS: 1999-2014	14
Global recording industry revenue: Decreased Nearly 40%

IFPI – MIDiA Research - April 2017

MUSIC INDUSTRY RECOVERY: 2015+ 15

The Rise of Digital Streaming
·	Streaming is now outpacing the effect of declining physical sales (CDs).
·	Technological advances (smartphones, mobile networks, etc.) are creating opportunities for continued growth.

IFPI – MIDiA Research - April 2017

GOLDMAN SACHS PROJECTION	16
Digital Streaming Paid Revenues: Revised Upward

Goldman Sachs Equity Research, GS Music in the Air Series. - August 28, 2017

MUSIC INDUSTRY RECOVERY CHAIN	17
Major Beneficiary: Royalty Asset Owners

GLOBAL DIGITAL MUSIC REVENUE	18
2005-2016

INCLUDES:
·	Streaming
·	Downloads
·	Ringtones
·	Non-interactive streaming (Pandora, Sirius XM, YouTube)

IFPI – “Global Music Report 2017”, Page 11 - April 2017

DIGITAL STREAMING:	19
CHALLENGING TERRESTRIAL RADIO

U.S. TERRESTRIAL RADIO AIRPLAY	à	RECORDING ARTISTS DO NOT GET PAID
DIGITAL STREAMING PLAYS	à	RECORDING ARTISTS GET PAID

 

IFPI – “Global Music Report 2017”, page 16 – April 2017     Edison Research “State of the News Media 2016” – February 2017

MUSIC INDUSTRY:	20
PROJECTED REVENUE GROWTH

PWC; VentureBeat – June 2017

21

Royalty Flow is a specialty financing company acquiring
passive interests in quality media royalty streams.

ROYALTY FLOW 22

E X C L U S I V E    R O Y A L T Y   A C C E S S

Royalty Flow will grant investors exclusive access to media
royalty streams via a daily liquid, exchange-traded stock.

	Acquisition & Growth Strategy Will:
Royalty Flow will offer the most direct exposure to media royalties available on a public exchange.	Initially focus on music assets. Actively analyze and potentially include other forms of media-based Intellectual Property, including but not
	limited to:
	Movies	Television	Trademarks

  

ROYALTY  FLOW 23

A S S E T    E V A L U A T I O N   C R I T E R I A

We use a series of quantitative, qualitative, financial, and legal criteria by which we
evaluate the potential acquisition of royalty interests. The factors considered include:

		Experience and skill of
		the active management
		team
Track record of royalty earnings		Target IRR: 8-16%		Longevity and staying power of the underlying intellectual property
	Type of intellectual		Potential for revenue
	property royalties		growth

ROYALTY  FLOW 24

G R O W T H    S T R A T E G Y

ROYALTY FLOW’S GROWTH STRATEGY WILL TARGET

Dividend Growth
Capital Appreciation
Cost efficiency
|	|
Passive interest only	Established operating partners

DIVIDEND GROWTH CREATES VALUE 25

R O Y A L T Y   F L O W   W I L L   P U R S U E   D I V I D E N D   G R O W T H

“DIVIDENDS HAVE BEEN A
MAJOR COMPONENT OF THE
STOCK MARKET’S OVERALL
TOTAL RETURNS
THROUGHOUT HISTORY.
DIVIDENDS HAVE
CONTRIBUTED ANYWHERE
FROM 25% TO 75% OF THE
MARKET’S OVERALL TOTAL
RETURN OVER THE PAST
SEVEN DECADES”   - BRIAN BOLLINGER * THESTREET.COM  

	Ned Davis Research, Morningstar
	*https://www.simplysafedividends.com/dividends-vs-total-returns/

ROYALTY FLOW 26

C A P I T A L    A P P R E C I A T I O N    P O T E N T I A L

		Goldman Sachs 2030 Projection
The current trends in the music industry provide an opportunity to dwarf the bull market of the early 90s (introduction of CDs)
		$28.0 B
2016 Digital Streaming: Global Paid Revenues
	$3.0 B

Goldman Sachs Equity Research, GS Music in the Air Series. - August 28, 2017

CAPITAL APPRECIATION POTENTIAL 27

We at Royalty Exchange agree with Goldman
Sachs that the music industry is in the early
days of a bull market. For example, in 2016:

28

COST EFFICIENCY

	PASSIVE  INTERESTS  ONLY		ESTABLISHED  OPERATING  PARTNERS
	·	No expenses of a label or publisher	·	History of effective stewardship, i.e.: defending the asset
	·	Copyright owners maintain economic interest to exploit catalog	·	Vigilant focus on monetization

29

 

FIRST EXCLUSIVE ASSSET

EMINEM

EMINEM’S FULL CATALOG 1999-2013 30

E X T R A O R D I N A R Y    S O U N D    R E C O R D I N G    C A T A L O G    I N C L U D E S

	ALL OF EMINEM’S ALBUMS FROM 1999’S SLIM SHADY LP UP TO AND INCLUDING 2013’S MARSHALL MATHERS LP 2.		EMINEM’S SIDE PROJECTS INCLUDING WORKS WITH JAY-Z, AKON, TUPAC, 50 CENT AND MORE
	ALL OF EMINEM’S MUSIC VIDEOS		REVENUE HISTORY 20+ YEARS

*Asset being acquired is a 15% or 25% royalty interest from FBT
Productions, the individuals who discovered and developed EMINEM

EMINEM CATALOG 31

T O P    2 0    S O N G S    B Y    R E V E N U E    2 0 1 3 - 2 0 1 6

Song Title
The Monster
Berzerk
Lose Yourself
Rap God
Love The Way You Lie - Album V
'Till I Collapse
Without Me
The Real Slim Shady
Survival
Not Afraid
Marshall Mathers
Stan
Mockingbird
Headlights
When I’m Gone
Shake That	Includes songs from
Superman	·	Albums
My Name Is	·	Side Projects
Sing For The Moment	·	Compilations
8 Mile	·	Soundtracks

