U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File No.
(Name of small business issuer in its charter) |
(State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
Issuer’s
telephone number (
Securities registered under Section 12(b) of the Exchange Act:
None | None | |
Title of each class | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ | Large Accelerated Filer | ☐ | Accelerated Filer | ||
☐ | Non-accelerated Filer | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
As of November 16, 2020, shares of the registrant’s Common Stock were outstanding.
ROCKETFUEL BLOCKCHAIN, INC.
TABLE OF CONTENTS
2 |
ROCKETFUEL BLOCKCHAIN, INC.
Balance Sheets
(Unaudited)
September 30, 2020 | March 31, 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Total current assets and total assets | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Total current liabilities and total liabilities | ||||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock; $par value; shares authorized; and shares issued and outstanding as of September 30, 2020 and March 31, 2020, respectively | - | - | ||||||
Common stock; $par value; shares authorized; and and shares issued and outstanding as of September 30, 2020 and March 31, 2020, respectively | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity (deficit) | ( | ) | ||||||
Total liabilities and stockholders’ equity (deficit) | $ | $ |
The accompanying notes are an integral part of these condensed financial statements.
3 |
ROCKETFUEL BLOCKCHAIN, INC.
Statements of Operations
(Unaudited)
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Six Months Ended September 30, 2020 | Six Months Ended September 30, 2019 | |||||||||||||
Revenues | $ | $ | $ | $ | ||||||||||||
Expenses: | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic and diluted |
The accompanying notes are an integral part of these condensed financial statements.
4 |
ROCKETFUEL BLOCKCHAIN, INC.
Statement of Stockholders’ Equity (Deficit)
For the Three and Six Month Periods Ended September 30, 2019 and 2020
(Unaudited)
Preferred Stock Outstanding | Common Stock Outstanding | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at March 31, 2019 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
Balance at June 30, 2019 | ( | ) | ( | ) | ||||||||||||||||||||||||
Issuance of common stock in connection with private placement | - | - | ||||||||||||||||||||||||||
Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Balance at March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Issuance of common stock in connection with private placement | - | - | ||||||||||||||||||||||||||
Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
Balance at June 30, 2020 | - | ( | ) | |||||||||||||||||||||||||
Issuance of common stock to consultant | - | - | ||||||||||||||||||||||||||
Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these condensed financial statements.
5 |
ROCKETFUEL BLOCKCHAIN, INC.
Statements of Cash Flows
(Unaudited)
Six Months Ended September 30, 2020 | Six Months Ended September 30, 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | |||
Adjustment to reconcile net loss to net cash flows provided by (used in) operating activities: | ||||||||
Stock-based compensation | ||||||||
Changes in assets and liabilities: | ||||||||
Accounts payable and accrued expenses | ||||||||
Net cash flows used in operating activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | ||||||||
Net cash flows provided by financing activities | ||||||||
Net change in cash | ||||||||
Cash at beginning of period | ||||||||
Cash at end of period | $ | $ | ||||||
Supplemental disclosure of non-cash flow information: | ||||||||
Common stock issued to consultant in lieu of cash | $ | $ | ||||||
Income taxes paid | $ | $ |
The accompanying notes are an integral part of these condensed financial statements.
6 |
ROCKETFUEL BLOCKCHAIN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
1. Business
Business
RocketFuel Blockchain Company, a Nevada corporation (“RocketFuel” or the “Company”) was formed on January 12, 2018 for the purpose of bringing highly efficient check-out systems to eCommerce. These new check-out means based upon blockchain technology are designed to increase speed, security, and ease of use. Using RocketFuel’s technology, merchants can enable new impulse buying schemes that may be unavailable in present day eCommerce sites.
On
June 27, 2018, we consummated a transaction as contemplated by that certain Contribution Agreement made and entered into as of
June 27, 2018 by and among B4MC Gold Mines, Inc. (“B4MC”), a Nevada corporation, and us. Pursuant to the Contribution
Agreement, B4MC issued
2. Interim Financial Statements and Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the six months ended September 30, 2020 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. These condensed financial statements should be read in conjunction with our audited financial statements as of March 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on June 26, 2020.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments, which are evaluated on an ongoing basis, and that affect the amounts reported in our unaudited condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments.
