ROCKETFUEL BLOCKCHAIN, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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This Quarterly Report on Form 10-Q contains certain statements that are
“forward-looking” within the meaning of the federal securities laws. These
forward-looking statements and other information are based on our beliefs as
well as assumptions made by us using information currently available.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,”
“should” and similar expressions, as they relate to us, are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and
assumptions, and are not guaranties of future performance. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected, intended or using other similar
expressions. We are making investors aware that such forward-looking statements,
because they relate to future events, are by their very nature subject to many
important factors that could cause actual results to differ materially from
those contemplated by the forward-looking statements contained in this Quarterly
Report on Form 10-Q. Important factors that could cause actual results to differ
from our predictions include, without limitation:
? Market acceptance of our products and services;
? Competition from existing products or new products that may emerge;
? The implementation of our business model and strategic plans for our business
and our products;
? Estimates of our future revenue, expenses, capital requirements and our need
for financing;
? Our financial performance;
? Current and future government regulations;
? Developments relating to our competitors; and
? Other risks and uncertainties, including those listed under the section titled
"Risk Factors" in our annual report filed on Form 10-K filed with the
Securities and Exchange Commission on July 15, 2022 .
Although we have sought to identify the most significant risks to our business,
we cannot predict whether, or to what extent, any of such risks may be realized,
nor can there be any assurance that we have identified all possible issues which
we might face. For all of these reasons, the reader is cautioned not to place
undue reliance on forward-looking statements contained herein, which speak only
as of the date hereof. We assume no responsibility to update any forward-looking
statements as a result of new information, future events, or otherwise except as
required by law. We urge readers to review carefully the risk factors described
in this Quarterly Report and in our annual report filed on Form 10-K filed with
the
documents at www.sec.gov.
Overview Our Business
We provide payment and check-out systems enabling shoppers on e-commerce sites
to pay using cryptocurrencies and direct bank transfers. Currently our payment
and check-out systems focus on B2C applications; we are currently developing B2B
capabilities that will among other things enable businesses to receive payments
on their invoices in cryptocurrencies. Our check-out systems are based upon
blockchain technology and are designed to reduce costs and increase speed,
security and ease of use. We believe that users of our systems enjoy a seamless
check-out experience compared to current online shopping solutions, and that
merchants will realize cost savings and other advantages over credit-card based
payment systems.
We are developing versions of our payment systems for use for in-store purchases
and other applications. Our check-out and payment systems 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 transaction information, metrics and reports. Our systems
also include 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.
15
Our merchant portal is updated instantly when a payment transaction is made on
the merchant’s website. The merchant is notified of the transaction and can see
the transaction details, including the customer that made the transaction, the
transaction amount and the items purchased. This information is available to the
merchant on its dashboard, where various metrics are tracked and displayed to
the merchant, including information about the various cryptocurrencies that are
used for payments to that merchant, the different currencies received by the
merchant as payment and transaction details such as the transaction hash. In
addition to various metrics, merchants are able to generate a variety of
reports, and are able to configure various options, including settlement
options, from their portal.
Customers of merchants that use the RocketFuel payment solution are able to
track their payments in their own online portal. They are also able to track
payments they made to all the merchants that are integrated with the RocketFuel
payment technology within a single consolidated user portal. They are currently
able to connect to their accounts on
plan to add connectivity to Binance, Kraken and other exchanges. Customers can
also pay from any cryptocurrency wallet, such as Metamask and Electrum and are
able to pay from their bank accounts as well. These customers are able to make
payment with any of these payment options with 1, 2, or 3 clicks from the
merchant checkout page. By default, these customers can choose from over 100
cryptocurrencies with which to pay.
Our payment user interface allows customers to easily onboard as well as to pay
for merchants’ products or services with a variety of cryptocurrencies or via
bank transfers. The user interface is displayed as a stand-alone popup that
allows the creation of new accounts as well as payment directly from crypto
exchanges, crypto wallets, and bank accounts, with no redirects to browser tabs
or pages. This can be integrated as a plugin on the merchant checkout page or as
a browser extension. The plugin, which we are currently developing, will come
integrated with popular ecommerce platforms including WooCommerce, Shopify,
Prestashop and others. The browser extension is integrated with popular browsers
including Chrome, Chromium, Opera, Firefox, and Edge. The payment interface is
designed for both web and mobile checkout experiences. Merchants are able to
integrate the RocketFuel payment interface to their checkout page with software
development kits (SDKs) that are available via the merchant portal. Application
programming interfaces (APIs) are also available to the merchant for deeper
integration into backend systems, ERP platforms, and other third-party
platforms.
