NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
1.
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.
On
May 12, 2022, the Company incorporated a wholly owned subsidiary, RocketFuel (BVI) Ltd., in the British Virgin Islands. The subsidiary
is formed to be the issuer of digital tokens in connection with our planned loyalty program. On May 17, 2022, the Company incorporated
another wholly owned subsidiary, RocketFuel A/S, in Denmark. This subsidiary will engage in our B2B cross border settlement program.
The subsidiary received a Virtual Asset Services Provider (VASP) license in July 2022, allowing it to offer a variety of crypto-based
services in the EU. Both subsidiaries have not commenced commercial operations as of September 30, 2022.
2.
Summary of Significant Accounting Policies
Other than as discussed herein, our significant accounting policies are described in Note 2 to the audited financial
statements as of March 31, 2022 which are included in our Annual Report on Form 10-K as filed with the SEC on July 15, 2022.
Basis
of Presentation
The
accompanying unaudited 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
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 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 for the three and six months ended September 30, 2022 and cash flows for the six months ended September 30, 2022 may not
necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The March 31,
2022 balance sheet included herein was derived from the audited financial statements included in the Company’s Annual Report
on Form 10-K as of that date. These unaudited financial statements should be read in conjunction with our audited financial
statements as of March 31, 2022 as filed with the Securities and Exchange Commission (the “SEC”) on July 15,
2022.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries in accordance with
consolidation accounting guidance. The Company’s subsidiaries consist of RocketFuel Blockchain Company (RBC) (incorporated in Nevada),
RocketFuel A/S (incorporated in Denmark), and RocketFuel (BVI) (incorporated in the British Virgin Islands), the latter two of which
were incorporated during the quarter ended June 30, 2022. All intercompany balances and transactions have been eliminated in consolidation.
Use
of Accounting Estimates
The
preparation of these consolidated 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 reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting periods. 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.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations.
Cash
and Cash Equivalents
Cash
includes cash on hand. We consider all highly-liquid, temporary cash investments with a maturity date of three months or less to be cash
equivalents.
Restricted
Cash
In relation to the Company’s incorporation of a subsidiary in Denmark, a cash deposit of $55,956 was made
into an escrow account controlled by a legal firm. This cash is not available to fund immediate or general business use until it is released
from escrow into an operating cash account of the Denmark subsidiary. Until this release occurs, the cash is restricted in nature and
is separately disclosed on the Company’s consolidated balance sheet and consolidated statement of cash flows.
Software
Development Costs
The
Company accounts for software development costs in accordance with ASC 350-40. Research
and development costs are expensed as incurred, except for certain costs which are capitalized in connection with the development of
its internal-use software and website. These capitalized costs are primarily related to the application software that is hosted by the
Company and accessed by its customers through the Company’s website. In addition, the Company capitalizes certain general and administrative
costs related to the customization and development of our internal business systems. Costs incurred in the preliminary stages of development
are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental,
are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of
all substantial testing performed to ensure the product is ready for its intended use. The Company also capitalizes costs related to
specific upgrades and enhancements of internal-use software when it is probable that the expenditures will result in additional functionality.
Maintenance and training costs are expensed as incurred. Capitalized internal use software costs are recorded as part of property and
equipment and are amortized on a straight-line basis over an estimated useful life of two years.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated
useful lives of the assets, which is three years for the Company. Maintenance and repairs are charged to operations as incurred. Significant
improvements are capitalized and depreciated over the useful life of the assets. Gains or losses on disposition or retirement of property
and equipment are recognized in operating expenses.
The
Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of the related assets. The factors considered by management in performing this
assessment include current operating results, trends and prospects, the manner in which the property is used, the effects of obsolescence,
demand, competition, and other economic factors.
Revenue
Recognition
During
March 2021 we commenced commercial operations. Our revenues will 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 June 2022, we conducted tests of our cross-border B2B solution, which we expect to place in commercial operations
by the end of 2022.
Our
revenue recognition policy follows the guidance from Accounting Standards Codification (“ASC”) 606, “Revenue Recognition,”
and Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (Topic 606) which provides guidance on the recognition,
presentation, and disclosure of revenue in consolidated financial statements. We determine revenue recognition through the following
steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract;
(iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract
and (v) recognition of revenue when a performance obligation is satisfied. Collectability is assessed based on a number of factors, including
the creditworthiness of a client, the size and nature of a client’s website and transaction history. Amounts billed or collected
in excess of revenue recognized are included as deferred revenue. An example of this deferred revenue would be arrangements where clients
request or are required by us to pay in advance of delivery.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
Earnings
(Loss) Per Share
Earnings
(loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the
reporting period. Diluted earnings per share is computed similar to basic earnings per share, except the weighted average number of
common shares outstanding are increased to include additional shares from the assumed exercise of share options, if dilutive. The
dilutive effect, if any, of convertible instruments or warrants is calculated using the treasury stock method. There are no
outstanding dilutive instruments as the outstanding convertible instruments, stock options and warrants would be anti-dilutive if converted or
exercised for the three and six months ended September 30, 2022 and 2021.
