Stock-Based Compensation

9 Months Ended

Dec. 31, 2021

Compensation Related Costs [Abstract]

Stock-Based Compensation

10. 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 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 10 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 initially reserved 2,000,000 shares of our common stock for issuance in connection with awards under the plan. On September 15, 2020 and March 18, 2021, our board of directors unanimously resolved to amend the 2018 Plan to increase the number of shares of our common stock available for grant to 4,000,000 shares and 6,000,000 shares, respectively. As of December 31, 2021 and March 31, 2021 there were 399,405 shares and 502,230 shares, respectively, of our common stock available for grant pursuant to the 2018 Plan. As of the date of the filing of this Quarterly Report on Form 10-Q, we had not yet solicited votes from our stockholders to approve the increase in the number of shares of our common stock available for grant pursuant to the 2018 Plan.

Service-Based Stock Option Grants

From August 8, 2018 through December 31, 2021, we granted service-based options to employees and consultants, pursuant to the 2018 Plan, exercisable into a total of 5,000,595 shares of our common stock. In determining the fair value of the service-based options granted during the period from August 8, 2018 through December 31, 2021, we utilized the Black-Scholes pricing model utilizing the following assumptions:

	Service-Based Options
Option exercise price per share		$1.00 - $2.75
Grant date fair market value per share		$1.00 - $2.75
Expected term of option in years		6.25
Expected volatility		40.3% to 220.5	%
Expected dividend rate		0.00	%
Risk free interest rate		0.42% to 2.83	%

During the three months ended December 31, 2021, we granted no service-based options pursuant to the 2018 Plan. During the nine months ended December 31, 2021, we granted service-based options pursuant to the 2018 Plan to (i) one employee exercisable into 2,825 shares of our common stock at exercise prices from $1.00 per share to $2.75 per share; and (ii) one consultant exercisable into 100,000 shares of our common stock at an exercise price of $1.08 per share. In determining the fair value of the service-based options granted during the three and nine months ended December 31, 2021, we utilized the Black-Scholes pricing model utilizing the following assumptions:

	Service-Based Options
Option exercise price per share		$1.00 - $2.75
Grant date fair market value per share		$1.00 - $2.75
Expected term of option in years		6.25
Expected volatility		218.1% to 220.5	%
Expected dividend rate		0.00	%
Risk free interest rate		0.71% to 1.02	%

ROCKETFUEL BLOCKCHAIN, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Activity under the 2018 Plan for all service-based stock options for the nine months ended December 31, 2021 are as follows:

	Options Outstanding		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
Options outstanding at April 1, 2021:		4,897,770	$	1.08		9.63	$	1,175,417
Granted		102,825		1.10		9.59		-
Exercised		-
Cancelled or forfeited		-
Options outstanding as of December 31, 2021		5,000,595	$	1.08		7.73	$	nil
Options exercisable as of December 31, 2021		1,830,448	$	1.08		7.73	$	nil
Options vested or expected to vest as of December 31, 2021		1,830,448	$	1.08		7.73	$	nil

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on December 31, 2021 of $0.24 and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. There were no service-based stock options exercised under the 2018 Plan for the three and nine months ended December 31, 2021 and 2020.

For the three and nine months ended December 31, 2021, we recorded stock-based compensation expense for service-based stock options pursuant to the 2018 Plan in the amount of $296,167 and $882,105, respectively. For the three and nine months ended December 31, 2020, we recorded stock-based compensation expense for service-based stock options pursuant to the 2018 Plan in the amount of $164,217 and $164,217, respectively. As of December 31, 2021, we had $3,326,852 of unrecognized stock-based compensation cost related to service-based stock options.

Performance-Based Stock Option Grants

We also granted performance-based options pursuant to the 2018 Plan to Rohan Hall, our chief technology officer, which are exercisable into 600,000 shares of our common stock subject to certain designated milestones. On March 18, 2021, our Board of Directors determined that Mr. Hall earned all of the performance-based options effective February 1, 2021. The Board of Directors also entered into a resolution whereby 75,000 shares of our common stock underlying the performance-based options would vest immediately and 525,000 shares of our common stock underlying the performance-based option would vest ratably over a 48-month period with the first vesting date being February 1, 2021.

In determining the fair value of the performance-based options granted to Mr. Hall on September 14, 2020 and earned effective February 1, 2021, we utilized the Black-Scholes pricing model utilizing the following assumptions:

	Performance -Based Options
Option exercise price per share	$	1.08
Grant date fair market value per share	$	1.08
Expected term of option in years		6.25
Expected volatility		240.1	%
Expected dividend rate		0.00	%
Risk free interest rate		0.54	%

ROCKETFUEL BLOCKCHAIN, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Activity under the 2018 Plan for all performance-based stock options for the nine months ended December 31, 2021 is as follows:

	Options Outstanding		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
Balance at April 1, 2021		600,000	$	1.08		9.83	$	144,000
Granted		-
Exercised		-
Cancelled or forfeited		-
Options outstanding as of December 31, 2021		600,000	$	1.08		8.71	$	nil
Options exercisable as of December 31, 2021		184,380	$	1.08		8.71	$	nil
Options vested or expected to vest as of December 31, 2021		184,380	$	1.08		8.71	$	nil

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on December 31, 2021 of $0.24 and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. There were no performance-based stock options exercised under the 2018 Plan for the three and nine months ended December 31, 2021 and 2020.

For the three and nine months ended December 31, 2021, we recorded performance-based compensation expense for performance-based stock options pursuant to the 2018 Plan in the amount of $25,404 and $76,212, respectively. For the three and nine months ended December 31, 2020, we recorded no performance-based compensation expense for performance-based stock options pursuant to the 2018 Plan. As of December 31, 2021, we had $321,763 of unrecognized stock-based compensation cost related to performance-based stock options.