Our significant accounting policies are described in Note 3 to the audited financial statements as of March 31, 2020 which are included in our Annual Report on Form 10-K as filed with the SEC on June 26, 2020.
3. Going Concern
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 September 30, 2020, we reported
a net loss of $
We will require additional financing 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.
7 |
ROCKETFUEL BLOCKCHAIN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. We have instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its managers and minimize business disruption. We considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on our results of operations and financial position at September 30, 2020. The full extent of the future impacts of COVID-19 on our operations is uncertain. A prolonged outbreak could have a material adverse impact on our financial results and business operations, including the timing and ability of obtaining financing to fund the operations and to develop our business plan.
4. New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on our accounting and reporting. We believe that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on our accounting or reporting or that such impact will not be material to our financial position, results of operations and cash flows when implemented.
5. Income Taxes
We are required to file federal and state income tax returns in the United States. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. In consultation with our tax advisors, we base our tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various federal and state taxing authorities in the jurisdictions in which we file tax returns. As part of these reviews, a taxing authority may disagree with respect to the income tax positions taken by us (“uncertain tax positions”) and, therefore, may require us to pay additional taxes. As required under applicable accounting rules, we accrue an amount for our estimate of additional income tax liability, including interest and penalties, which we could incur as a result of the ultimate or effective resolution of the uncertain tax positions. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
We
had
The
U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law.
8 |
ROCKETFUEL BLOCKCHAIN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
6. Stockholders’ Equity (Deficit)
Prior
to August 8, 2018, we had
On September 3, 2019, a private investor purchased shares of our common stock at a price of $ per share.
On
January 9, 2020, we sold shares of our common stock to a private
investor, resulting in cash proceeds of $
On
April 29, 2020, we entered into a subscription agreement with a private investor for the purchase of shares of our common stock, at a purchase
price of $per share, resulting in cash proceeds
of $
On
August 24, 2020, we issued
All of these transactions were exempt from registration under the Securities Act of 1933 pursuant to Regulation S thereunder.
As of September 30, 2020, and March 31, 2020, we had shares and shares of our common stock issued and outstanding, respectively.
7. Employment Agreements
On
September 15, 2020, we appointed Mr. Peter M. Jensen as our Chief Executive Officer and a member of our board of directors. Mr.
Jensen’s employment agreement provides for a base salary of $
9 |
ROCKETFUEL BLOCKCHAIN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
On
October 2, 2020, we appointed Mr. Rohan Hall as our Chief Technology Officer. Mr. Hall’s employment agreement with us is
retroactive to September 14, 2020. Mr. Hall’s employment agreement provides for a base salary of $
8. Stock-Based Compensation
Stock Option Plan
On August 8, 2018, the Board and stockholders holding a majority of our voting power approved the RocketFuel Blockchain, Inc., 2018 Stock Incentive Plan (the “2018 Plan”), which plan enables us to make awards that qualify as performance-based compensation. Under the terms of the 2018 Plan, the options will (i) be incentive stock options, (ii) have an exercise price equal to the fair market value per share of our common stock on the date of grant as determined by an independent valuation by a qualified appraiser, (iii) have a term of years, (iv) vest and become exercisable pursuant to the terms set forth in the grantees stock option agreement, (v) be subject to the exercise, forfeiture and termination provisions set forth in the 2018 Plan and (vi) otherwise be evidenced by and subject to the terms of our standard form of stock option agreement. We have reserved shares of our common stock for issuance in connection with awards under the plan. On September 15, 2020, our board of directors amended the 2018 Plan to increase the number of shares available for grant from shares to shares. The board also directed that the amendment be submitted to our stockholders for approval.
Stock-Based Compensation
Pursuant to the 2018 Plan, we granted service-based options to (i) Mr. Peter M. Jensen, our chief executive officer, in the amount of shares of our common stock on September 15, 2020; and (ii) Mr. Rohan Hall, our chief technical officer, in the amount of shares of our common stock on September 14, 2020. These service-based options vest monthly over 48 months beginning on the first grant date monthly anniversary. Additionally, we granted performance-based options to Mr. Hall in the aggregated amount of shares of our common stock. No milestones have been met pursuant to the terms of the performance-based options; accordingly, no options have vested.
