PROXY STATEMENT

FOR

SPECIAL MEETING OF STOCKHOLDERS

To Be Held Monday, November 25, 2019

Unless the context requires otherwise, references in this proxy statement to “Tapinator,” “we,” “us,” “our” and the “Company” are to Tapinator, Inc. and its consolidated subsidiaries. Unless the context otherwise requires, references to the “stockholders” are to the holders of our Common Stock.

The accompanying proxy is solicited by the Board of Directors on behalf of Tapinator, Inc., a Delaware corporation, to be voted at the Special Meeting of Stockholders of the Company (the “Special Meeting”) to be held on Monday, November 25, 2019, at the time and place and for the purposes set forth in the accompanying Notice of Special Meeting of Stockholders (the “Notice”) and at any recess(es), adjournment(s) or postponement(s) thereof. This proxy statement and accompanying proxy are first being mailed on or about October 17, 2019.

INTERNET AVAILABILITY AND ELECTRONIC DELIVERY OF PROXY DOCUMENTS

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on November 25, 2019: Our official Notice of Special Meeting of Stockholders and Proxy Statement are available at www.proxyvote.com.

The executive offices of the Company are located at, and the mailing address of the Company is, 110 West 40^th Street, Suite 1902, New York, New York 10018.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

What is a proxy?

A proxy is another person that you legally designate to vote your shares of Common Stock. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.

What is a proxy statement?

It is a document that we are required to give you in accordance with regulations of the Securities and Exchange Commission (the “SEC”) when we ask you to sign a proxy card to vote your shares of Common Stock as directed by you at the Special Meeting.

What is the purpose of the Special Meeting?

At our Special Meeting, stockholders will act upon the matters outlined in the Notice, including:

(1) the approval of an amendment to the Company’s Restated Certificate of Incorporation, as amended (the “Charter”), to, at the discretion of the Board of Directors of the Company, effect a Reverse Stock Split with respect to the Company’s issued and outstanding Common Stock, par value $0.001 per share, including shares held by the Company as treasury shares, at a ratio of between 1-for-2 and 1-for-200 (the “Range”), with the ratio within such Range to be determined at the discretion of the Board of Directors of the Company (such action, the “Reverse Stock Split,” and such proposal is referred to herein as the “Reverse Stock Split Proposal”);

(2) the approval, if and only if the Reverse Stock Split is approved and implemented, of an amendment to the Charter to reduce the total number of authorized shares of Common Stock from 250,000,000 to 25,000,000 (such action, the “Authorized Share Reduction,” and such proposal is referred to herein as the “Authorized Share Reduction Proposal”); and

(3) the approval of an amendment to the Tapinator, Inc. 2015 Equity Incentive Plan (the “Equity Incentive Plan”) to add an “evergreen” provision to adjust the total size of the Equity Incentive Plan on a semi-annual basis and make certain other amendments to reflect changes to applicable sections of the tax code upon enactment of the Tax Cuts and Jobs Act of 2017 (such proposal is referred to herein as the “Equity Incentive Plan Amendment Proposal”).

What is “householding” and how does it affect me?

With respect to eligible stockholders who share a single address, we are sending only one proxy statement to that address unless we received instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a stockholder of record residing at such address wishes to receive a separate proxy statement in the future, he or she may contact Tapinator, Inc. at 110 West 40^th Street, New York, New York 10018, Attn: Secretary or call (914) 930-6232 and ask for investor relations. Eligible stockholders of record receiving multiple copies of our proxy statement can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker or other nominee can request householding by contacting such nominee.

We hereby undertake to deliver promptly, upon written or oral request, a copy of the proxy statement to a stockholder at a shared address to which a single copy of the document was delivered. Requests should be directed to the address or phone number set forth above.

SEC rules permit companies to send you a notice that proxy materials are available on the Internet, instead of mailing you a complete set of materials. In the future, the Company may choose to distribute proxy materials in this manner.

What should I do if I receive more than one set of voting materials?

Despite our efforts related to householding, you may receive more than one set of proxy materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold stock. Similarly, if you are a stockholder of record and hold stock in a brokerage account, you will receive a proxy card and a voting instruction card. Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all your shares are voted.

What is the record date and what does it mean?

The record date for the determination of stockholders entitled to notice of and to vote at the Special Meeting is the close of business on October 11, 2019 (the “Record Date”). The Record Date is established by the Board of Directors as required by Delaware law. On the Record Date, 87,979,526 shares of Common Stock were issued and outstanding.

Who is entitled to vote at the Special Meeting?

Subject to the limitations set forth below, only stockholders at the close of business on the Record Date may vote at the Special Meeting.

What are the voting rights of the stockholders?

Each holder of Common Stock is entitled to one vote per share of Common Stock on all matters to be acted upon at the Special Meeting. Neither the Company’s Charter nor its bylaws allow for cumulative voting rights.

The presence, in person, by a duly authorized representative in the case of a corporation or other legal entity, or through representation by proxy, of the holders of shares of Common Stock having a majority of the votes which could be cast by the holders of all outstanding shares of Common Stock entitled to vote at the Special Meeting is necessary to constitute a quorum to transact business. If a quorum is not present or represented at the Special Meeting, the chairperson of the meeting or the stockholders entitled to vote thereat, present in person or represented by proxy, may adjourn the Special Meeting until a quorum is present or represented.

What is the difference between a stockholder of record and a “street name” holder?

If your shares are registered directly in your name with Action Stock Transfer, the Company’s transfer agent (the “Transfer Agent”), you are considered the stockholder of record with respect to those shares. The proxy statement and proxy card have been sent directly to you by the Company.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of these shares, and your shares are held in “street name.” The proxy statement and proxy card have been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee how to vote your shares by using the voting instructions included in the mailing or by following such nominee’s instructions for voting by telephone or the Internet.

What is a broker non-vote?

Under the rules of the New York Stock Exchange (“NYSE”), brokers who hold stock on behalf of beneficial owners have the authority to vote on certain proposals when they have not received instructions from the beneficial owners. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to that item under the rules of the NYSE and has not received voting instructions from the beneficial owner. Your broker has discretionary authority to vote your shares with respect to the Reverse Stock Split Proposal and the Authorized Share Reduction Proposal. Your broker does not have discretionary authority to vote your shares with respect to the Equity Incentive Plan Amendment Proposal in the absence of specific instructions from you.

How do I vote my shares?

If you are a record holder, you may vote your shares of Common Stock at the Special Meeting in person or by proxy. To vote in person, you must attend the Special Meeting and obtain and submit a ballot. The ballot will be provided at the meeting. To vote by proxy, you must do one of the following:

The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow you to vote your shares and to confirm that your instructions have been properly recorded. Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which options are available to you. The proxy card is fairly simple to complete, with specific instructions right on the card. By completing and submitting it, you will direct the designated persons (known as “proxies”) to vote your shares of Common Stock at the Special Meeting in accordance with your instructions. The Board of Directors has appointed Ilya Nikolayev and Andrew Merkatz to serve as the proxies for the Special Meeting.

Your proxy card will be valid only if you mark, sign, date and return it before the Special Meeting. If you complete all of the proxy card except the voting instructions, then the designated proxies will vote your shares “for” the Reverse Stock Split Proposal, the Authorized Share Reduction Proposal and the Equity Incentive Plan Amendment Proposal. We do not anticipate that any other matters will come before the Special Meeting, but if any other matters properly come before the meeting, then the designated proxies will vote your shares in accordance with applicable law and their discretion.

If your shares are held in “street name,” in addition to the proxy solicitation materials we have provided to the street name holder, the street name holder should provide its own request for voting instructions. By completing the voting instruction card, you may direct your street name holder how to vote your shares. Alternatively, if you want to vote your street name shares at the Special Meeting, you must contact your broker directly in order to obtain a proxy issued to you by your street name holder. Note that a broker letter that identifies you as a stockholder is not the same as a nominee-issued proxy. If you fail to bring a nominee-issued proxy to the Special Meeting, you will not be able to vote your street name shares at the Special Meeting.