ROYALTY FLOW 32

T H E   F I R S T   A S S E T

○	Named “Billboard’s Artist of the Decade” for 2000-2010
○	43 Grammy Award nominations, 15 Grammy wins - including six for Best Rap Album.
○	Won an Oscar for Best Original Song with “Lose Yourself”
○	Ranked by Rolling Stone and VH-1 as one of the 100 Greatest Artists of all time.
○	So far in 2017, Eminem is the 12th most streamed artist in the world. And he hasn't released an album in 4 years.
○	One of the best-selling artists of all time, with 10 No. 1 albums and five No. 1 singles.
○	Second best-selling male artist of the Nielsen SoundScan era.
○	Sixth best-selling artist in the United States.
○	Best-selling hip-hop artist of all-time.
○	Globally, has sold more than 172 million albums.
○	Long-term relevance: This catalog has four albums currently charting on the Billboard 200. Three of which are among the top 20 longest-charting of all time, and one: "Curtain Call" was named the longest-charting hip-hop album in history.

EMINEM POPULARITY 33

Statista - 2017

EMINEM POPULARITY 34

Fanpagelist.com - 2017

EMINEM CATALOG 35

FINANCIAL HIGHLIGHTS

C O N T I N U E D   R E L E V A N C E

	T H E   S T R E A M I N G   E F F E C T The streaming royalties grew by 76% in calendar year 2016 over calendar year 2015. Streaming represents 46% of the asset’s total 2016 royalties.
The catalog’s royalties grew by 43% from 2015 to 2016, even though Eminem hasn’t released a new album since 2013.

  

EMINEM CATALOG: TOTAL EARNINGS 36

Audited financials of the catalog

FBT PRODUCTIONS VS. AFTERMATH RECORDS 37

EFFECTIVE  ASSET  OPERATOR  CASE  STUDY

SEPTEMBER 3, 2010:

· FBT won the landmark case of FBT Productions v. Aftermath Records.*

· The Ninth Circuit overruled a District Court decision (which FBT Productions had appealed) determining digital downloads from third party sites are generally licensed, not purchased, by the retailer from the copyright owner.

THE RESULT:

· The artist (FBT, in this case) is owed the licensing rate for digital downloads and streams of 50%, rather than the sale rate of 12-20%.

· FBT is now receiving significantly enhanced royalties from digital uses and other licensing.

· This case has already had a major influence on the income of many renowned artists.

* FBT Productions, LLC v. Aftermath Records, 621 F.3d 958, 961 (9^th Cir. 2010), cert. denied, 131 S. Ct. 167

COMPARABLE CASE STUDY: ROYAL GOLD 38

Royal Gold is engaged in the acquisition and
management of precious metals royalties and streams

Company	Symbol	IPO Date	Price/Book Ratio*	Total Return*	Market Cap*	Approximate Employee count*
Royal Gold	RGLD	6/19/1981	2.6	3596%	$6.1 billion	30

In acquiring assets, Royal Gold Seeks:
	○	EXTRAORDINARY ASSETS/DEPOSITS
	○	POLITICALLY STABLE ENVIRONMENTS
	○	EFFECTIVE OPERATING PARTNERS

*Morningstar.com as of September 2017

ROYALTY FLOW 39

V A L U E    P R O P O S I T I O N

INCOME FOCUS	ALIGNMENT OF INTERESTS	CAPITAL EFFICIENT STRUCTURE
Royalty Flow will seek to acquire assets generating uncorrelated income of 8-16% IRR.	Royalty Exchange will own Royalty Flow (approximately 20% upon IPO), aligning interests with shareholders. Royalty Flow will not charge management or performance fees	Keeping costs low Finding, valuing, acquiring and administering media-based IP royalty assets has been our specialty since inception.
	Many alternative asset investors have experienced muted returns due to managers charging exorbitant fees like “2 & 20.”	Intangible assets: no factories or storage facilities necessary. Acquisitions and growth should create “economies of scale.”

IMPORTANT INFORMATION 40

		IPO IN Q4 2017
Broker-Dealer(s):	Folio Investing	Fundraise Goal: $11-$50 million
Reg A+ Investment Portal:	Folio Investing	Minimum Investment: $2,250
Stock Exchange:	TBD (NASDAQ or OTC)	Goal: List on NASDAQ Capital Market (may require IPO on OTC Markets)
Transfer Agent:	ComputerShare	NASDAQ Ticker Symbol: RLTY
Legal Counsel:	Hogan Lovells US LLP
		Investment period opens:
		October 2017
Third Party Due Diligence:	Hogan Lovells US LLP

ROYALTY FLOW FAQ

What is Royalty Flow?

Royalty Flow is a specialty financing company that will acquire and manage royalty interests in media assets. We focus on royalties derived from intellectual property (IP) in the media industry.

Royalty Exchange, our controlling shareholder, creates financing options for IP owners and royalty investment opportunities for investors.

What am I buying?

Buying shares of Royalty Flow means you are an owner of the company which receives royalty income from the catalogs it manages.

The first such asset is the sound recording royalty income of the producer's share of Eminem's pre-2013 catalog; including every solo recording, his side projects (with other artists such as Rihanna, Dr. Dre and music from the movie soundtrack for "8 Mile"), and the videos created for each of the recordings.

For more information on this asset, click here.

Can I sell my shares?

Yes. Shortly after the regulation A+ offer is closed, Royalty Flow plans to list on a public exchange.

When will shares appear on the public exchange?

The timing is dependent on a number of factors, but we expect it to be a month or two after the crowdfunding campaign ends.

