ROCKETFUEL BLOCKCHAIN, INC. Management’s Discussion and Analysis or Plan of Operation (form 10-K)

Overview



Our Business


We (or the “Company”) provide cryptocurrency and other check-out and payment
systems that securely automate and simplify the way online payment and shipping
information is received by merchants from their customers. Our “one click”
checkout solution is modeled on the “buy now” button on leading eCommerce sites.
Our check-out systems are designed to enhance customers’ data protection,
enabling consumers to pay for goods and services using cryptocurrencies or by
direct transfers from their bank accounts without exposing spending credentials
such as credit card data. At the same time, our check-out systems are designed
to increase the speed, security and ease of use for both customers and merchants
and include a merchant portal that provides detailed transactions and metrics
about payments received by the merchant. Our system also includes a customer
portal where shoppers are able to track their payments, configure payment
defaults and connect with various cryptocurrency exchanges and banks to
facilitate payment to merchants. Merchants are able to integrate a unique pop-up
user interface that allows customers to pay directly from their eCommerce
checkout page with no need to redirect to another website or web page.

Our corporate headquarters are located in San Francisco, California.



Critical Accounting Policies


Our significant accounting policies are summarized in Note 2 to our financial
statements. Certain of our accounting policies require the application of
significant judgment by our management, and such judgments are reflected in the
amounts reported in our financial statements. In applying these policies, our
management uses its judgment to determine the appropriate assumptions to be used
in the determination of estimates. Those estimates are based on our historical
experience, terms of existing contracts, our observance of market trends,
information provided by our strategic partners and information available from
other outside sources, as appropriate. Actual results may differ significantly
from the estimates contained in our financial statements.



Results of Operations


Fiscal Years Ended March 31, 2022 vs. March 31, 2021



Revenues


During March 2021, we commenced commercial operations and executed several
contracts with customers. In accordance with the terms of the contracts, we
received the payment in connection with the implementation of our remittance
technologies. We record the implementation fees as deferred revenue which is
amortized ratably over the contract term. During the fiscal year ended March 31,
2022
, we generated $30,504 primarily from the recognized implementation fees.
During the fiscal year ended March 31, 2021, we did not generate any revenue. We
anticipate that future revenues will be generated from (i) fees charged in
connection with the implementation of our remittance technologies; and (ii)
ongoing daily transactional fees derived as a negotiated percentage of the
transactional revenues earned by our merchant customers.



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Research and Development Expenses

Research and development expenses for the fiscal year ended March 31, 2022 were
$897,277 as compared to $163,405 for the comparable prior year period, an
increase of $733,872. The increase is due primarily to hiring of contractors in
India and applying additional resources in connection with continued development
of our technology for payment processing. Costs associated with adding new
features to our software platform are capitalized and amortized over a 2-year
expected life.

General and Administrative Expenses

General and administrative expenses for the fiscal year ended March 31, 2022
were $3,763,179 as compared to $2,200,177 for the comparable prior year period,
an increase of $1,563,002. The increase is primarily a result of legal fees
incurred in connection with certain litigation costs and payroll expenses
incurred in connection with the hiring of our full-time executive officers,
which was somewhat offset by a decrease in stock-based compensation.

Stock-based compensation for the fiscal year ended March 31, 2022 of $1,380,642
was composed of (i) the $20,000 value of 20,000 shares of our common stock
issued to two customers in lieu of cash consideration; (ii) stock options
granted to employees which were valued at $1,326,177; and the (iii) repricing of
certain stock options granted to employees which resulted in additional
stock-based compensation of $34,465.

Stock-based compensation for the fiscal year ended March 31, 2021 of $1,622,335
was composed of (i) the $162,000 value of 150,000 shares of our common stock
issued to an independent consultant for services in lieu of cash consideration;
(ii) stock options granted to employees which were valued at $601,140; (iii) the
issuance of a warrant to our chief executive officer that is exercisable into
265,982 shares of our common stock and valued at $370,131; and the (iv)
repricing of certain stock options granted to our chief financial officer in
August 2018 which were re-priced resulting in additional stock-based
compensation of $489,064.