Are votes confidential?

The votes of all stockholders will be held in confidence from directors, officers and employees of the Company except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in case of a contested proxy solicitation; (c) if a stockholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or (d) to allow the independent inspectors of election to certify the results of the vote.

Can I vote my shares in person at the Special Meeting?

Yes. If you are a stockholder of record, you may vote your shares at the Special Meeting by completing a ballot at the meeting.

However, if your shares are held in “street name,” you may vote your shares in person only if you obtain a nominee-issued proxy from your broker or nominee giving you the right to vote the shares.

Even if you currently plan to attend the Special Meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.

What are my choices when voting?

Stockholders may vote “for,” “against” or abstain from voting with respect to each of the Reverse Stock Split Proposal, the Authorized Share Reduction Proposal and the Equity Incentive Plan Amendment Proposal.

What are the recommendations of the Board of Directors on how I should vote my shares?

The Board of Directors recommends that you vote your shares FOR the Reverse Stock Split Proposal, the Authorized Share Reduction Proposal and the Equity Incentive Plan Amendment Proposal.

What if I do not specify how I want my shares voted?

If you return a signed proxy card and do not specify on your proxy card (or when giving your proxy by telephone or over the Internet) how you want to vote your shares, your shares will be voted FOR the Reverse Stock Split Proposal, the Authorized Share Reduction Proposal and the Equity Incentive Plan Amendment Proposal.

Can I change my vote?

Yes. You may revoke your proxy at any time by any of the following means:

What percentage of the vote is required to approve the Reverse Stock Split Proposal?

Pursuant to the Delaware General Corporation Law (the “DGCL”) and our organizational documents, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is required to approve the Reverse Stock Split Proposal.

What percentage of the vote is required to approve the Authorized Share Reduction Proposal?

Pursuant to the DGCL and our organizational documents, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is required to approve the Authorized Share Reduction Proposal.

What percentage of the vote is required to approve the Equity Incentive Plan Amendment Proposal?

Pursuant to the DGCL and our organizational documents, the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the Equity Incentive Plan Amendment Proposal is required to approve the Equity Incentive Plan Amendment Proposal.

How are abstentions and broker non-votes treated?

Abstentions are included in the determination of the number of shares present for determining a quorum at the Special Meeting. An abstention will have the same effect as a vote cast against the Reverse Stock Split Proposal, the Authorized Share Reduction Proposal and the Equity Incentive Plan Amendment Proposal.

Broker non-votes are included in the determination of the number of shares present for determining a quorum at the Special Meeting. Broker non-votes are not applicable to the Reverse Stock Split Proposal or the Authorized Share Reduction Proposal because such proposals are considered routine matters and therefore a broker holding shares for a beneficial owner will have discretionary authority to vote those shares for such proposals in the absence of voting instructions from the beneficial owner. Broker non-votes will have no impact on the Equity Incentive Plan Proposal.

If the Reverse Stock Split Proposal is approved by the Company’s stockholders, is the Company required to effect the Reverse Stock Split?

No. The Board of Directors has the sole authority to determine whether or not to effect the Reverse Stock Split, even if the Reverse Stock Split Proposal is approved by our stockholders. If the Reverse Stock Split Proposal is approved by our stockholders, the Board of Directors will make a determination as to whether effecting the Reverse Stock Split is in the best interests of the Company and our stockholders. In making its determination, the Board of Directors will consider, among other things:

If the stockholders approve the Reverse Stock Split Proposal and the Board of Directors decides to effect the Reverse Stock Split, the Board of Directors will have the sole authority to determine the timing of filing the amendment to our Charter to effect the Reverse Stock Split. The Board of Directors will also have the sole discretion to determine the ratio of the Reverse Stock Split, subject to such ratio being within the Range of between 1-for-2 and 1-for-200.

When will the Reverse Stock Split become effective?

If the Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split will become effective upon the filing of the amendment to our Charter related to the Reverse Stock Split with the Secretary of State of the State of Delaware. However, notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split. The Board of Directors will also have the sole discretion to determine the ratio of the Reverse Stock Split, subject to such ratio being within the Range of between 1-for-2 and 1-for-200.

How will fractional shares resulting from the Reverse Stock Split be treated?

We do not intend to issue fractional shares in connection with the Reverse Stock Split. If you are a direct holder of our Common Stock, to the extent the Reverse Stock Split would result in you owning a fractional share of Common Stock, such fractional share will be rounded up to the nearest whole share of Common Stock. If you are the holder of an outstanding equity award that is exercisable, convertible or exchangeable for common stock, to the extent the Reverse Stock Split would result in your award entitling you to own a fractional share of Common Stock, your award will be rounded down to the nearest whole share and the per share exercise price resulting from any such reductions or adjustments will be rounded up to the nearest whole cent to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). If you are the holder of outstanding warrants, to the extent the Reverse Stock Split would result in your warrant entitling you to own a fractional share of Common Stock, your warrant will be adjusted in accordance with the terms set forth in such warrant governing the treatment of fractional shares.

How will the Reverse Stock Split impact the voting rights of stockholders?

The Reverse Stock Split will affect all of our stockholders uniformly and will not change any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split would result in adjustments with respect to fractional shares.

Is the Authorized Share Reduction conditioned on the approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split?

Yes. If the Reverse Stock Split Proposal is approved and the Reverse Stock Split is implemented, the Board of Directors, subject to the approval of the Authorized Share Reduction Proposal, intends to implement the Authorized Share Reduction to reduce the total number of shares of Common Stock that we are authorized to issue from 250,000,000 to 25,000,000. If the Reverse Stock Split Proposal is not approved by our stockholders or the Reverse Stock Split is otherwise not implemented by the Board of Directors, the Board of Directors does not intend to implement the Authorized Share Reduction.

The implementation of the Reverse Stock Split, however, is not conditioned on the approval of the Authorized Share Reduction Proposal or the implementation of the Authorized Share Reduction. Even if the Authorized Share Reduction Proposal is not approved by our stockholders or if the Board of Directors determines not to implement the Authorized Share Reduction, the Board of Directors will retain the option to implement the Reverse Stock Split, subject to the approval of the Reverse Stock Split Proposal by our stockholders.

If the Authorized Share Reduction Proposal is approved by the Company’s stockholders, is the Company required to effect the Authorized Share Reduction?

No. The Board of Directors has the sole authority to determine whether or not to effect the Authorized Share Reduction, even if the Authorized Share Reduction Proposal is approved by our stockholders. If the Authorized Share Reduction Proposal is approved by our stockholders, the Board of Directors will make a determination as to whether effecting the Authorized Share Reduction is in the best interests of the Company and our stockholders. In addition, the implementation of the Authorized Share Reduction is subject to the approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split.

In making its determination, the Board of Directors will consider, among other things, whether the Authorized Share Reduction is in the best interests of the Company’s stockholders in light of the Company’s anticipated needs to reserve authorized shares of Common Stock for:

In addition, whether the Board of Directors determines to implement the Authorized Share Reduction will depend on the ratio that the Board of Directors selects for the Reverse Stock Split and the number of shares of Common Stock that are issued and outstanding following the Reverse Stock Split.

If the stockholders approve the Authorized Share Reduction Proposal and the Board of Directors decides to effect the Authorized Share Reduction, the Board of Directors will have the sole authority to determine the timing of filing the amendment to our Charter to effect the Authorized Share Reduction; provided, however, that the implementation of the Authorized Share Reduction is conditioned on the approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split.

When will the Authorized Share Reduction become effective?

If the Reverse Stock Split Proposal and the Authorized Share Reduction Proposal are approved by our stockholders, and the Reverse Stock Split is implemented, the Authorized Share Reduction will become effective upon the filing of the amendment to our Charter related to the Authorized Share Reduction with the Secretary of State of the State of Delaware. However, notwithstanding approval of the Authorized Share Reduction Proposal and Reverse Stock Split Proposal by our stockholders and the implementation of the Reverse Stock Split, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Authorized Share Reduction.