What are shares of Royalty Flow worth?

Royalty Flow shares are being offered at $7.50 a share during the crowdfunding campaign. Once listed on the public exchange, the share price will be based on supply and demand.

How long will the Reg A+ offer last?

Until the minimum is reached. Management will also make an announcement seven days prior to closing the offer.

How long until I see a return on my investment?

We intend to distribute dividends in the first year.

 

1

What is Regulation A+ and how is it different from crowdfunding sites like Kickstarter?

Reg A+ regulations were created by the JOBS Act. It allows non-accredited investors to participate in startup investing. You are purchasing equity in Royalty Flow, which entitles you to future potential dividends. Kickstarter is crowdfunding in which the rewards are based on product tiers.

Read more here

What's the difference between buying during the Reg A+ offering or on the public exchange?

The Reg A+ round gives you first access at a fixed per-share price of $7.50, with a minimum buy-in of $2,250 for 300 shares. The public exchange will let you buy a single share if you want but without a set per-share price.

Will I have to pay taxes on earnings?

You'd have to pay taxes on any dividends received, and on the profits of any sale of your stock. Same as any other publicly traded stock.

How is Royalty Exchange involved?

Royalty Exchange will own a minimum of 20% of Royalty Flow, and therefore makes money the same way other shareholders do.

Is there a minimum investment?

Yes, the minimum investment during the Reg A+ round is $2,250 for 300 shares.

What are the risks?

Any investment carries risks. Past performance does not guarantee future results. For a full disclosure of the potential risks, please read our 1A filing, available here.

How much are you trying to raise?

Our goal is to raise between $11 - $50 million.

 

2

What are you using the proceeds for?

The proceeds from the initial offering will be used first to acquire the Eminem catalog from FBT Productions. We plan to use any remaining funds to acquire additional premium catalogs with a proven history of success to add to and diversify the Royalty Flow holdings.

What are royalties?

Royalties are payments made from one party (sometimes referred to as the "licensee") to another (the" licensor") for the right to make use of an asset. The asset can be virtually anything -- from music, to tangible assets like minerals and oil, to intellectual property like copyrights, trademarks and patents. Royalty payments are often calculated as a percentage of the revenue generated by the asset's use.

Learn more about industry-specific royalties here.

Do I have to be an accredited investor?

No. Regulation A+ allows anyone to participate, not just accredited investors.

How can I include my catalog in Royalty Flow?

We’re constantly evaluating other catalogs and media IP assets to include in Royalty Flow. If you’d like to get involved, contact us.

Where can I learn more about Royalty Exchange?

You can read more on the Royalty Exchange FAQ page.

 

3

Disclaimer:

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative.  Investing in shares of Royalty Flow will involve significant risks.  Investment will be suitable only for persons who can afford to lose their entire investment.  Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time.  No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue. 

This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

4

ROYALTY EXCHANGE TO LAUNCH IPO OF ICONIC MUSIC ROYALTY CATALOGS

DENVER (Sept. 25, 2017)—Royalty Flow, Inc. (“Royalty Flow”), a subsidiary of Royalty Exchange, the premier online marketplace for music and media royalties, today filed to offer its shares to the public under Title IV of the 2012 JumpStart Our Business Start-up (JOBS) Act, known as “Regulation A+”, paving the way for individuals to invest in iconic music royalties.

Royalty Flow intends to acquire and hold royalties from music catalogs of the world’s biggest music artists. The first of these iconic music catalogs will be the production company’s master sound recording royalties from the 1999-2013 recording catalog of hip-hop superstar EMINEM.

Royalty Exchange is working with the Detroit producers who first signed EMINEM, Jeff and Mark Bass—co-founders of “Funky Bass Team” (FBT) Productions—with their manager Joel Martin, to bring this opportunity to fans and investors alike.

To make this possible, Royalty Exchange created Royalty Flow, a one-of-a-kind company designed to acquire and hold royalty catalogs of music and other media.

Individual and institutional investors can buy shares of Royalty Flow—and with it share in the previously privately owned royalty catalog it holds—through an equity offering the company filed for today. Royalty Flow targets raising between $11 and $25 million.

Royalty Flow’s Regulation A+ offering will begin after the SEC qualifies the filing, expected sometime in October. Minimum buy-in is expected to be $2,250 for 150 shares ($15 per share). Following this “mini IPO,” Royalty Flow intends to list on a public stock exchange, where anyone can buy and trade shares and be eligible to collect dividends from the EMINEM royalties, as well as other world-class royalty assets as they are added.  

“Royalty Flow gives investors the opportunity to participate in assets that are uncorrelated with public markets, and directly benefit in the music industry’s growth,” said Matthew Smith, CEO Royalty Exchange and Royalty Flow’s Chairman. “It also gives thousands of artists, producers, labels, songwriters, publishers, and other rightsholders who contribute to the success of the superstars they work with access to on-demand financing options with the kind of flexibility seldom found in the music industry.”

 

5

The Bass brothers and FBT own producer credits and additional royalties on all EMINEM recordings and releases from 1999 - 2013. They are making up to 25% of their master sound recording royalties in the EMINEM recording catalog available to investors through Royalty Flow.

This includes all EMINEM albums released in that timeframe (such as the diamond-certified The Marshall Mathers LP and The Eminem Show) as well as other EMINEM projects, contributions, and recordings.

With more than 172 million albums sold in his career, EMINEM is the second best-selling male artist of the last 25 years. Four of his albums remain on the Billboard 200 today, three are among the top 20 longest-charting albums of all time, and one—Curtain Call—was recently named the longest-charting hip-hop album in history.

