THIS INFORMATION STATEMENT IS BEING PROVIDED TO

YOU BY THE BOARD OF DIRECTORS OF IRONCLAD ENCRYPTION CORPORATION.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE

REQUESTED NOT TO SEND US A PROXY.

IronClad Encryption Corporation

1 Riverway, Suite 1700

Houston, Texas  77056

INFORMATION STATEMENT

(Preliminary)

NOTICE OF STOCKHOLDER ACTION BY WRITTEN CONSENT

GENERAL INFORMATION

March 9, 2020

Dear Shareholders:

This Information Statement has been filed with the Securities and Exchange Commission and is being furnished, pursuant to Section 14C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the holders (the “Stockholders”) of the shares of the Class A and Class B common stock, par value $0.001 per share (the “Common Stock”) of IronClad Encryption Corporation, a Delaware corporation (the “Company”), as of the close of business on the record date of March XX, 2020 (the “Record Date”).

The purpose of this Information Statement is to notify our shareholders that on February 7, 2020 the Company received a written consent in lieu of a meeting (the “Written Consent”) in accordance with the Delaware General Corporation Law (“DGCL”) from the holder of at least a majority of the voting power of all issued and outstanding voting capital of the Company (the “Majority Stockholder”) which authorized and approved the Company to take the following actions (collectively, the “Actions”):

At the discretion of the Board, perform up to a one-for-twenty thousand (1:20,000) reverse stock split of the Company’s issued and outstanding shares of Common Stock, while maintaining the number of authorized shares of Common Stock (the “Reverse Stock Split”); and  

Following the completion of the Reverse Stock Split, at the discretion of the Board of Directors, decrease the number of authorized shares of Common Stock of the Company to an amount not less than 521,707, 093 shares (the “Authorized Decrease”). 

On February 12, 2020, the Board of Directors of the Company (the “Board”) approved the Reverse Stock Split and the Authorized Decrease by written consent in accordance with the DGCL.

The Board believes the Reverse Stock Split and Authorized Decrease are necessary and advisable in order for the Company to maintain the Company’s financing and capital raising ability.  Accordingly, it

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is the Board’s opinion that the Reverse Stock Split and Authorized Decrease will better position the Company to continue and/or expand operations.

INTRODUCTION

Section 228 of the DGCL provides that the written consent of the holders of outstanding shares of voting capital stock having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted can approve an action in lieu of conducting a special stockholders' meeting convened for the specific purpose of such action.

The DGCL, however, requires that in the event an action is approved by written consent, a company must provide prompt notice of the taking of any corporate action without a meeting to the stockholders of record who have not consented in writing to such action and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to a company.

In accordance with the foregoing, we will mail the Notice of Stockholder Action by Written Consent on or about March XX, 2020.

This Information Statement contains a brief summary of the material aspects of the Reverse Stock Split and Authorized Decrease approved by the Board of IronClad Encryption Corporation (the “Company,” “we,” “our,” or “us”) and the Majority Stockholder who holds a majority of the voting capital stock of the Company.

Preferred and Common Stock

On April 12, 2019, the Board of Directors (the “Board”) ratified the amendment of the Company’s Certificate of Incorporation, effective as of April 3, 2019, upon filing a Certificate of Designation with the Secretary of State of Delaware, which sets forth the rights, preferences and privileges of the Preferred Stock, Series A.  The Board also approved the issuance of 100 shares of the Preferred Stock, Series A with a stated value of $0.001 per share for no consideration to the Company’s President pursuant to Rule 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D as promulgated by the SEC under the Securities Act.  

Except as otherwise required by law or by the Certificate of Incorporation, or by the Certificate of Designation, the outstanding shares of the Preferred Stock, Series A shall vote together with the shares of Common Stock and other voting securities of the Company as a single class and, regardless of the number of shares of the Preferred Stock, Series A outstanding and as long as at least one of such shares of the Preferred Stock, Series A is outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Company or action by written consent of shareholders.  Each outstanding share of the Preferred Stock, Series A shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Preferred Stock, Series A.

The shares of the Preferred Stock, Series A are not convertible into Common Stock of the Company.  The holder of the shares will not be entitled to receive any dividends.

As of February 25, 2020, the Company’s President beneficially owns 100 shares (100%) of the Series A Preferred Stock and 22,837,091 shares of Common Stock, which represents approximately eighty and eight tenths of a percent (80.2%; 0.2% by virtue of the common shares owned directly by the President (0.79% of 20%) and 80.0% based on the Preferred Stock, Series A held by the President) of the outstanding voting securities of the Company.

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As of February 7, 2020, there were issued and outstanding 2,865,795,009 shares of Common Stock and 100 shares of Preferred Stock, Series A.  Based on the foregoing, the total aggregate amount of votes entitled to vote regarding the approval of the Reverse Stock Split is approximately 2,865,795,109. Pursuant to Section 228 of the DGCL, at least a majority of the voting equity of the Company, or at least 63 votes of the Preferred Series A, is required to approve the Reverse Stock Split by written consent.

The Majority Stockholder, who holds 100 shares of Preferred Stock, Series A (having 1 vote per share) and therefore having over 80.0 % of the total voting power of all outstanding voting capital, has voted in favor of the Actions, thereby satisfying the requirement under Section 228 of the DGCL that at least a majority of the voting equity vote in favor of a corporate action by written consent.