If I am a holder of Common Stock with shares represented by share certificates, should I send in my share certificates now?

NO, STOCKHOLDERS OF THE COMPANY SHOULD NOT SEND SHARE CERTIFICATE(S) WITH THEIR PROXY CARD(S). If the Reverse Stock Split is completed, our Transfer Agent will send our stockholders written instructions for sending in their share certificates or, in the case of shares held electronically in “book-entry” form, for surrendering their book-entry shares.

What are the solicitation expenses and who pays the cost of this proxy solicitation?

Our Board of Directors is asking for your proxy, and we will pay all of the costs of asking for stockholder proxies. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Common Stock and collecting voting instructions. We may use officers and employees of the Company to ask for proxies, as described below.

Do I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the Special Meeting?

No. Delaware law does not provide stockholders any dissenters’ or appraisal rights with respect to the matters to be voted on at the Special Meeting.

Is this proxy statement the only way that proxies are being solicited?

No. In addition to the solicitation of proxies by use of the mail, officers and employees of the Company may solicit the return of proxies by mail, telephone, facsimile or e-mail or through personal contact. These officers and employees will not receive additional compensation but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees and fiduciaries, in connection with shares of Common Stock registered in their names, will be requested to forward solicitation materials to the beneficial owners of Common Stock.

Are there any other matters to be acted upon at the Special Meeting?

Management does not intend to present any business for a vote at the Special Meeting other than the matters set forth in the Notice and has no information that others will do so. If other matters requiring a vote of the stockholders properly come before the Special Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and their discretion on such matters.

Where can I find voting results?

The Company expects to publish the voting results in a Current Report on Form 8-K to be filed with the SEC within four business days after the Special Meeting.

Who can help answer my questions?

The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement. We urge you to carefully read this entire proxy statement and the documents we refer to in this proxy statement. If you have any questions, or need additional materials, please feel free to contact Investor Relations by phone at (914) 930-6232 or by email at investor.relations@tapinator.com.

APPROVAL OF THE AMENDMENT TO THE COMPANY’S CHARTER TO EFFECT THE REVERSE STOCK SPLIT

(Proposal 1)

Background and Proposed Amendment

Our Charter currently authorizes the Company to issue a total of 251,532,500 shares of capital stock, consisting of 250,000,000 shares of Common Stock, par value $0.001 per share, and 1,532,500 shares of preferred stock, par value $0.001 per share.

On October 3, 2019, subject to stockholder approval, the Board of Directors approved an amendment to our Charter to, at the discretion of the Board of Directors, effect the Reverse Stock Split of the Common Stock at a ratio of between 1-for-2 and 1-for-200, including shares held by the Company as treasury shares, with the exact ratio within such Range to be determined by the Board of Directors of the Company at its discretion. The primary goal of the Reverse Stock Split is to increase the per share market price of our Common Stock to meet the minimum per share bid price requirements for listing on The Nasdaq Capital Market. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Reverse Stock Split is not intended to modify the rights of existing stockholders in any material respect.

If the Reverse Stock Split Proposal is approved by our stockholders and the Reverse Stock Split is effected, between every 2 to 200 shares of our outstanding Common Stock would be combined and reclassified into one share of Common Stock.

The actual timing for implementation of the Reverse Stock Split would be determined by the Board of Directors based upon its evaluation as to when such action would be most advantageous to the Company and its stockholders. Notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split. If the Reverse Stock Split Proposal is approved by our stockholders, the Board of Directors will make a determination as to whether effecting the Reverse Stock Split is in the best interests of the Company and our stockholders in light of, among other things, the Company’s ability to increase the trading price of our Common Stock to meet the minimum stock price standards of The Nasdaq Capital Market without effecting the Reverse Stock Split, the per share price of the Common Stock immediately prior to the Reverse Stock Split and the expected stability of the per share price of the Common Stock following the Reverse Stock Split. If the Board of Directors determines that it is in the best interests of the Company and its stockholders to effect the Reverse Stock Split, it will hold a meeting to determine the ratio of the Reverse Stock Split. For additional information concerning the factors the Board of Directors will consider in deciding whether to effect the Reverse Stock Split, see “—Determination of the Reverse Stock Split Ratio” and “—Board Discretion to Effect the Reverse Stock Split.”

The text of the proposed amendments to the Company’s Charter to effect the Reverse Stock Split is included as Annex A to this proxy statement (the “Reverse Stock Split Charter Amendment”). If the Reverse Stock Split Proposal is approved by the Company’s stockholders, the Company will have the authority to file the Reverse Stock Split Charter Amendment with the Secretary of State of the State of Delaware, which will become effective upon its filing; provided, however, that the Reverse Stock Split Charter Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the Board of Directors deems necessary and advisable. The Board of Directors has determined that these amendments are advisable and in the best interests of the Company and its stockholders and has submitted the amendments for consideration by our stockholders at the Special Meeting.

Reasons for the Reverse Stock Split

We are submitting this proposal to our stockholders for approval in preparation for a potential “uplisting” of our Common Stock from the OTCQB Marketplace (the “OTCQB”) to The Nasdaq Capital Market, and to help attract institutional investors with minimum trading price requirements. We believe increasing the trading price of our Common Stock will also assist in our capital-raising efforts by making our Common Stock more attractive to a broader range of investors. Accordingly, we believe that the Reverse Stock Split is in our stockholders’ best interests.

In connection with an application for listing our shares on The Nasdaq Capital Market, we believe that the Reverse Stock Split is our best option to meet one of the criteria to obtain an initial listing. The Nasdaq Capital Market requires, among other criteria, an initial bid price of least $4.00 per share and, following initial listing, maintenance of a continued price of at least $1.00 per share. On the Record Date, the last reported sale price of our Common Stock on the OTCQB was $0.046 per share. A decrease in the number of outstanding shares of our Common Stock resulting from the Reverse Stock Split should, absent other factors, assist in ensuring that the per share market price of our Common Stock remains above the requisite price for listing. However, we cannot provide any assurance that (i) we will pursue a listing on The Nasdaq Capital Market, or (ii) even if we do, our minimum bid price would remain over the minimum bid price requirement of The Nasdaq Capital Market following the Reverse Stock Split.

In addition, as noted above, we believe that the Reverse Stock Split and the resulting increase in the per share price of our Common Stock could encourage increased investor interest in our Common Stock and promote greater liquidity for our stockholders. A greater price per share of our Common Stock could allow a broader range of institutions to invest in our Common Stock (namely, funds that are prohibited or discouraged from buying stocks with a price below a certain threshold), potentially increasing marketability, trading volume and liquidity of our Common Stock. Many institutional investors view stocks trading at low prices as unduly speculative in nature and, as a result, avoid investing in such stocks. We believe that the Reverse Stock Split will provide the Board of Directors flexibility to make our Common Stock a more attractive investment for these institutional investors, which we believe will enhance the liquidity for the holders of our Common Stock and may facilitate future sales of our Common Stock. The Reverse Stock Split could also increase interest in our Common Stock for analysts and brokers who may otherwise have policies that discourage or prohibit them in following or recommending companies with low stock prices. Additionally, because brokers’ commissions on transactions in low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.

Risks Associated with the Reverse Stock Split

The Reverse Stock Split May Not Increase the Price of our Common Stock over the Long-Term. As noted above, the principal purpose of the Reverse Stock Split is to increase the trading price of our Common Stock to meet the minimum stock price standards of The Nasdaq Capital Market. However, the effect of the Reverse Stock Split upon the market price of our Common Stock cannot be predicted with any certainty and we cannot assure you that the Reverse Stock Split will accomplish this objective for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock by a multiple of the Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock may be affected by other factors which may be unrelated to the number of shares outstanding, including the Company’s business and financial performance, general market conditions, and prospects for future success.