The Bass brothers and Martin are groundbreaking champions for artists’ digital rights. They successfully fought for higher royalty payments for digital downloads and streaming, and won a landmark legal victory with an award of a substantially higher rate than paid to most producers or artists.

“We believe Royalty Exchange is the new model for music financing,” said their manager, Joel Martin. “We’ve supported increased transparency for artists our entire career, and Royalty Exchange is no different. They give investors simple, direct access to royalty opportunities that previously were available only to industry insiders. This changes everything.”

To register for updates on the Royalty Flow crowdfunding campaign, or to get more information, please visit www.royaltyipo.com.  

About Royalty Exchange Royalty Exchange helps artists and rightsholders raise money by connecting them with private investors on the world’s first premium marketplace for royalty generating assets. Creators love us because our transparent marketplace helps them get fair market value for their work. Investors love us because we help them diversify into uncorrelated, income-generating assets. And our commitment to transparency and honesty ensures value for all. Follow us on Twitter and Facebook.

 

6

About FBT/Bass Brothers

The Bass brothers, and their company FBT Productions, is the production team made up of Mark and Jeff Bass. Both are exceptional musicians, but their true talents lie in producing, working with the likes of Quincy Jones, George Clinton, D-12 and, of course, Eminem. After discovering and signing Eminem in 1995, the Bass brothers developed his signature musical style, producing and/or co-writing more Eminem tracks than any other producer on his most successful albums. This relationship garnered not only multiple Grammy awards, but also the Academy Award in 2003 for Best Original Song, “Lose Yourself.” For more background, see: 

Disclaimer:

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative.  Investing in shares of Royalty Flow will involve significant risks.  Investment will be suitable only for persons who can afford to lose their entire investment.  Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time.  No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue.

This news release contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this news release.

7

Video 1: Introduction to the opportunity

Disclaimer:

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve significant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue.

This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

 

V-1

Today I’m going to share the details of a new investment opportunity. This does involve the sale of securities, so I’d like to encourage you to read the information on the screen right now. And remember, at any point during this presentation, you can find the same information at the bottom of the screen. Please read it.

Today, I want to talk about a new and unusual investment opportunity. If you're at all interested in income-producing assets, you're gonna love this...

Because of recent changes in crowdfunding laws, you now have the chance to invest in some of the world’s best royalty-generating media assets, including the music of one particular artist listed on Rolling Stone’s 100 greatest artists of all time.¹

Hi, my name is Matthew Smith

I'm the Chairman of Royalty Flow and the CEO of Royalty Exchange. You may have heard of Royalty Exchange because it’s the online marketplace for buying and selling music royalties. The exchange has been written about in the Wall Street Journal, Rolling Stone, the NY Times and many other major publications

Music streaming is booming and leading the way of a music industry resurgence.

And, it just so happens that the artist I’m talking about - despite the fact some of his work is more than 20 years old - is the 12th most streamed artist in the world.²

Now… I don’t know if you’re one of Spotify’s 60 Million paying Subscribers, or Apple Music’s 30 Million, or Pandora or Amazon Music or any of the others… but if you are imagine this…

Each time you or anyone else plays this artist’s work, a royalty is generated for the rights holders including the artist, the label, and soon, perhaps you.

____________________

¹ http://www.rollingstone.com/music/lists/100-greatest-artists-of-all-time-19691231/eminem-20110420

² http://www.buzzanglemusic.com/wp-content/uploads/BuzzAngle-Music-2017-Mid-Year-U.S.-Report.pdf (p. 26)  

V-2

Here are a few facts you should know:

· This artist’s first record was released in 1996.³

· This artist has sold more than 172 million records. Michael Jackson is the only male artist who’s sold more.⁴

· This artist was the first in his genre to win an Academy Award.⁵

Let’s talk more about the artist in a moment.

First, let me tell you a bit more about what we’ve been working on and how you can benefit.

We’ve created a new company called Royalty Flow, that will acquire royalty interests in world-class media assets. We're using Regulation A+ of the JOBS act to raise capital for this purpose, so that any investor can participate in this initial public offering.

This is a unique opportunity for investors to earn dividends from one of the most iconic assets in the world.

As operators of the largest exchange for music royalties, it’s clear to us that these assets, with a strong track record of royalty income, are undervalued right now - and present an opportunity for investors like you.

In this series of videos, I'm going to explain why we believe media royalties are undervalued today. I'll share how you can be one of the first investors in this exciting new opportunity. And of course, I'll tell you all about the first asset that Royalty Flow will buy.

Let's start there...

One night in 1992, Mark Bass, who together with his brother Jeff Bass, makes up the Funky Bass Team, FBT Productions, discovered a young rapper freestyling on a local radio show.

____________________

³ https://en.wikipedia.org/wiki/Infinite_(Eminem_album)

⁴ https://en.wikipedia.org/wiki/Eminem#cite_note-British_Hit_Singles_.26_Albums-2

⁵ https://en.wikipedia.org/wiki/Eminem#cite_note-British_Hit_Singles_.26_Albums-2 

V-3

Impressed by this rapper's talent and potential, the brothers signed the young artist, soon to be known to the world as Eminem, and in 1996 released his first album, Infinite to critical dismay. The album sold less than 100 copies.

But Mark and Jeff continued to nurture and support Eminem as he developed the alter ego, Slim Shady, and are responsible for creating his signature music style. Both exceptional musicians, they crafted catchy tracks without using samples, a common practice in the hip-hop world, instead playing all the instruments themselves. Once they release his break-through album, the Slim Shady EP in 1997, the brothers continued to work with Eminem co-writing or producing most of his acclaimed recordings and hits through the release of Curtain Call.

They've won several Grammys and an even Academy Award for Best Original Song with “Lose Yourself” from the film “8-Mile”.