Our solution is designed to be implemented on an eCommerce site’s check-out
page. The technology will also be used for different scenarios, including paying
for services, paying invoices, and other payment strategies. In addition, we
anticipate that a future version of our payment system will allow for
advertisements in which the entire checkout process is embedded to be placed on
third party websites where sales may be completely finalized. Thus, our
technology will enable eCommerce strategies that can include advertisements with
a fully integrated check-out process. We believe that this has never before been
accomplished on any eCommerce platform. We believe that such advertisements
could provide significant new sales channels to retailers that are simply not
possible with legacy check-out solutions. We also believe that transactions
costs on our system will be significantly less expensive than the cost of
credit-card transactions.
The RocketFuel check-out solution is designed to operate identically across
merchant channels with all participating merchants. eCommerce merchants are able
to encode their check-out protocol to support our technology and the merchants
will no longer have to administer complex check-out and payment gateways at
their eCommerce websites. At the same time, consumers are able to experience
enhanced data protection opportunities and significantly improved convenience.
With the RocketFuel check-out systems, consumers will no longer have to enter
credit card information or shipping details every time they want to buy online.
Payment and shipping information will be handled automatically. Using the
RocketFuel payment solution, credit card data will no longer be shared or
transmitted and exposed online. Rather, payments will be made via 100% secure
cryptocurrency conveyance or direct bank transfer on the blockchain.
Our corporate headquarters are located in
Critical Accounting Policies
Our significant accounting policies are described in Note 2 to the financial
statements as of
10-K. There were no changes to our significant accounting policies during the
three and six months ended
account policies described in our Annual Report on Form 10-K for the year ended
results of operations are based upon these financial statements, which have been
prepared in accordance with accounting principles generally accepted in
United States
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. We evaluate our estimates on an on-going basis. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. In the past, actual results
have not been materially different from our estimates. However, results may
differ from these estimates under different assumptions or conditions.
16 Results of Operations
For the Three Months Ended
Revenues
During the three months ended
software development contract, and a combined total of
fees and the recognition of amortization of deferred setup fee revenues in
connection with the execution of contracts with customers. During the three
months ended
recognition of deferred revenues.
For the three months ended
transaction costs, of which
contract,
processing fees, for a net negative margin of
hosting fees and processing fee structure will contribute positive gross margin
as the Company grows and these expenses remain static or grow ratably with
revenues.
We anticipate that future revenues will continue to be generated from (i) fees
charged under the software development contract; (ii) fees charged in connection
with conversion of crypto currencies to and from fiat currencies; (iii) fees
charged in connection with the implementation of our ecommerce checkout
solutions; and (iv) ongoing daily transactional fees derived as a negotiated
percentage of the transactional revenues earned by our merchant customers. In
to place in commercial operations by the end of 2022.
Research and Development Expenses
Research and development expenses for the three months ended
were
the prior year period. Research and development expenses increased due to
increases in software coding and development activities during the recent
quarter compared to the same period of the prior year.
General and Administrative Expenses
General and administrative expenses for the three months ended
2022
increase of
hiring expense and staffing costs for increased staffing of approximately
fees in designing and managing accounting systems to accommodate additional
revenue stream opportunities. These were largely offset by a decrease in legal
fees in connection with decreased work on business development strategies.
For the Six Months Ended
Revenues
During the six months ended
including
combined total of
amortization of deferred setup fee revenues in connection with the execution of
contracts with customers. During the six months ended
recorded revenues of
For the six months ended
transaction costs, of which
contract,
processing fees, for a net negative margin of
hosting fees and processing fee structure will contribute positive gross margin
as the Company grows and these expenses remain static or grow ratably with
revenues.