The Reverse Stock Split May Decrease the Liquidity of our Common Stock. The Board of Directors believes that the Reverse Stock Split may result in an increase in the market price of our Common Stock which could lead to increased interest in our Common Stock and possibly promote greater liquidity for our stockholders. However, the Reverse Stock Split will also reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of the Reverse Stock Split.

The Reverse Stock Split May Result in Some Stockholders Owning “Odd Lots” That May Be More Difficult to Sell or Require Greater Transaction Costs per Share to Sell. If the Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Common Stock.

The Reverse Stock Split May Lead to a Decrease in our Overall Market Capitalization. The Reverse Stock Split may be viewed negatively by the market and, consequently, could lead to a decrease in our overall market capitalization. If the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, then the value of our Company, as measured by our market capitalization, will be reduced. Additionally, any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of Common Stock outstanding following the Reverse Stock Split.

Effects of the Reverse Stock Split

Effects of the Reverse Stock Split on Issued and Outstanding Shares. If the Reverse Stock Split is effected, it will reduce the total number of issued and outstanding shares of Common Stock, including shares held by the Company as treasury shares, by a Reverse Stock Split ratio of between 1-for-2 and 1-for-200. Accordingly, each of our stockholders will own fewer shares of Common Stock as a result of the Reverse Stock Split. However, the Reverse Stock Split will affect all stockholders uniformly and will not affect any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split would result in an adjustment to a stockholder’s ownership of Common Stock due to the treatment of fractional shares in the Reverse Stock Split. Therefore, voting rights and other rights and preferences of the holders of Common Stock will not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). Common Stock issued pursuant to the Reverse Stock Split will remain fully paid and nonassessable, and the par value per share of Common Stock will remain $0.001.

As of the Record Date, the Company had approximately 88.0 million shares of Common Stock outstanding. For purposes of illustration, if the Reverse Stock Split is effected at a ratio of 1-for-5, the number of issued and outstanding shares of Common Stock after the Reverse Stock Split would be approximately 17.6 million.

Effects of the Reverse Stock Split on Outstanding Equity Awards and Warrants. If the Reverse Stock Split is effected, the terms of equity awards under the Equity Incentive Plan and the terms of our outstanding warrants, including the per share exercise price of options and warrants and the number of shares issuable under such securities, will be proportionally adjusted to maintain their approximate economic value. In addition, the total number of shares of Common Stock that may be the subject of future grants under the Incentive Plan will be adjusted and proportionately decreased as a result of the Reverse Stock Split.

As of the Record Date, the Company had 18,000,000 shares of Common Stock authorized for issuance under the Incentive Plan. For purposes of illustration, if the Reverse Stock Split is effected at a ratio of 1-for-5, the number of shares of Common Stock authorized for issuance under the Incentive Plan after the Reverse Stock Split would be approximately 3,600,000. Additionally, a pre-Reverse Stock Split stock option or warrant representing the right to purchase 10,000 shares of Common Stock at an exercise price of $0.05 per share would be converted into a post-Reverse Stock Split stock option or warrant representing the right to purchase 2,000 shares of Common Stock at an exercise price of $0.25 per share.

Effects of the Reverse Stock Split on Voting Rights. Proportionate voting rights and other rights of the holders of Common Stock would not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). For example, a holder of 1% of the voting power of the outstanding Common Stock immediately prior to the effective time of the Reverse Stock Split would continue to hold 1% of the voting power of the outstanding Common Stock after the Reverse Stock Split.

Effects of the Reverse Stock Split on Regulatory Matters. The Company is subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Stock Split will not affect the Company’s obligation to publicly file financial and other information with the SEC.

Effects of the Reverse Stock Split on Authorized Share Capital. The total number of shares of capital stock that we are authorized to issue will not be affected by the Reverse Stock Split and will remain at 251,532,500 shares, consisting of 250,000,000 shares of Common Stock and 1,532,500 shares of preferred stock, unless the Company’s stockholders approve the Authorized Share Reduction Proposal and the Board of Directors implements the Authorized Share Reduction. If the Reverse Stock Split Proposal and the Authorized Share Reduction Proposal are approved and the Reverse Stock Split is implemented, our Board of Directors currently intends to effect the Authorized Share Reduction to reduce the total number of shares of Common Stock that we are authorized to issue from 250,00,000 to 25,000,000. Please see “Proposal 2 – Approval of the Amendment to the Company’s Charter to Reduce the Number of Authorized Shares of Common Stock” for additional information.

Treatment of Fractional Shares in the Reverse Stock Split

The Company does not intend to issue fractional shares in the event that a stockholder owns a number of shares of Common Stock that is not evenly divisible by the Reverse Stock Split ratio. If the Reverse Stock Split is effected, each fractional share of Common Stock will be:

Determination of the Reverse Stock Split Ratio

The Board of Directors believes that stockholder approval of a range of potential Reverse Stock Split ratios is in the best interests of our Company and stockholders because it is not possible to predict market conditions at the time the Reverse Stock Split would be implemented. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split ratio to be selected by our Board of Directors will be not less than 1-for-2 and not more than 1-for-200.

The selection of the specific Reverse Stock Split ratio will be based on several factors, including, among other things:

We believe that granting our Board of Directors the authority to set the ratio for the Reverse Stock Split is essential because it allows us to take these factors into consideration and to react to changing market conditions. If the Board of Directors chooses to implement the Reverse Stock Split, the Company will make a public announcement regarding the determination of the Reverse Stock Split ratio.

Board Discretion to Effect the Reverse Stock Split

If the Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split will only be effected upon a determination by the Board of Directors, in its sole discretion, that filing the Reverse Stock Split Charter Amendment to effect the Reverse Stock Split is in the best interests of the Company and its stockholders. This determination by the Board of Directors will be based upon a variety of factors, including those discussed under “—Determination of the Reverse Stock Split Ratio” above. We expect that the primary focus of the Board of Directors in determining whether or not to file the Reverse Stock Split Amendment will be whether we will be able to obtain the approval of the listing of our Common Stock on The Nasdaq Capital Market without effecting the Reverse Stock Split.

The implementation of the Reverse Stock Split is not conditioned on the approval of the Authorized Share Reduction Proposal or the implementation of the Authorized Share Reduction.

Effective Time of the Reverse Stock Split

If the Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split would become effective, if at all, when the Reverse Stock Split Amendment is accepted and recorded by the office of the Secretary of State of the State of Delaware. However, notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split.

The implementation of the Reverse Stock Split is not conditioned on the approval of the Authorized Share Reduction Proposal or the implementation of the Authorized Share Reduction.

Exchange of Share Certificates

If the Reverse Stock Split is effected, each certificate representing pre-Reverse Stock Split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split Common Stock at the effective time of the Reverse Stock Split. As soon as practicable after the effective time of the Reverse Stock Split, the Transfer Agent will mail a letter of transmittal to the Company’s stockholders containing instructions on how a stockholder should surrender its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock to the Transfer Agent in exchange for certificate(s) representing post-Reverse Stock Split shares of Common Stock. No certificate(s) representing post-Reverse Stock Split shares of Common Stock will be issued to a stockholder until such stockholder has surrendered all certificate(s) representing pre-Reverse Stock Split shares of Common Stock, together with a properly completed and executed letter of transmittal, to the Transfer Agent. No stockholder will be required to pay a transfer or other fee to exchange its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock for certificate(s) representing post-Reverse Stock Split shares of Common Stock registered in the same name.

Stockholders who hold uncertificated shares of Common Stock electronically in “book-entry” form will have their holdings electronically adjusted by the Transfer Agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Stock Split. If any certificate(s) or book-entry statement(s) representing pre-Reverse Stock Split shares of Common Stock to be exchanged contain a restrictive legend or notation, as applicable, the certificate(s) or book-entry statement(s) representing post-Reverse Stock Split shares of Common Stock will contain the same restrictive legend or notation.