And FBT Productions paved the way for a ground breaking ninth circuit court decision in 2011 affirming the payment of digital exploitation of the Eminem’s recordings were subject to the much higher 50-50 licensing provision in their contract with Universal Music Group.

Now for the first time, a portion of FBT’s on-going royalty interest from the entire catalog of Eminem’s recordings are available to investors through the initial public offering of Royalty Flow.

Macro trends shaping the music industry have increased the royalty income earned by this catalog in recent years and will likely do the same for years to come.

In fact, the total royalties earned by this catalog grew by 43% from 2015 to 2016.^[6] In the next video, I’ll explain more about these macro trends and how we could benefit.

___________________

⁶Audited financials of the catalog
 

V-4

Right now, I’d like to share some of the reasons we’re incredibly excited to have this world-class catalog as part of Royalty Flow’s IPO

· Eminem was named “Billboard's Artist of the Decade” for 2000 - 2010

· He's been nominated for 43 Grammy Awards and won 15, including six for Best Rap Album.

· He won an Oscar for Best Original Song with “Lose Yourself”

· He was ranked by Rolling Stone and VH-1 as one of the 100 Greatest Artists of all time.

· So far in 2017, Eminem is the 12th most streamed artist in the world. And he hasn't released an album in 4 years.⁷

· Eminem is one of the best-selling artists of all time, with 10 No. 1 albums and five No. 1 singles.

· He is the second best-selling male artist of the Nielsen SoundScan era.

· He is the sixth best-selling artist in the United States.

· He is the best-selling hip-hop artist ever.

· Globally, he has sold more than 172 million albums.

· And the ultimate sign of a great artist - long term relevance. This catalog has four albums currently charting on the Billboard 200. Three of which are in the top 20, and one: "Curtain Call" was named the longest-charting hip-hop album of all time.

{good sources for stats on EM}: http://www.billboard.com/articles/columns/hip-hop/7678124/rap-chart-facts-eminem-jay-z-mc-hammer ;

http://www.billboard.com/articles/columns/the-juice/5944791/eminem-marks-sales-hot-100-milestones ;

http://www.billboard.com/articles/columns/hip-hop/7541968/10-highest-selling-rap-album-series ;

http://www.billboard.com/articles/columns/the-juice/474607/eminem-songs-best-hits-list ;

https://www.nytimes.com/interactive/2017/08/07/upshot/music-fandom-maps.html?smid=fb-nytimes&smtyp=cur&mtrref=m.facebook.com ← Eminem is the 11th most listened to artist on Youtube;

http://www.billboard.com/articles/columns/chart-beat/7874083/jay-z-444-second-week-no-1-billboard-200-albums-chart-french-montana ← Eminem has the most weeks at #1 for a rapper on Billboard chart in the 61 years of the charts; http://www.billboard.com/articles/columns/chart-beat/7873993/beatles-jay-z-artists-most-number-1s-billboard-200 ; }

This extraordinary catalog in in the Royalty Flow IPO and includes royalties from:

1.	All of Eminem’s albums from 1999’s Slim Shady LP up to and including 2013’s Marshall Mathers LP 2.
2.	Eminem’s side projects including works with Jay-Z, Akon, Tupac, 50 Cent, and others.
3.	All of Eminem’s music videos.

___________________

⁷ http://www.buzzanglemusic.com/wp-content/uploads/BuzzAngle-Music-2017-Mid-Year-U.S.-Report.pdf 

V-5

It’s not surprising that a catalog made up of all the musical works of a major artist like Eminem would be lucrative but here are a few important financial details -

· The catalog’s royalties grew by 43% from 2015 to 2016, even though Eminem hasn’t released a new album since 2013.

· Great catalogs should be generating higher and higher levels of royalty income as streaming subscriptions, which started to boom in 2016, take their effect. This catalog certainly meets that standard.

· This catalog is very diversified as well. We’ve looked at thousands of catalogs over the past couple of years at Royalty Exchange, and this is very unusual. Unlike most royalty assets, this catalog doesn’t rely on one massive hit to make money.

In the coming days, you’ll have the opportunity to invest in this extraordinary catalog via Royalty Flow’s IPO. Early investors will be able to get into this unique company at the ground floor ahead of us executing our strategy.

In the next video I’ll explain…

How the macro-trends that once decimated the music industry have shifted and are now generating massive gains for certain players. Plus, I’ll show you how investors in Royalty Flow will be uniquely positioned to benefit from this shift.

V-6

Video 2: Why music royalties belong in your portfolio

Disclaimer:

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve significant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue.

This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

V2-1

Today I’m going to share the details of a new and unusual investment opportunity. This does involve the sale of securities, so I’d like to encourage you to read the information on the screen right now. And remember, at any point during this presentation, you can find the same information at the bottom of the screen. Please read it.

Hey, this is Matthew Smith, Chairman of Royalty Flow. In today’s video, I want to talk to you about why music royalties should be part of your portfolio.

Brief intro:

At Royalty Exchange our mission is to make royalty streams on Intellectual property - things like music, film and books - easy to invest in.

We’ve built an online marketplace, where we connect buyers and sellers of royalty streams. This creates transparency, liquidity, and price discovery in a market that lacks all three. The exchange is thriving with over 21,000 users and is growing fast.

And now, we’ve created a company called Royalty Flow, designed specifically to directly acquire royalty interests in world-class media assets. We're using Regulation A+ of the JOBS act to raise capital for this purpose, and this allows any investor to participate in this initial public offering.

Why Royalties are one of the best alternative assets:

You probably know that alternative investments can be an important part of a broader portfolio. Alternative investments offer the promise of low correlation to traditional investments like stocks and bonds. They often have the potential to generate income as well.

When you add them to a portfolio you get a significant diversification benefit over time. The goal and result can often be better risk-adjusted returns.

