Stock-Based Compensation

9 Months Ended

Dec. 31, 2022

Equity [Abstract]

Stock-Based Compensation

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 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. On May 10, 2022, the Board has approved a plan to increase the number of shares to 8,000,000 for 2018 plan. As of December 31, 2022 and March 31, 2022, there were 918,987 and 393,987 shares, respectively, of our common stock available for grant pursuant to the 2018 Plan.

Service-Based Stock Option Grants

In determining the fair value of the service-based options during the nine months ended December 31, 2022, we utilized the Black-Scholes pricing model utilizing the following assumptions:

Option exercise price per share	$0.10 - $0.30
Grant date fair value per share	$0.14 - $0.21
Range of expected volatility	151% - 179	%
Expected term of option in years	6.25
Range of risk-free interest rate	2.5 - 4.7	%
Dividend yield	-

ROCKETFUEL BLOCKCHAIN, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2022

(UNAUDITED)

Activity under the 2018 Plan for all service-based stock options for the nine months ended December 31, 2022 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, 2022:		5,766,886	$	0.21		8.00	$	-
Granted		575,000	$	0.17		5.61		6,780
Exercised		-	$	-		-		-
Cancelled or forfeited		489,127	$	0.21		5.61		-
Options outstanding as of December 31, 2022		5,852,758	$	0.20		5.61	$	28,099
Options vested and exercisable as of December 31, 2022		2,784,623		0.21			$	5,899

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, 2022 of $0.1455 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, 2022. There were no service-based stock options exercised under the 2018 Plan for the three and nine months ended December 31, 2022.

For the three months ended December 31, 2022 and 2021, we recorded stock-based compensation expense for service-based stock options pursuant to the 2018 Plan in the amount of $253,188 and $294,446, respectively. For the nine months ended December 31, 2022 and 2021, we recorded stock-based compensation expense for service-based stock options pursuant to the 2018 Plan in the amount of $770,842 and $585,939, respectively. As of December 31, 2022 and March 31, 2022, we had $2,017,192 and $3,336,948 of unrecognized stock-based compensation cost related to service-based stock options, respectively.

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	%

Activity under the 2018 Plan for all performance-based stock options for the nine months ended December 31, 2022 is 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, 2022:		600,000	$	0.33		8.46	$	-
Granted		-		-
Exercised		-		-
Cancelled or forfeited		-		-
Options outstanding as of December 31, 2022		600,000	$	0.33		7.96	$	-
Options vested and exercisable as of December 31, 2022		282,822	$	0.33			$	-

ROCKETFUEL BLOCKCHAIN, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2022

(UNAUDITED)

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, 2022 of $0.1455 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, 2022. There were no performance-based stock options exercised under the 2018 Plan for the three and nine months ended December 31, 2022.

For the three months ended December 31, 2022 and 2021, we recorded stock-based compensation expense for performance-based stock options pursuant to the 2018 Plan in the amount of $27,148 and $25,404, respectively. For the nine months ended December 31, 2022 and 2021, we recorded stock-based compensation expense for performance-based stock options pursuant to the 2018 Plan in the amount of $54,295 and $50,808, respectively. As of December 31, 2022 and March 31, 2022, we had $233,721 and $315,164 of unrecognized stock-based compensation cost related to performance-based stock options, respectively. There were no performance-based stock options exercised under the 2018 Plan for the three and nine months ended December 31, 2022 and 2021.