Any stockholder whose share certificate(s) representing pre-Reverse Stock Split shares of Common Stock has been lost, stolen or destroyed will only be issued post-Reverse Stock Split Common Stock after complying with the requirements that the Company and the Transfer Agent customarily apply in connection with lost, stolen or destroyed certificates.

STOCKHOLDERS SHOULD NOT DESTROY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK UNTIL THEY ARE REQUESTED TO DO SO.

Accounting Treatment of the Reverse Stock Split

If the Reverse Stock Split is effected, the par value per share of our Common Stock will remain unchanged at $0.001. Accordingly, on the effective date of the Reverse Stock Split, the stated capital on the Company’s consolidated balance sheet attributable to our Common Stock will be reduced in proportion to the size of the Reverse Stock Split ratio and the additional paid-in-capital account will be increased by the amount by which the stated capital is reduced. Our stockholders’ equity, in the aggregate, will remain unchanged. Per share net income or loss will be increased because there will be fewer shares of Common Stock outstanding. The Common Stock held in treasury will be reduced in proportion to the Reverse Stock Split ratio. The Company does not anticipate that any other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, will arise as a result of the Reverse Stock Split.

Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a discussion of certain material U.S. federal income tax consequences of the Reverse Stock Split. This discussion is included for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant to stockholders in light of their particular circumstances. This discussion is based on the Code and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion.

All stockholders are urged to consult with their own tax advisors with respect to the tax consequences of the Reverse Stock Split. This discussion does not address the tax consequences to stockholders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, partnerships, nonresident alien individuals, broker-dealers and tax-exempt entities, persons holding shares as part of a straddle, hedge, conversion transaction or other integrated investment, U.S. holders (as defined below) subject to the alternative minimum tax or the unearned income Medicare tax and U.S. holders whose functional currency is not the U.S. dollar. This summary also assumes that the pre-Reverse Stock Split shares of Common Stock were, and the post-Reverse Stock Split shares of Common Stock will be, held as a “capital asset,” as defined in Section 1221 of the Code.

As used herein, the term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:

In general, no gain or loss should be recognized by a stockholder upon the exchange of pre-Reverse Stock Split Common Stock for post-Reverse Stock Split Common Stock. The aggregate tax basis of the post-Reverse Stock Split Common Stock should be the same as the aggregate tax basis of the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split. A stockholder’s holding period in the post-Reverse Stock Split Common Stock should include the period during which the stockholder held the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split.

As noted above, we will not issue fractional shares of Common Stock in connection with the Reverse Stock Split. In certain circumstances, stockholders who would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional fraction of a share of Common Stock to round up to the next whole post-Reverse Stock Split share of Common Stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of Common Stock is not clear.

The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Reverse Stock Split.

Vote Required

Pursuant to the DGCL and our organizational documents, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is required to approve the Reverse Stock Split Proposal.

APPROVAL OF THE AMENDMENT TO THE COMPANY’S CHARTER TO REDUCE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

(Proposal 2)

Background and Proposed Amendment

Our Charter currently authorizes the Company to issue a total of 251,532,500 shares of capital stock, consisting of 250,000,000 shares of Common Stock, par value $0.001 per share, and 1,532,500 shares of preferred stock, par value $0.001 per share.

On October 6, 2019, subject to stockholder approval, the Board of Directors approved an amendment to our Charter to, at the discretion of the Board of Directors, effect the Authorized Share Reduction to reduce the total number of shares of Common Stock that the Company is authorized to issue from 250,000,000 to 25,000,000. The Authorized Share Reduction will not change the number of authorized shares of preferred stock, which currently consists of 1,532,500 shares.

The primary purpose of the Authorized Share Reduction is to reduce the total number of shares that we are authorized to issue so that we do not have what some stockholders might view as an unreasonably high number of authorized shares of Common Stock that are unissued or reserved for issuance following the Reverse Stock Split. Accordingly, the implementation of the Authorized Share Reduction is expressly conditioned on stockholder approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split.

The actual timing for implementation of the Authorized Share Reduction would be determined by the Board of Directors, following or concurrent with the implementation of the Reverse Stock Split, and based upon its evaluation as to when such action would be most advantageous to the Company and its stockholders. Notwithstanding approval of the Authorized Share Reduction Proposal and the Reverse Stock Split Proposal by our stockholders and the implementation of the Reverse Stock Split, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Authorized Share Reduction. If the Authorized Share Reduction Proposal and Reverse Stock Split Proposal are approved by our stockholders and the Reverse Stock Split is implemented, the Board of Directors will make a determination as to whether effecting the Authorized Share Reduction is in the best interests of the Company and our stockholders in light of, among other things, the Company’s anticipated needs for future equity issuances. For additional information concerning the factors the Board of Directors will consider in deciding whether to effect the Authorized Share Reduction, see “—Board Discretion to Effect the Authorized Share Reduction.”

The text of the proposed amendments to the Company’s Charter to effect the Authorized Share Reduction is included as Annex B to this proxy statement (the “Authorized Share Reduction Charter Amendment”). If the Authorized Share Reduction Proposal and the Reverse Stock Split Proposal are approved by the Company’s stockholders and the Reverse Stock Split is implemented, the Company will have the authority to file the Authorized Share Reduction Charter Amendment with the Secretary of State of the State of Delaware, which will become effective upon its filing; provided, however, that the Authorized Share Reduction Charter Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the Board of Directors deems necessary and advisable. 

Reasons for the Authorized Share Reduction

The primary purpose of the Authorized Share Reduction is to reduce the total number of shares that we are authorized to issue so that we do not have what some stockholders might view as an unreasonably high number of authorized shares of Common Stock that are unissued or reserved for issuance following the Reverse Stock Split. Accordingly, the implementation of the Authorized Share Reduction is expressly conditioned on the approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split. In addition, the Authorized Share Reduction is anticipated to decrease the amount of annual franchise taxes that the Company may be required to pay to the State of Delaware following the Reverse Stock Split.

Effects of the Authorized Share Reduction; Risks Associated with the Authorized Share Reduction

If the Authorized Share Reduction is implemented, it will reduce the total number of shares of Common Stock that we are authorized to issue from 250,000,000 to 25,000,000. The Authorized Share Reduction would not have any effect on the rights of existing stockholders and the par value per share of Common Stock will remain $0.001. The Authorized Share Reduction would not have any impact on the total number of shares of preferred stock that the Company is authorized to issue, which will remain at 1,532,500 shares.

The decrease in the number of authorized shares of Common Stock would result in fewer shares of authorized but unissued Common Stock being available for future issuance for various purposes, including raising capital or making acquisitions. However, we currently expect that the amount of authorized but unissued shares of Common Stock available for future issuances following the Reverse Stock Split and Authorized Share Reduction will be sufficient for our future needs.

The Authorized Share Reduction is conditioned on the approval of the Reverse Stock Split Proposal and the implementation of the Reverse Stock Split, but will not be effected in proportion to the Reverse Stock Split ratio. Accordingly, depending on the ratio of the Reverse Stock Split and the total number of shares we have issued and outstanding following the Reverse Stock Split, the practical effect of the Reverse Stock Split and the Authorized Share Reduction could be to proportionally increase or decrease the total number of shares of Common Stock we are authorized to issue compared to the amount authorized by our Charter as in effect today.

Conditioned on Reverse Stock Split

The Board of Directors intends to proceed with the Authorized Share Reduction only if and when the Reverse Stock Split Proposal is approved by our stockholders and the Reverse Stock Split is implemented. Accordingly, if we do not receive approval of the Reverse Stock Split Proposal or the Board of Directors determines not to proceed with the Reverse Stock Split, then we will not implement the Authorized Share Reduction.

The implementation of the Reverse Stock Split, however, is not conditioned on the approval of the Authorized Share Reduction Proposal or the implementation of the Authorized Share Reduction. Even if the Authorized Share Reduction Proposal is not approved by our stockholders or if the Board of Directors determines not to implement the Authorized Share Reduction, the Board of Directors will retain the option to implement the Reverse Stock Split, subject to the approval of the Reverse Stock Split Proposal by our stockholders.