But, when investors typically seek out alternative investments, they have very few options and those almost never include what we think is the purest alternative investment available:

Royalty income derived from intellectual property.

 

V2-2

Over the course of this video series, you’ll learn a lot about how intellectual property assets actually work.

For now, let’s focus on music royalties, by taking a look at how rights holders get paid.

The first question you might be having is, “What’s a rightsholder?”

A rightsholder is a company or individual with a legal claim on income generated from the use of that IP, or in this case, that music.

Rightsholder could be songwriters, could be the performing artist, could be labels, could be the publishers, could be producers. There are a number of different parties that can have that legal claim on future income.

And, the owners of royalty rights are paid based on streams, downloads, physical album sales, and other usage. In essence, consumption of music drives royalty payments.

And music consumption doesn’t change when interest rates go up or when stock market sentiment turns bearish.

In addition, royalties:

· Can earn consistent cash flow.

· Are long-term assets (royalties are paid for the life of the artist +70 years!)

· They have relative price, or NAV (Net Asset Value) stability.

· They have the potential for capital appreciation - especially now.

Why now is the time to buy music royalties.

Let’s take a closer look at the potential for capital appreciation.

You see, the music industry and related assets are climbing out of a long, brutal bear market. For the last 15 years, the industry has been the victim of:

· Piracy

· Disaggregation of music from physical albums to digital singles

· Mispricing / undervaluation due to lack of transparency

 

V2-3

As you see from this chart, we didn’t see things turn around until 2015. At Royalty Exchange, we’re confident we’ve only seen the start of that recovery - and we’re not the only ones.

The reason? The rise of digital streaming.

Subscriptions to digital streaming services like Spotify, Apple and Pandora have been a game changer for the industry.

Streaming generated approximately $3.9 billion in 2016, according to trade group IFPI*¹. In December 2016, Goldman Sachs projected streaming revenues to grow to about $14.1 billion by 2030.

But, streaming is growing faster than anyone expected.

According to an August 2, 2017 Business Insider analysis², “[Spotify] managed to increase its user growth rate as its subscriber base grew. The music streaming service added 10 million subscriber additions in roughly four months, faster than the approximate six months it took to go from 40 million subscribers to 50 million.”

With facts like these, just eight months after Goldman Sachs estimated streaming would get to $14.1 billion by 2030, they revised the forecast - In fact, they doubled it to $34 billion.³

We believe because of streaming, music is about to enter a decade long bull market that will cause the tide to rise for rightsholders… and especially for owners of trophy assets like the Eminem royalties included in the Royalty Flow IPO.

_________________

¹ http://www.riaa.com/wp-content/uploads/2017/03/RIAA-2016-Year-End-News-Notes.pdf

² http://www.businessinsider.com/spotify-reaches-new-subscriber-milestone-2017-8

³ https://www.thestreet.com/story/14286436/1/vivendi-and-sony-will-be-winners-as-music-streaming-takes-off-says-goldman-sachs.html

* Paid and ad-supported streaming together

http://www.riaa.com/wp-content/uphttps://www.thestreet.com/story/14286436/1/vivendi-and-sony-will-be-winners-as-music-streaming-takes-off-says-goldman-sachs.htmlloads/2017/03/RIAA-2016-Year-End-News-Notes.pdf

V2-4

There was tremendous growth in the music industry between 2015 and 2016, but it is just the beginning, and here’s why...

○	Every single smartphone owner has a portable music player in their pocket. And streaming is the most convenient and inexpensive way for consumers to get all the music they want. Essentially, or the price of one CD per month, Spotify and Apple Music users can stream millions of different songs. The mere convenience of streaming from your phone makes all the difference.
○	Music industry trade group IFPI reported 112 million paying subscribers to music streaming services at the end of 2016. Sounds like a lot, but that’s about 3% of the 4 billion smartphones worldwide.4
○	Goldman Sachs analyst Lisa Yang predicts 14% of global smartphone users will subscribe to music services by 2030, raising her previous estimate of 9%.5

And the future goes beyond the smartphone.

○	When I was a kid, I wanted a stereo in my room. Today’s kids want something different. They want a smart speaker like the Alexa-powered Amazon Echo. My 10 & 12 year old kids use it every day to play their favorite music. I have 4 echo devices in my home right now and I can tell you, they are amazing.
○	These devices aren’t just popular with my family. If Goldman Sachs is right, the rise of smart speakers and connected cars could contribute up to $8 billion in additional revenue to the music industry by 2030.6
○	Amazon’s Echo speaker line is expected to ship 10 Million units in 20177 A similar device from Google called Google Home is growing in popularity, and Apple will release their version, something they call the HomePod, this December.

The combination of the streaming business model and globalization has been, and will continue to be a big win for the music industry.

________________

⁴ http://news.ihsmarkit.com/press-release/technology/more-six-billion-smartphones-2020-ihs-markit-says

⁵ Lisa Yang, et. al., Music in the Air Series, August 2017, Goldman Sachs Research.

⁶ Lisa Yang, et. al., Music in the Air Series, August 2017, Goldman Sachs Research.

⁷ http://www.digitimes.com/news/a20170601PD218.html

V2-5

Streaming is allowing people around the world to discover music from other parts of the globe. As the quality of smartphones and mobile networking increases around the world, usage and revenue to the music industry will increase dramatically.

Previously, record labels were faced with a tough economic decision when considering whether or not they should release albums internationally - especially in the developing world. But with streaming services, the whole cost/benefit analysis has been turned on its head.

International success no longer requires successful manufacturing, distribution and negotiating shelf space.

Streaming promises global access to legally licensed music. That’s great for fans and rightsholders.