Service-Based Options | ||||
Total shares underlying options granted | ||||
Option exercise price per share | $ | |||
Grant date fair market value per share | $ | |||
Expected term of option in years | ||||
Expected volatility | ||||
Expected dividend rate | ||||
Risk free interest rate | ||||
Calculated option value | $ |
For the three and six months ended September 30, 2020, we recorded $ in compensation expense in connection with the grant of these options. As of September 30, 2020, there were an aggregate of options, inclusive of service- and performance-based options, outstanding under the 2018 Plan.
10 |
ROCKETFUEL BLOCKCHAIN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
9. Legal Proceedings
Other than as set forth below, we are not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.
On
October 8, 2020, we filed a lawsuit in the U.S. District Court for the Central District of California against Joseph Page, our
former director and chief technology officer. The causes of action include securities fraud under Federal and California law;
fraud, breach of fiduciary duty, negligent misrepresentation and unjust enrichment under California law; and violation of California
Business and Professions Code §17200 et seq. We are seeking injunctive and declaratory relief as well as damages of
at least $
10. Subsequent Events
We evaluated all events or transactions that occurred after the balance sheet date through the date when we issued these financial statements, and we did not have any material recognizable subsequent events during this period.
11 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
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 those discussed under “Risk Factors,” “Management’s Discussion and Analysis” and “Business.” 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 the other documents that we file with the Securities and Exchange Commission. You can read these documents at www.sec.gov.
Overview
RocketFuel was formed on January 12, 2018 for the purpose of bringing highly efficient check-out systems to eCommerce. We are currently developing innovative check-out systems based upon blockchain technology and designed to increase speed, security, and ease of use. We believe that users of RocketFuel’s systems will enjoy a seamless check-out experience compared to current online shopping solutions. We believe that with RocketFuel’s technology, online merchants will be able to implement new impulse buying schemes that are unavailable in present day eCommerce sites.
On June 27, 2018, we consummated the Business Combination and related transactions contemplated by the Contribution Agreement. Pursuant to the Contribution Agreement, B4MC issued 17,001,312 shares of its $0.001 par value common stock to the Sellers in exchange for a 100% ownership interest in us, resulting in 22,668,416 post-merger shares of B4MC common stock issued and outstanding.
On June 29, 2018, we filed a Current Report on Form 8-K with the Securities and Exchange Commission which fully describes the transaction set forth herein.
Critical Accounting Policies
Our significant accounting policies are described in Note 3 to the financial statements as of March 31, 2020 which are included in our Annual Report on Form 10-K. Our discussion and analysis of our financial condition and results of operations are based upon these financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make 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.
12 |
Results of Operations
For the Three Months Ended September 30, 2020 vs September 30, 2019
Revenues
We had no revenue generating operations during the three months ended September 30, 2020 and 2019.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2020 were $230,564 as compared with $45,385 for the prior year period, an increase of $185,179 or 408.0%. The increase is primarily a result of increased consulting and professional fees including $162,000 of stock-based compensation for the issuance of 150,000 shares of our common stock to a consultant in lieu of cash.
For the Six Months Ended September 30, 2020 vs September 30, 2019
Revenues
We had no revenue generating operations during the six months ended September 30, 2020 and 2019.
General and Administrative Expenses
General and administrative expenses for the six months ended September 30, 2020 were $327,924 as compared with $69,088 for the prior year period, an increase of $258,836 or 374.6%. The increase is primarily a result of increased consulting and professional fees including $162,000 of stock-based compensation for the issuance of 150,000 shares of our common stock to a consultant in lieu of cash.
Liquidity and Capital Resources
As of September 30, 2020, we had cash of $326,075 as compared to $7,838 as of March 31, 2020.
During the six months ended September 30, 2020, we had net cash of $160,513 used in operating activities, which was composed primarily of our net loss of $327,924 and offset by stock-based compensation of $162,000 in connection with the issuance of 150,000 shares of our common stock to a consultant in lieu of cash for services.
During the six months ended September 30, 2020, we had net cash of $478,750 provided by financing activities as a result of the issuance 478,750 shares of our common stock to a private investor.
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. We incorporated our business on January 12, 2018. During the six months ended September 30, 2020, we reported a net loss of $327,924 and negative cash flows of $160,513 from operating activities. As a result, management believes that there is substantial doubt about our ability to continue as a going concern.