Liquidity and Capital Resources

As of March 31, 2022, we had cash of $2,634,794, an increase of $1,834,463 as
compared to a cash balance of $800,331 as of March 31, 2021. Our current cash
requirements are approximately $350,000 per month.

During the fiscal year ended March 31, 2022, net cash of $2,776,911 was used in
operating activities. Net cash used in operating activities was primarily
composed of our net loss of $4,662,924 and offset by (i) $1,360,642 of non-cash
stock-based compensation in connection with the grant of employee stock options
and; (ii) $20,000 of non-cash stock-based compensation in connection with the
issuance of 20,000 shares of our common stock to two customers in lieu of cash
consideration; (iii) increase in depreciation and amortization of $149,919 and
(iv) increase in accounts payable and accrued expenses payable of $262,352 in
the aggregate.

During the fiscal year ended March 31, 2021, net cash of $636,257 was used in
operating activities. Net cash used in operating activities was primarily
composed of our net loss of $2,363,582 and offset by (i) $1,460,335 of non-cash
stock-based compensation in connection with the grant of employee stock options
and issuance of a common stock purchase warrant to our chief executive officer;
(ii) $162,000 of non-cash stock-based compensation in connection with the
issuance of 150,000 shares of our common stock to a consultant for services in
lieu of cash consideration; and (iii) increase in accounts payable, accrued
expenses and related party payable of $109,990 in the aggregate.

During the fiscal year ended March 31, 2022, net cash of $610,095 was used in
investing activities, primarily from (i) the acquisition of computer equipment
for $23,395 and the capitalization of software development costs of $586,700,
There were no such investments in the fiscal year ended March 31, 2021.

During the fiscal year ended March 31, 2022, net cash of $5,221,469 was provided
by financing activities, primarily from (i) the issuance of 6,666,667 shares of
our common stock and warrants to purchase 6,666,667 shares of common stock in
exchange for net cash proceeds (after net of issuance costs) of $4,375,001 in a
public offering and; (ii) the issuance of 850,000 shares of our common stock in
connection with exercise of common stock purchase warrants in consideration of
$882,500 in gross cash proceeds. Additionally, we received proceeds from a
convertible note payable of $126,250, net of finance costs, and repaid $159,282
for this same convertible note payable.

During the fiscal year ended March 31, 2021, net cash of $1,428,750 was provided
by financing activities from the issuance of 1,478,750 shares of our common
stock to two investors. During the fiscal year ended March 31, 2021, one
investor exercised warrants to purchase 1,100,000 shares of our common stock of
which (i) 1,000,000 shares of our common stock were issued in consideration of
gross proceeds of $1,000,000 prior to March 31, 2021; and (ii) 100,000 shares of
our common stock, for which we received notice of exercise on March 31, 2021,
were issued subsequent to March 31, 2021 in consideration of gross proceeds of
$100,000. There were no options exercised during the fiscal years ended March
31, 2022
and 2021.

Our financial statements have been presented on the basis that we are a going
concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. During the fiscal year ended March
31, 2022
, we reported a net loss of $4,662,924, which included non-cash
stock-based compensation of $1,380,642, and cash flows used in operating
activities of $2,776,911. As a result, management believes that there is
substantial doubt about our ability to continue as a going concern.

We will require additional financing in order to continue to develop our product
and execute on our business plan. However, there can be no assurances that we
will be successful in raising the additional capital necessary to continue
operations and execute on our business plan. Any potential future sale of equity
or debt securities may result in dilution to our stockholders, and we cannot be
certain that additional public or private financing will be available in amounts
or on terms acceptable to us, or at all. If we are required to raise additional
financing, but are unable to obtain such financing, we may be required to delay,
reduce the scope of, or eliminate one or more aspects of our operations or
business development activities.



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Off-Balance Sheet Arrangements

As of March 31, 2022, we did not have any off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future material effect on
our financial condition, results of operations, liquidity, capital expenditures
or capital resources.

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