Technology is providing data and transparency never previously available in the music business. Collecting, aggregating and analyzing data has become much easier in the digital world, and royalty rightsholders are reaping the benefits.

Better data means more accurate royalty collection and distribution, as well as easier analysis of music as an asset for investors.

Advertising supported music revenues will increase with better ad targeting:

■ Currently, there are premium ad-free, music streaming services, and there are ad-supported subscriptions that are free to users. Music consumers that don’t pay for streaming subscriptions still generate advertising revenue for rightsholders though.

■ And, as targeting and advertising technology improves, the effectiveness of ads will grow and the number of advertisers wanting to buy the ads increases as well, driving up the revenue to rightsholders.

■ In fact, Goldman Sachs expects ad-supported revenue to contribute $6.1Billion to the music industry per year by 2030. That’s up over 450% from just $1.1 billion today.

 

V2-6

This fact may surprise you -

Before digital radio services like SiriusXM and Pandora, artists and labels didn’t make a cent from radio plays. That’s right, if your music was played in the US on traditional AM/FM radio and your rights were tied to the sound recording copyright, you got nothing for the use of your intellectual property.

But it’s a totally different situation in digital. As US consumers transition away from traditional radio, the billions of dollars that are currently spent in advertising on local radio typically will follow the consumer to digital, much like the advertising dollars shifted from the Yellow Pages to Google in the last decade.

And in the digital world, these ad dollars will produce royalty income for rightsholders which include the record labels, the publishers, the artists, and, of course, shareholders of Royalty Flow.

With streaming, consumers have instant access to vast libraries of music, and that makes it easy to listen to music from decades ago. And that’s caused some older catalogs to experience a revival.

Digitizing the industry has helped recording artists and other rights holders unlock the value of their royalty streams by increasing consumer’s access to music and providing much more transparency than we have ever had before. Industry insiders expect this trend to continue.

To illustrate the point, let’s take a look at FBT’s royalty income from streaming on EMINEM’s catalog for the last 3 years.

	Solo	Side Projects	Total	Growth Rate
2014	1,329,606	117,600	1,447,206	67%
2015	1,180,203	142,641	1,322,844	-9%
2016	2,007,522	324,468	2,331,990	76%

As you can see, the streaming royalties grew by 76% in calendar year 2016 over calendar year 2015. And now, streaming represents 46% of total royalties in 2016.

 

V2-7

Other than 2014 when royalties spiked due to the release of a new album, this catalog produced more royalty income last year than it has since 2002.⁸

We find ourselves at a pivotal time in investing in media royalties as an asset class. The growing importance of intellectual property in the global economy, the music industry’s recovery, and increasing cash flows that are uncorrelated to stock and bond markets, make media royalties an incredible alternative asset class and one that should be considered for many investment portfolios.

Revenue from streaming services is expected to grow more than 8x - from $3.9B⁹ in 2016 to $34 billion by 2030¹⁰.

The lionshare of that revenue is passed on to the rightsholders through royalty payments. Investing in music royalties in 2017 is the opportunity to invest at the start of a boom and experience massive appreciation, collecting royalty income along the way.

In the coming days you’ll have be able to take advantage of the opportunity through Royalty Flow’s IPO. Be sure you’re on our email list so we can send notice when doors open to investors.

And be on the lookout for our next video in this series where I’ll explain how Royalty Flow will create value for its shareholders.

__________________

⁸ Unaudited financials that Joel sent us.

⁹ http://www.riaa.com/wp-content/uploads/2017/03/RIAA-2016-Year-End-News-Notes.pdf

¹⁰ https://www.thestreet.com/story/14286436/1/vivendi-and-sony-will-be-winners-as-music-streaming-takes-off-says-goldman-sachs.html

V2-8

Video 3: How Royalty Flow Will Create Value for Shareholders

Disclaimer:

No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Royalty Flow will not be accepted. No offer to buy securities in a Regulation A+ offering of Royalty Flow can be accepted and no part of the purchase price can be received until Royalty Flow’s offering statement is qualified with the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indication of interest in Royalty Flow’s offering involves no obligation or commitment of any kind.

The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve significant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue.

This contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its crowdfunding campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, including without limitation: Royalty Flow’s ability to execute its equity crowdfunding and future growth strategies, the state of the music industry and payment under royalty interests, and the future popularity of Eminem. Should one or more of these risks or uncertainties materialize, or should any of the Royalty Flow’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Royalty Flow’s forward-looking statements. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained here.

V3-1

Today I’m going to share the details of a new investment opportunity. This does involve the sale of securities, so I’d like to encourage you to read the important information on the screen right now. And remember, at any point during this presentation, you can find the same information at the bottom of the screen. Please read it.

“The best business is a royalty on the growth of others, requiring very little capital itself.” -- Warren Buffett¹

Hi this is Matthew Smith, Chairman of Royalty Flow.

If you’ve watched the previous videos in this series, you’ve learned that music royalties, so long the victim of technology, experienced a tech-enabled shift starting in 2015 that’s still accelerating and expected to drive substantial growth.

This growth, driven by streaming, has accelerated so much that Goldman Sachs claims it will “create a lot more sustainable, profitable revenue streams that should drive the doubling of the market…”

You also know that Royalty Flow is about to conduct an Initial Public Offering in the coming days and this gives you the opportunity to invest in these trends and reap the benefits.

Royalty Flow is using Regulation A+ of the JOBS act to raise capital to acquire royalty interests in world-class media assets. And we’re starting with royalties on Eminem’s incredible music catalog.²

The JOBS act allows any investor to participate in this initial public offering. Make sure you’re on our email list so you don’t miss the opportunity to invest.

Now, for today’s video, I want to discuss how Royalty Flow plans to create value for shareholders.

__________________

¹ David Ogilvy, Ogilvy on Advertising

² Document that includes the asset list of the catalog.