We anticipate that future revenues will continue to be generated from (i) fees
charged under the software development contract; (ii) fees charged in connection
with conversion of crypto currencies to and from fiat currencies; (iii) fees
charged in connection with the implementation of our ecommerce checkout
solutions; and (iv) ongoing daily transactional fees derived as a negotiated
percentage of the transactional revenues earned by our merchant customers. In
to place in commercial operations by the end of 2022.
Research and Development Expenses
Research and development expenses for the six months ended
were
the prior year period. Research and development expenses increased year over
year by approximately
development activities, but was more than offset in the current period as a
result of capitalization of software development costs, which practice was
implemented after the completion of the six-month period of the prior year.
General and Administrative Expenses
General and administrative expenses for the six months ended
were
increase of
expense and staffing costs for increased staffing of approximately
(ii)
period; and (iii) increases in travel, audit and other fees. These were
partially offset by a decrease in legal fees in connection with decreased work
on business development strategies.
17
Liquidity and Capital Resources
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.
On
of
of
of prepaid expenses and other current assets and
equipment, net of depreciation and amortization. The decrease in assets compared
to
result of increase business activities, somewhat offset by an increase in
accounts receivable as a result of a new software development contract and
increasing merchant contracts, an increase in prepaid expenses and other current
assets and the capitalization of software development costs. As of
2022
expenses,
increase in liabilities compared to
of accounts payables and accrued expenses, an increase in deferred revenues as a
result of a new software development contract in process, and an increase in
amounts due to a related party.
On
equity of
equity of
months ended
and cash used in operating activities to expand on the Company’s product
offerings and capabilities of its software. Stockholders’ equity decreased due
to the operating loss for the six-month period ended
offset for the
operating loss.
As of
compared to
During the six months ended
used in operating activities, which was composed primarily of (i) our net loss
of
in accounts receivable of
other current assets of
were partially offset by (i) stock-based compensation of
connection with stock options granted pursuant to the 2018 Stock Option Plan,
(ii) depreciation and amortization of
payable and accrued expenses of
related party of
During the six months ended
used in operating activities, which was composed of our net loss of
and offset by (i) stock-based compensation of
incremental increases and decreases to accounts receivable, prepaid expenses and
other current assets, accounts payable and accrued expenses, payables to related
parties and deferred revenues.
During the six months ended
purchase of property and equipment and the capitalization of software
development costs. There were no such investments during the six-month period
ended
During the six months ended
provided by financing activities, compared with
the issuance of common stock in connection with exercise of common stock
purchase warrants and issuance of convertible note payable during the six-month
period ended
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 six months ended
non-cash stock-based compensation of
settlement, and cash flows used in operating activities of
factors, among others, raise substantial doubt about the ability of the Company
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Commitments
We do not have any long-term commitments as of
18 Subsequent Events
On
the exercise price of all stock options to $0.2065 per share, including all
stock options issued and outstanding under our 2018 Stock Incentive Plan and a
warrant to purchase 265,982 shares issued to our chief executive officer,
M. Jensen
by one key manager was changed to straight vesting options in
other terms remained unchanged.
In
common stock in relation to a contract with a contractor.
On
effective as of
Off-Balance Sheet Arrangements
As of
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.
Impact of COVID-19 on Our Business
The COVID-19 pandemic has resulted, and may continue to result, in significant
economic disruption despite progress made in the development and distribution of
vaccines. It disrupted global travel, supply chains and the labor market and
adversely impacted global commercial activity. While the pandemic has largely
subsided, considerable uncertainty still surrounds COVID-19, the evolution of
its variants, its potential long-term economic effects, as well as the
effectiveness of any responses taken by government authorities and businesses
and of various efforts to inoculate the global population.
Significant uncertainty continues to exist concerning the impact of the COVID-19
pandemic on our customers’ and prospects’ business and operations in future
periods. Although our total revenues for the three and six months ended
revenues may be negatively impacted in future periods until the effects of the
pandemic have fully subsided and the current macroeconomic environment has
substantially recovered. Effects of the COVID-19 pandemic that may negatively
impact our business in future periods include, but are not limited to:
limitations on the ability of our customers to conduct their business, purchase
our products and services, and make timely payments? curtailed consumer
spending? deferred purchasing decisions? delayed consulting services
implementations? labor shortages and decreases in product licenses revenues
driven by channel partners. We will continue to actively monitor the nature and
extent of the impact to our business, operating results, and financial
condition.
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