Board Discretion to Effect the Authorized Share Reduction

If the Authorized Share Reduction Proposal and the Reverse Stock Split Proposal are approved by our stockholders and the Reverse Stock Split is implemented, the Authorized Share Reduction will only be effected upon a determination by the Board of Directors, in its sole discretion, that filing the Authorized Share Reduction Charter Amendment to effect the Authorized Share Reduction is in the best interests of the Company and its stockholders. In making its determination, the Board of Directors will consider, among other things, whether the Authorized Share Reduction is in the best interests of the Company’s stockholders in light of the Company’s anticipated needs to reserve authorized shares of Common Stock for:

In addition, whether the Board of Directors determines to implement the Authorized Share Reduction will depend on the ratio that the Board of Directors selects for the Reverse Stock Split and the number of shares of Common Stock that are issued and outstanding following the Reverse Stock Split.

Effective Time of the Authorized Share Reduction

If the Authorized Share Reduction Proposal and the Reverse Stock Split Proposal are approved by our stockholders and the Reverse Stock Split is implemented, the Authorized Share Reduction would become effective, if at all, when the Authorized Share Reduction Amendment is accepted and recorded by the office of the Secretary of State of the State of Delaware. However, notwithstanding approval of the Authorized Share Reduction Proposal and the Reverse Stock Split Proposal by our stockholders and the implementation of the Reverse Stock Split, the Board of Directors will have the sole authority to elect whether or not and when to amend our Charter to effect the Authorized Share Reduction.

Vote Required

Pursuant to the DGCL and our organizational documents, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is required to approve the Authorized Share Reduction Proposal.

APPROVAL OF THE AMENDMENT TO THE EQUITY INCENTIVE PLAN TO ADD AN “EVERGREEN” PROVISION TO ADJUST THE TOTAL SIZE OF THE EQUITY INCENTIVE PLAN ON A SEMI-ANNUAL BASIS AND MAKE CERTAIN OTHER AMENDMENTS

(Proposal 3)

The Board of Directors is seeking the approval of our stockholders of an amendment to the Equity Incentive Plan, which was adopted by the Board of Directors on October 3, 2019, subject to stockholder approval (the “Plan Amendment”). The Equity Incentive Plan was originally approved by the Board of Directors and our stockholders on December 14, 2015.

Under the Equity Incentive Plan, we originally reserved a total of 18,000,000 shares of our Common Stock for issuance as awards to key employees, officers, outside directors, consultants and advisors of the Company. The purpose of the Equity Incentive Plan is to enable us to remain competitive and innovative in our ability to attract and retain the services of key employees, officers, outside directors, consultants and advisors of the Company. The Equity Incentive Plan provides for the granting of incentive stock options (“ISOs”), nonqualified stock options, restricted stock, restricted stock units, and performance awards. The Equity Incentive Plan is expected to provide flexibility to our compensation methods in order to adapt the compensation of our key employees, officers, outside directors, consultants and advisors to a changing business environment, after giving due consideration to competitive conditions and the impact of applicable federal tax laws. The Equity Incentive Plan is administered by the Board of Directors or its Compensation Committee.

A copy of the Plan Amendment and the Equity Incentive Plan are included as Annex C and Annex D, respectively, to this Proxy Statement. Below is a summary of certain key provisions of the Plan Amendment and the Equity Incentive Plan, which are qualified in their entirety by reference to the full text of the Plan Amendment and the Equity Incentive Plan.

Summary of the Equity Incentive Plan Amendment

The Board of Directors adopted the Plan Amendment on October 3, 2019, subject to stockholder approval, to (i) add an “evergreen” provision to the Equity Incentive Plan whereby the number of shares reserved for issuance under the Equity Incentive Plan will automatically adjust on each March 31 and September 30 such that the number of shares of our Common Stock available for issuance pursuant to awards under the Equity Incentive Plan will continue to represent fifteen percent (15%) of the total number of shares of our Common Stock outstanding on such adjustment dates, on a fully diluted basis, (ii) add a cap on the maximum number of shares of Common Stock authorized under the Equity Incentive Plan that may be issued as incentive stock options qualifying under Section 422 of the Code and (iii) eliminate the requirement that no person may be granted more than 3,000,000 stock options in any given fiscal year under the Equity Incentive Plan, which annual limit is no longer required by Section 162(m) of the Code.

Although the total of 18,000,000 shares of our Common Stock reserved for issuance under our current Equity Incentive Plan represents approximately thirteen percent (13%) of our shares of Common Stock outstanding as of the Record Date on a fully diluted basis, we believe the addition of an “evergreen” provision at a slightly higher percentage as described above will continue to allow us to attract and retain key employees, officers, outside directors, consultants and advisors in the event of future dilutive equity issuances in connection with a potential “uplisting” to The Nasdaq Capital Market or otherwise.

Description of the Equity Incentive Plan

Purpose. The purpose of the Equity Incentive Plan is to enable us to remain competitive and innovative in our ability to attract and retain the services of key employees, officers, outside directors, consultants and advisors. The Equity Incentive Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, and performance awards. The Equity Incentive Plan is expected to provide flexibility to our compensation methods in order to adapt the compensation of our key employees, officers, outside directors, consultants and advisors to a changing business environment, after giving due consideration to competitive conditions and the impact of applicable federal tax laws.

Effective Date and Expiration. The Equity Incentive Plan was originally approved by the Board of Directors and our stockholders on December 14, 2015. The Equity Incentive Plan will terminate on December 13, 2025, unless sooner terminated by the Board of Directors. No award may be made under the Equity Incentive Plan after its termination date, but awards made prior to the termination date may extend beyond that date.

Share Authorization. Subject to certain adjustments, the number of shares of our Common Stock that are reserved for issuance pursuant to awards under the Equity Incentive Plan, prior to the adoption of the Plan Amendment, is 18,000,000 (the “Authorized Shares”), of which one hundred percent (100%) (the “ISO Limit”) may be delivered pursuant to incentive stock options. If the Plan Amendment is approved, the number of Authorized Shares (but not the ISO Limit) will be automatically adjusted on each adjustment date so that the Authorized Shares are equal to fifteen percent (15%) of the total number of shares of our Common Stock outstanding on the adjustment date, on a fully diluted basis. In addition, if the Plan Amendment is approved, the Equity Incentive Plan will no longer limit the amount of stock options that may be awarded to a single person in any given fiscal year under the Equity Incentive Plan. Please note that if the Reverse Stock Split Proposal is approved by our stockholders, then the share limits in the Equity Incentive Plan and described herein shall be adjusted by the ratio ultimately determined in the discretion of the Board of Directors in accordance with the Reverse Stock Split Proposal.

Shares to be issued may be made available from authorized but unissued shares of our Common Stock or shares reacquired by us. During the term of the Equity Incentive Plan, we will at all times reserve and keep enough shares available to satisfy the requirements of the Equity Incentive Plan. If an award under the Equity Incentive Plan is cancelled, forfeited, or expires, in whole or in part, the shares subject to such forfeited, expired, or cancelled award may again be awarded under the Equity Incentive Plan. Only shares forfeited back to us or shares cancelled on account of termination, expiration, or lapse of an award shall again be available for grant as incentive stock options under the Equity Incentive Plan, but shall not increase the maximum number of shares described above as the maximum number of shares that may be delivered pursuant to incentive stock options.

Administration. The Equity Incentive Plan is administered by the Board of Directors or its Compensation Committee (the “Committee”). At any time there is no Compensation Committee to administer the Equity Incentive Plan, any reference to the Committee is a reference to the Board of Directors. The Committee will determine the persons to whom awards are to be made; determine the type, size, and terms of awards; interpret the Equity Incentive Plan; establish and revise rules and regulations relating to the Equity Incentive Plan; establish performance goals for awards and certify the extent of their achievement; correct any defect, supply any omission or reconcile any inconsistency in the Equity Incentive Plan or any award agreement; and make any other determinations that it believes necessary for the administration of the Equity Incentive Plan. Any such determination, interpretation or construction shall be final, binding and conclusive for all purposes. The Committee may delegate certain duties to one or more of the Company’s officers as provided in the Equity Incentive Plan.