V3-2

Royalty Flow’s Shareholder Friendly Strategy

Dividends and Dividend Growth

We know that dividends can generate enormous amounts of shareholder wealth over time.

“Dividends have been a major component of the stock market’s overall total returns throughout history. Dividends have contributed anywhere from 25% to 75% of the market’s overall total return over the past seven decades” -- Brian Bollinger³

On the subject of dividends, check this out:

This chart shows that if you had invested $100 in non dividend-paying stocks in 1972, you would have $284 in your brokerage account in 2014. That’s a measly 2.34% return.

If you’d put $100 into the S&P 500, you’d have $2,207 in your account by 2014. That’s much better, a solid 7.61% average annual return.

But, if you’d put $100 into all dividend-paying stocks, your $100 would have turned into $4,165 by 2012. That’s a 9.28% annual return. Now of course, there are no guarantee that we’re going to have this kind of growth or these types of returns -- but this is the business that we intend to grow.

That’s the power of dividend stocks and the reason why dividend distribution is a key part of our strategy.

Royalty Flow will return cash to shareholders through a dividend. We intend to pay our first dividend next year and aim to grow this dividend each year as acquire income-producing royalty assets.

We understand that liquidity is very important to investors, so shortly after the fund raising period of the IPO, we intend to list Royalty Flow on the Nasdaq. It’s important to note that the standards that companies must meet in governance and in reporting to list on a major US exchange like the Nasdaq are far more rigorous than what required for companies that have raised capital normally through Regulation A+ without the intent of going on a major US exchange.

Royalty Flow has adopted these more rigorous standards of governance and reporting to insure the eligibility for listing on the Nasdaq or other exchange.

__________________

³ https://www.simplysafedividends.com/dividends-vs-total-returns/

V3-3

Now, if for whatever reason we cannot immediately list on Nasdaq, we will pursue liquidity options via the New York Stock Exchange or OTC Markets. We believe that our dividend based model will support liquidity no matter what exchange we’re traded on.

Now, let me take a few minutes to explain our approach to royalty acquisitions and operations.

Our criteria for new royalty acquisitions include:

A Track Record of Royalty Income:

The first thing we look at when making a royalty acquisition is: does the asset have a track record of earning royalty income. Royalty Flow does not plan on speculating on unproven artists or catalogs. We’re looking for assets with a track record of earnings that we expect will generate substantial income in the future.

Our first acquisition, FBT’s Eminem royalties, has a long track record of earning royalties… and we believe that those earnings will continue.

The second category is

Capital Appreciation Potential

We agree with Goldman Sachs when they say the music industry is “finally turning the corner.” We believe that the music industry is still in the early days of its rebirth. With that in mind, when we evaluate potential royalty acquisitions, we’ll keep an eye towards the future and seek to buy assets that have high potential for capital appreciation.

As we discussed in depth in video 2, subscription streaming has transformed the music business and we expect that streaming will drive growth. In 2015, the industry grew for the first time in 15 years. We believe that we’re only in the first inning of the bull market for the music business, so we believe that many of these assets have high potential for capital appreciation.

Passive Interests Only

We plan to acquire non-operating interests in great IP.

This strategy opens up a new universe of potential investments for us. We’ll only allow owners of great assets to take some money off the table but still maintain a substantial economic interest.

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That will allow us to acquire great assets that other players in the space can’t profitably buy because of their overhead. And frankly, as investors, you only care about generating great returns and the best way to do that is to get as close to ownership of underlying royalty asset as possible. We think Royalty Flow will prove to be the best way to achieve this.

Royalty Flow offers an option to owners of great assets that others can’t match and we’ll keep our interests aligned with the IP owners we partner with. And, since we’re not acting as a record label or publisher, it keeps our cost base lower and allows us to reward shareholders.

Established Operating Partners

Since Royalty Flow will only acquire passive interests in royalty streams, we must partner with excellent active operators.

We’re looking for operators of the asset that have a track record of great stewardship. FBT has been an excellent steward of the Eminem royalties. They’ve demanded consistent earnings audits. They’ve unlocked additional value by vigorously protecting their rights against infringement. They’re a great operating partner for us.

But identifying great operating partners isn’t enough, we must also ensure that our interests are in alignment with the operators. We will do this by shared incentives and equal treatment clauses in our agreements.

These 4 criteria will drive our operating strategy going forward.

The next thing we should discuss are few comparable royalty companies.

Comparable Companies

Part of the reason for building Royalty Exchange was because, as investors, we recognized how valuable royalty companies or royalty income streams can be. See, the best part about royalty deals is that after you pay to acquire the royalty, you don’t have to spend additional capital to keep that cash flow coming in.

Over the last few years, publicly traded royalty businesses have popped up in a number of industries. And the results have been excellent for shareholders.

As you can see, investors who acquired IPO shares in these royalty companies did extraordinarily well.

Of course, there is no guarantee that investors in Royalty Flow will achieve similar results, keep that in mind.

However, Royalty Flow is using this tried and true model and simply applying it to a new industry. An industry that is in the early stages of a bull market after more than a decade of bad news.

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IPO investors will have the potential to participate in uncorrelated income, growing dividends and capital appreciation on great assets. We believe that the combination of our capital efficient business model, our acquisitions of revenue generating assets, and the accelerating growth of the music industry will make this a great opportunity.

In the coming days, you can be amongst the first to buy shares in Royalty Flow as part of our Initial Public Offering. Keep in mind that once we hit our maximum investment, we’ll have to close the offering and you might not be able to get in at the IPO price.

Make sure you’ve registered with your email address below so we can notify you as soon as the IPO offering opens up.

We look forward to serving you as a shareholder of Royalty Flow.

Thank you.

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