The following table sets forth the name of the Majority Stockholders, the number of shares of Common Stock and Preferred Stock, Series A held by the Majority Stockholders (as well as members of the board and management), the total number of votes that the Majority Stockholders voted in favor of the Reverse Stock Split, and the percentage of the issued and outstanding voting equity of the Company voted in favor thereof.

ACTIONS TO BE TAKEN

The Reverse Stock Split will become effective on the date that we file Certificate of Amendment to the Company’s Certificate of Incorporation, as amended, (the “Amendment”), with the State of Delaware and FINRA processes the Reverse Stock Split.  We intend to file the Amendment with the State of Delaware promptly after the twentieth (20^th) day following the date on which this Information Statement is mailed to the Stockholders.  Further, the Authorized Decrease will become effective on the date the Board elects to enact the Authorized decrease by the filing of a Certificate of Amendment to the Company’s Certificate of Incorporation with the State of Delaware

REVERSE STOCK SPLIT

General.

The Board has approved a reverse stock split of all the outstanding shares of the Company’s Common Stock at an exchange ratio of up to 1 post-split share for 20,000 pre-split shares (1:20,000), and an amendment to the Company’s Certificate of Incorporation to implement such Reverse Stock Split.  As part of the Reverse Stock Split, the Board will have the discretion to maintain or reduce its authorized common stock in any proportion it deems appropriate.  As stated above, the holders of shares representing a majority of the voting securities of the Company have given their written consent to the Reverse Stock Split.

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Upon execution of the Reverse Stock Split, (i) the number of shares of Common Stock issued and outstanding will be reduced based on the ratio of the Reverse Stock Split that the Board selects and (ii) proportionate adjustments will be made to the per-share exercise price and the number of shares covered by outstanding options and warrants, if any, to buy Common Stock, so that the total prices required to be paid to fully exercise each option and warrant before and after the Reverse Stock Split will be approximately equal.

Except for adjustments that may result from the treatment of fractional shares, which will be rounded up to the nearest whole number, each shareholder will beneficially hold the same percentage of Common Stock and Preferred Stock immediately following the Reverse Stock Split as such shareholder held immediately prior to the Reverse Stock Split.

The Board will have the discretion to maintain or reduce its authorized common stock in any proportion it deems appropriate as part of the Reverse Stock Split, and that proportion may differ from the Reverse Stock Split ratio.  If the Board decides to not decrease the authorized common stock, or decrease the authorized common stock at a ratio less than the reverse stock split ratio, the Reverse Stock Split would have the result of creating newly authorized shares of common stock.  This increase in the authorized number of shares of common stock and any subsequent issuance of such shares could have the effect of delaying or preventing a change in control of the Company without further action by the stockholders.

Shares of authorized and unissued common stock could (within the limits imposed by applicable law and stock exchange regulations) be issued in one or more transactions which would make a change in control of the Company more difficult, and therefore less likely.  Management use of additional shares to resist or frustrate a third-party transaction favored by a majority of the independent stockholders would likely result in an above-market premium being paid in that transaction.  Any such issuance of the additional shares of common stock would likely have the effect of diluting the earnings per share and book value per share of outstanding shares of common stock, and such additional shares could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of the Company.

The Board is not aware of any attempt to take control of the Company and has not presented this proposal with the intention that the Reverse Stock Split be used as a type of antitakeover device.  Any additional common stock, when issued, would have the same rights and preferences as the shares of common stock presently outstanding.

Any additional common stock so authorized will be available for issuance by the Board for stock splits or stock dividends, acquisitions, raising additional capital, conversion of Company debt into equity, stock options or other corporate purposes.  The Company has no other plans for the use of any additional shares of common stock.  The Company does not anticipate that it would seek authorization from the stockholders for issuance of such additional shares unless required by applicable law or regulations.

The following table summarizes the effects of the Reverse Stock Split upon the Company’s outstanding common stock, assuming that (i) there are 2,864,256,137 shares of Class A Common Stock and 1,538,872 shares of Class B Common Stock outstanding immediately prior to the Reverse Stock Split, (ii)  that the Board does not reduce the authorized common stock.

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Reasons for the Reverse Stock Split

The Board believes that the increased market price of the Common Stock expected as a result of implementing the Reverse Stock Split will improve the marketability and liquidity of the Common Stock and will encourage interest and trading in the Common Stock.  Because of the trading volatility often associated with low-priced stocks, many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers.  Some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.

Additionally, because brokers’ commissions on 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 the Common Stock can result in individual shareholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.  It should be noted that the liquidity of the Common Stock may be adversely affected by the Reverse Stock Split given the reduced number of shares that would be outstanding after the Reverse Stock Split.

The Board anticipates, however, that the expected higher market price will reduce, to some extent, the negative effects on the liquidity and marketability of the Common Stock inherent in some of the policies and practices of institutional investors and brokerage houses described above.

The Board confirms this transaction will not be the first step in a series of plans or proposals of a “going private transaction” within the meaning of Rule 13e-3 of the Securities Exchange Act of 1934, as amended.

Based upon the foregoing factors, the Board has determined that the Reverse Stock Split is in the best interests of the Company and its shareholders.

Effects of the Reverse Stock Split

Upon the effectiveness of the Reverse Stock Split, each Common Stock shareholder will beneficially own a reduced number of shares of Common Stock.  However, the Reverse Stock Split will affect all of the Company’s common shareholders uniformly and will not affect any shareholder’s percentage ownership interests, except to the extent that the Reverse Stock Split results in any of the shareholders owning a fractional share as described above.  The number of shareholders of record will also not be affected by the Reverse Stock Split.