Prior to June 27, 2018, management was engaged in efforts to identify and negotiate a transaction with a public company quoted on the OTC Markets having shell status where a contemplated transaction would be treated as a reverse merger. On June 27, 2018, we consummated a transaction as contemplated by that certain Contribution Agreement made and entered into as of June 27, 2018 by and among B4MC Gold Mines, Inc. (“B4MC”), a Nevada corporation, and us. Pursuant to the Contribution Agreement, B4MC issued 17,001,312 shares of its $0.001 par value common stock to us in exchange for a 100% ownership interest in us resulting in 22,668,416 post-merger shares of B4MC common stock issued and outstanding. We financed our efforts to consummate this reverse merger transaction through the issuance of equity securities. In October 2018, we issued (i) 12,500 shares of our common stock, having a fair market value of $4.00 per share, or $50,000, in consideration for business advisory services, including research distribution services; and (ii) 1,250 shares of our common stock to an investor (the “Investor”) at $4.00 per share in consideration for $5,000 in cash. In November 2018, we issued an additional 6,250 shares of our common stock to the Investor at $4.00 per share in consideration for $25,000 in cash. 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.
13 |
Commitments
We do not have any long-term commitments at September 30, 2020.
Off-Balance Sheet Arrangements
At September 30, 2020, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of September 30, 2020 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that, as of September 30, 2020, our internal control over financial reporting was not effective due to (i) insufficient segregation of duties in the finance and accounting functions due to limited personnel; and (ii) inadequate corporate governance policies. In the future, subject to working capital limitations, we intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
14 |
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
Other than as set forth below, we are not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.
On October 8, 2020, we filed a lawsuit in the U.S. District Court for the Central District of California against Joseph Page, our former director and chief technology officer. The causes of action include securities fraud under Federal and California law; fraud, breach of fiduciary duty, negligent misrepresentation and unjust enrichment under California law; and violation of California Business and Professions Code §17200 et seq. We are seeking injunctive and declaratory relief as well as damages of at least $5.1 million. On May 29, 2019, Mr. Page resigned from our board. Subsequent to his resignation, we retained independent patent counsel to review our patent applications. In connection with this review, we discovered certain deficiencies in some of the applications and in their assignments to us. We determined that all of the applications had been abandoned. Based on this review, we decided to refile three of our applications with the U.S. Patent and Trademark Office, which we did in May 2020. It is our belief that the three newly filed patent applications cover and/or disclose the same subject matter as we disclosed in the five original patent applications. In this case, our rights may be subject to any intervening patent applications made after the dates of the original applications. In the lawsuit, we are alleging that Mr. Page was aware of the abandonments when he assigned the patents to RocketFuel Blockchain Company (“RBC”), a private corporation that he controlled, and that he failed to disclose to us the abandonments when we acquired RBC in exchange for shares of our common stock.
Item 1A. | Risk Factors |
There have not been any material changes from the risk factors previously disclosed under Item 2.01 – RISK FACTORS which are included in our Current Report on Form 8-K which was filed with the Securities and Exchange Commission on June 29, 2018.
Item 2. | Unregistered Sales of Equity Securities |
On April 29, 2020, we entered into a subscription agreement with a private investor for the purchase of 478,750 shares of our common stock, at a purchase price of $1.00 per share, resulting in cash proceeds of $478,750. This transaction was a part of a private placement of 500,000 shares of common stock. We paid a placement fee of $50,000 in connection with these transactions. On May 1, 2020, we issued a warrant to purchase 1,500,000 shares of common stock at $1.00 per share. The warrant expires on April 30, 2021. We also agreed that upon the full and timely exercise of this warrant, it would issue a second warrant for an additional 1,500,000 shares of common stock at a purchase price of $1.50 per share; this second warrant will have a term of 12 months from the date of issue.
On August 24, 2020, we issued 150,000 shares of our common stock to a consultant in lieu of cash for services. The common stock was valued at $162,000, or $1.08 per share, based on an independent appraisal.
These transactions were exempt from registration under the Securities Act of 1933 pursuant to Regulation S thereunder.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
15 |
Item 5. | Other Information |
None.
Item 6. | Exhibits |
Exhibit No. |
Description | |
31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of the Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxomony Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RocketFuel Blockchain, Inc. | ||
By: | /s/ Peter M. Jensen | |
Peter M. Jensen | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
By: | /s/ Bennett J. Yankowitz | |
Bennett J. Yankowitz | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
Dated: November 16, 2020 |
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