Eligibility. Employees, officers, outside directors, consultants and advisors of the Company or its subsidiaries who are in a business relationship with us on the date an award is granted under the Equity Incentive Plan, and whose judgment, initiative, and efforts contributed to or may be expected to contribute to our successful performance are eligible to participate in the Equity Incentive Plan. As of the Record Date, we had seven employees, three directors, and ten consultants who would be eligible for awards under the Equity Incentive Plan.

Stock Options. The Committee may grant either ISOs qualifying under Section 422 of the Code or nonqualified stock options, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not be granted with an option price less than one hundred percent (100%) of the fair market value of a share of our Common Stock on the date the stock option is granted. If an ISO is granted to an employee who owns or is deemed to own more than ten percent (10%) of the combined voting power of all classes of our stock (or any parent or subsidiary), the option price shall be at least one hundred ten percent (110%) of the fair market value of a share of Common Stock on the date of grant. The Committee will determine the terms of each stock option award at the time of grant, including, without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each option, the times at which each option will be exercisable, and provisions requiring forfeiture of unexercised options at or following a termination of employment or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 years or, in the case of an ISO granted to an employee who owns or is deemed to own more than ten percent (10%) of the combined voting power of all classes of our stock (or any parent or subsidiary), a term exceeding five years.

Recipients of stock options may pay the option price (i) in cash or check payable to the Company; (ii) by delivering to the Company shares of Common Stock already owned by the participant having a fair market value equal to the aggregate option price; (iii) through a cashless exercise, as may be provided in the applicable award agreement; (iv) by any other form of valid consideration that is acceptable to the Committee, in its sole discretion; or (v) any combination of (i) – (iv).

Restricted Stock and Restricted Stock Units. The Committee is authorized to grant restricted stock (which is referred to in the Equity Incentive Plan as “restricted shares”) and restricted stock units. Restricted stock consists of shares of our Common Stock that may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period, as specified by the Committee. Restricted stock units are the right to receive shares of Common Stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made; the number of shares or units to be granted; the price to be paid, if any; the time or times within which the shares covered by such grants will be subject to forfeiture; the time or times at which the restrictions will terminate; and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with us, the passage of time, or other restrictions or conditions. Except as otherwise provided in the Equity Incentive Plan or the applicable award agreement, a participant shall have, with respect to shares of restricted stock, all of the rights of a stockholder of the Company holding the class of Common Stock that is the subject of the restricted stock award, including, if applicable, the right to vote the Common Stock and the right to receive any dividends thereon.

Performance Awards. The Committee may grant performance awards payable in shares of Common Stock upon the achievement of pre-established performance goals or at the end of a specified performance period. Payment will be contingent upon achieving the pre-established performance goals (as discussed below) by the end of the performance period. The Committee will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the Equity Incentive Plan, and to the extent an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance. In addition, to the extent we intended for Section 162(m) of the Code to apply to any Grandfathered Awards (as defined in the Million Dollar Deduction Limit and Other Tax Matters section below), no participant has received in any calendar year Grandfathered Awards with an aggregate value of more than three million dollars ($3,000,000), based on the fair market value of shares of our Common Stock at the time such awards were granted. In certain circumstances, the Committee may, in its discretion, determine that the amount payable with respect to certain performance awards will be reduced from the amount of any potential awards. However, the Committee may not, in any event, increase the amount of compensation payable to an individual upon the attainment of a performance goal intended to satisfy the requirements of Section 162(m) of the Code. With respect to a performance award that is not intended to satisfy the requirements of Section 162(m) of the Code, if the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in our business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.

Performance Goals. Any performance goals may be used to measure our performance as a whole or any of our business units and may be measured relative to a peer group or index. Any performance goals may include or exclude (i) extraordinary, unusual, and/or non-recurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition, as identified in our quarterly and annual earnings releases; or (v) other similar occurrences. In all other respects, performance goals shall be calculated in accordance with our financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award, which is consistently applied and identified in the Company’s audited financial statements, including in footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is applicable, the Committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a performance goal.

Vesting, Forfeiture, Assignment. The Committee, in its sole discretion, may determine that an award will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, subject, in any case, to the terms of the Equity Incentive Plan. If the Committee imposes conditions upon vesting, then, subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the award may be vested.

The Committee may impose on any award at the time of grant or thereafter, such additional terms and conditions as the Committee determines, including, without limitation, terms requiring forfeiture of awards in the event of a participant’s termination of employment or service. The Committee will specify the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant prior to the end of a performance period or settlement of awards. Except as otherwise determined by the Committee, restricted stock will be forfeited upon a participant’s termination of service during the applicable restriction period.

Awards granted under the Equity Incentive Plan generally are not assignable or transferable except by will or by the laws of descent and distribution.

Adjustments Upon Changes in Capitalization. In the event that any stock dividend, recapitalization, reclassification, stock split, reverse stock split, or similar transaction, and (i) the outstanding shares of our Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company; or (ii) additional shares or new or different shares or other non-cash assets are distributed with respect to such shares of our Common Stock or other securities, then an appropriate and proportionate adjustment shall be made in (x) the maximum number and kind of shares of Common Stock reserved for issuance under the Equity Incentive Plan, (y) the number and kind of restricted stock or restricted stock units granted and shares of Common Stock or other securities subject to any then outstanding stock options under the Equity Incentive Plan, and (z) the exercise price for each share subject to any then outstanding stock options under the Equity Incentive Plan, without changing the aggregate purchase price as to which such stock options remain exercisable; provided, however, that the number of shares of Common Stock (or other securities or property) subject to any award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would (i) cause the Equity Incentive Plan or any stock option to violate Section 422 or 409A of the Code or Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or (ii) be considered as the adoption of a new plan requiring stockholder approval.

Amendment or Discontinuance of the Equity Incentive Plan. The Board of Directors may, at any time and from time to time, modify, amend, or discontinue the Equity Incentive Plan in whole or in part; provided, however, that (i) no amendment that requires stockholder approval in order for the Equity Incentive Plan or any awards under the Equity Incentive Plan to continue to comply with Section 422 of the Code (including any successors to such sections, or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system on which our stock is listed or traded, shall be effective unless such amendment is approved by the requisite vote of our stockholders entitled to vote on the amendment; and (ii) unless required by law, no action by the Board of Directors regarding amendment or discontinuance of the Equity Incentive Plan may affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding awards under the Equity Incentive Plan without the consent of the affected participant.

Federal Income Tax Consequences

The following is a brief summary of certain federal income tax consequences relating to the transactions described under the Equity Incentive Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local, or foreign tax consequences. This discussion is based upon provisions of the Code and the Treasury Regulations issued thereunder, and any judicial and administrative interpretations under the Code or Treasury Regulations, all as in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different interpretation.

Law Affecting Deferred Compensation. In 2004, Section 409A was added to the Code to regulate all types of deferred compensation. If the requirements of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest charge at the underpayment rate plus one percent (1%) and a twenty percent (20%) penalty tax. Certain performance awards, stock options, restricted stock units, and certain types of restricted stock are subject to Section 409A of the Code.

Incentive Stock Options. A participant will not recognize income at the time an ISO is granted. When a participant exercises an ISO, a participant also generally will not be required to recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value (determined as of the date of grant) of the shares with respect to which the participant’s ISOs are exercisable for the first time during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not ISOs, for federal tax purposes, and the participant will recognize income as if the ISOs were nonqualified stock options. In addition to the foregoing, if the fair market value of the shares received upon exercise of an ISO exceeds the exercise price, then the excess may be deemed a tax preference adjustment for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce significant tax repercussions depending upon the participant’s particular tax status.

The tax treatment of any shares acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares prior to the later of: two years after the date the ISO was granted or one year after the date the shares were transferred to the participant (referred to as the “Holding Period”). If a participant disposes of shares acquired by exercise of an ISO after the expiration of the Holding Period, any amount received in excess of the participant’s tax basis for such shares will be treated as a short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as a short-term or long-term capital loss, depending upon how long the participant has held the shares. If the participant disposes of shares acquired by exercise of an ISO prior to the expiration of the Holding Period, the disposition will be considered a “disqualifying disposition.” If the amount received for the shares is greater than the fair market value of the shares on the exercise date, then the difference between the ISO’s exercise price and the fair market value of the shares at the time of exercise will be treated as ordinary income for the tax year in which the “disqualifying disposition” occurs. The participant’s basis in the shares will be increased by an amount equal to the amount treated as ordinary income due to such “disqualifying disposition.” In addition, the amount received in such “disqualifying disposition” over the participant’s increased basis in the shares will be treated as capital gain. However, if the price received for shares acquired by exercise of an ISO is less than the fair market value of the shares on the exercise date and the disposition is a transaction in which the participant sustains a loss which otherwise would be recognizable under the Code, then the amount of ordinary income that the participant will recognize is the excess, if any, of the amount realized on the “disqualifying disposition” over the basis of the shares.

Nonqualified Stock Options. A participant generally will not recognize income at the time a nonqualified stock option is granted. When a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the shares of Common Stock on the date of exercise will be treated as compensation taxable as ordinary income to the participant. The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price paid for such shares, plus any amounts included in the participant’s income as compensation. When a participant disposes of shares acquired by exercise of a nonqualified stock option, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as a short-term or long-term capital loss, depending upon how long the participant has held the shares.

Special Rule if Option Price is Paid for in Shares. If a participant pays the option price of a nonqualified stock option with previously-owned shares of our Common Stock and the transaction is not a disqualifying disposition of shares previously acquired under an ISO, the shares received equal to the number of shares surrendered are treated as having been received in a tax-free exchange. The participant’s tax basis and holding period for these shares received will be equal to the participant’s tax basis and holding period for the shares surrendered. The shares received in excess of the number of shares surrendered will be treated as compensation taxable as ordinary income to the participant to the extent of their fair market value. The participant’s tax basis in these shares will be equal to their fair market value on the date of exercise, and the participant’s holding period for such shares will begin on the date of exercise.

If the use of previously acquired shares to pay the exercise price of a nonqualified stock option constitutes a disqualifying disposition of shares previously acquired under an ISO, the participant will have ordinary income as a result of the disqualifying disposition in an amount equal to the excess of the fair market value of the shares surrendered, determined at the time such shares were originally acquired on exercise of the ISO, over the aggregate option price paid for such shares. As discussed above, a disqualifying disposition of shares previously acquired under an ISO occurs when the participant disposes of such shares before the end of the Holding Period. The other tax results from paying the exercise price with previously-owned shares are as described above, except that the participant’s tax basis in the shares that are treated as having been received in a tax-free exchange will be increased by the amount of ordinary income recognized by the participant as a result of the disqualifying disposition.

Restricted Stock. A participant who receives restricted stock generally will recognize as ordinary income the excess, if any, of the fair market value of the shares granted as restricted stock at such time as the shares are no longer subject to forfeiture or restrictions, over the amount paid, if any, by the participant for such shares. However, a participant who receives restricted stock may make an election under Section 83(b) of the Code within 30 days of the date of transfer of the shares to recognize ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the restrictions on such shares) over the purchase price, if any, of such shares. If a participant does not make an election under Section 83(b) of the Code, then the participant will recognize as ordinary income any dividends received with respect to such shares. At the time of sale of such shares, any gain or loss realized by the participant will be treated as either short-term or long-term capital gain (or loss) depending on how long the participant has held the shares. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously taxable as ordinary income, plus the purchase price paid by the participant, if any, for such shares.

Federal Tax Withholding. Any ordinary income realized by a participant upon the exercise of an award under the Equity Incentive Plan is subject to withholding of federal, state, and local income tax and to withholding of the participant’s share of tax under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act. To satisfy our federal income tax withholding requirements, we will have the right to require that, as a condition to delivery of any certificate for shares of Common Stock or the registration of the shares in the participant’s name, the participant remit to us an amount sufficient to satisfy the withholding requirements. Alternatively, we may withhold a portion of the shares (valued at fair market value) that otherwise would be issued to the participant to satisfy all or part of the withholding tax obligations or may, if we consent, accept delivery of shares with an aggregate fair market value that equals or exceeds the required tax withholding payment. Withholding does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or her tax liability for the year. Additionally, withholding does not affect the participant’s tax basis in the shares. Compensation income realized and tax withheld will be reflected on Forms W-2 supplied by the Company to employees by January 31 of the succeeding year. Deferred compensation that is subject to Section 409A of the Code will be subject to certain federal income tax withholding and reporting requirements.

Tax Consequences to Us. To the extent that a participant recognizes ordinary income in the circumstances described above, we will be entitled to a corresponding deduction; provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code, and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code discussed below.

Million Dollar Deduction Limit and Other Tax Matters. We may not deduct compensation of more than $1,000,000 that is paid to “covered employees” (as defined in Section 162(m) of the Code), which include (i) an individual (or, in certain circumstances, his or her beneficiaries) who, at any time during the taxable year, is either our principal executive officer or principal financial officer; (ii) an individual who is among our three highest compensated officers for the taxable year (other than an individual who was either our principal executive officer or principal financial officer at any time during the taxable year); or (iii) anyone who was a covered employee for purposes of Section 162(m) of the Code for any tax year beginning on or after January 1, 2017. This limitation on deductions (x) only applies to compensation paid by a publicly-traded corporation (and not compensation paid by non-corporate entities) and (z) may not apply to certain types of compensation, such as qualified performance-based compensation that is payable pursuant to a written, binding contract that was in effect as of November 2, 2017 (each, a “Grandfathered Award”), so long as the contract is not materially modified after that date. To the extent that compensation is payable pursuant to a Grandfathered Award, and if we determine that Section 162(m) of the Code will apply to such Grandfathered Award, the Company intends to interpret and operate the Equity Incentive Plan so that the terms of the Grandfathered Award will not be materially modified and will be constructed so as to constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 limitation on deductible compensation.

If an individual’s rights under the Equity Incentive Plan are accelerated as a result of a change in control and the individual is a “disqualified individual” under Section 280G of the Code, the value of any such accelerated rights received by such individual may be included in determining whether or not such individual has received an “excess parachute payment” under Section 280G of the Code, which could result in (i) the imposition of a twenty percent (20%) federal penalty tax (in addition to federal income tax) payable by the individual on the value of such accelerated rights, and (ii) the loss by the Company of a compensation deduction.

Interest of Directors and Executive Officers

All members of the Board of Directors and all of our executive officers are eligible for awards under the Equity Incentive Plan and, thus, have a personal interest in the approval of the Plan Amendment.

New Plan Benefits

With respect to the increased number of shares reserved for issuance under the Equity Incentive Plan pursuant to the Plan Amendment, we cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to eligible participants under the Equity Incentive Plan because the grant of awards and the terms of such awards are to be determined in the sole discretion of the Committee.

The fair market value of our Common Stock is $0.046 per share based on the closing price of our Common Stock on the Record Date.

Vote Required

Pursuant to the DGCL and our organizational documents, the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the Equity Incentive Plan Amendment Proposal is required to approve the Equity Incentive Plan Amendment Proposal.

OTHER BUSINESS

The Board of Directors knows of no other business to be brought before the Special Meeting. If, however, any other business should properly come before the Special Meeting, the persons named in the accompanying proxy will vote the proxy in accordance with applicable law and as they may deem appropriate in their judgment, unless directed by the proxy to do otherwise.