Stock-based
Compensation
The
Company applies the provisions of ASC 718, Compensation - Stock Compensation, (“ASC 718”) which requires the measurement
and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statements
of operations.
For
stock options issued to employees and members of the Board of Directors (the “Board) for their services, the Company estimates
the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model
requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock
consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards
subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation
expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally
the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.
Pursuant
to Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to
Non-employee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services
in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process
for valuing employee stock options noted above.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
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.
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 September 30, 2022 were not
materially impacted by COVID-19, we believe our 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.
Recent
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.
3.
Going Concern
Our
consolidated 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, the date of
our inception, and commenced commercial operations in March 2021. During the three and six months ended September 30, 2022, we reported
a net loss of $1,242,471 and $2,191,199, respectively, which included as a component of general and administrative expenses in the statements
of operations a non-cash stock-based compensation charge of $298,058 and $589,440, respectively, and cash flows used in operating activities
during the six months ended September 30, 2022 of $1,818,113. These 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.
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. During the six months ended September 30, 2022, we raised $700,000
in proceeds, net of the issuance costs, through a private placement of common stock, warrants and tokens (see Note 7). We have used
and plan to continue using the net proceeds of the private placement and warrant exercise to recruit key management and operational
personnel, to retain software and blockchain developers and to develop our blockchain based check-out solution. Management believes
the funding from the private placement, the exercise of the common stock purchase warrant, and the growth strategy actions executed
and planned for execution could contribute to our ability to mitigate any substantial doubt as to our ability to continue as a going
concern.
4.
Property, Plant & Equipment
The
Company’s property, plant and equipment assets are comprised of the following:
Schedule
of Property Plant And Equipment
| | |
Useful
Life | |
September
30, 2022 | | |
March
31, 2022 | |
| Capitalized
software development costs | |
2
years | |
$ | 954,881 | | |
$ | 586,700 | |
| Computer
equipment | |
3
years | |
| 36,436 | | |
| 23,395 | |
| Less:
Accumulated depreciation and amortization | |
| |
| (348,397 | ) | |
| (149,919 | ) |
| Property
and equipment, net | |
| |
$ | 642,920 | | |
$ | 460,176 | |
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
Capitalized
software development costs represent the costs incurred during the development stage, when direct and incremental internal and external
costs, are capitalized until the software is substantially complete and ready for its intended use. The Company also capitalizes costs
related to specific upgrades and enhancements of internal-use software when it is probable that the expenditures will result in additional
functionality.
Depreciation
and amortization expenses amount to $111,396 and $198,477 for the three and six months ended September 30, 2022. No depreciation and amortization
expenses were recorded for the three and six months ended September 30, 2021.
5.
Related Party Transactions
During
the three and six months ended September 30, 2022 and 2021, our chief financial officer was affiliated with legal counsel who
provided us with general legal services (the “Affiliate”). We recorded legal fees paid to the Affiliate of $15,495 and $73,553
for the three and six months ended September 30, 2022, respectively. We recorded legal fees paid to the Affiliate of $75,009
and $99,170 for the three and six
months ended September 30, 2021, respectively. As of September 30, 2022 and March 31, 2022, we had $34,569
and $11,277,
respectively, payable to the Affiliate.
6.
Deferred Revenue
We
enter into certain contracts typically having initial one-year terms which define the scope of services to be provided. These contracts
can include agreed-upon setup fees during the initial one-year term, which setup fees are recorded as deferred revenue and amortized
ratably over the initial one-year term. Deferred revenue was $35,847 and $15,073 as of September 30, 2022 and March 31, 2022, respectively.
7.
Stockholders’ Equity
Private
placement:
On
September 19, 2022, the Company completed a private placement (the “Offering”) of 3,389,831
shares of its common stock, par value $0.001
per share (the “Common Stock”) and
warrants to purchase 1,694,915
shares of Common Stock (the “Warrants”).
In addition, in connection with the Offering, RocketFuel (BVI) Ltd., a wholly owned subsidiary of the Company, also entered into pre-launch
token sale agreements with four investors for the issuance of 3,389,831 cryptographic tokens (the “Tokens”) when such Tokens are
created. The Company plans to issue the Tokens in connection with a loyalty program it is developing, and these Tokens have not been
issued as of September 30, 2022. The combined purchase price for one share of Common Stock, an accompanying Warrant and a Token was $0.2065.
The Warrants are immediately exercisable at an exercise price equal to $0.2065
per share of Common Stock, subject to adjustments
as provided under the terms of the Warrants. The Warrants are exercisable for five
years from the initial exercise date.
On
September 19, 2022, in connection with the Offering, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with four investors. The Purchase Agreement sets forth the economic terms set forth above and contains customary representations and
warranties of the Company, as well as certain indemnification obligations of the Company and ongoing covenants for the Company. The Company
also entered into a registration rights agreement with the investors requiring the Company to file within 90 days of closing a registration
statement under the Securities Act of 1933 covering the Common Stock sold in the private placement and the shares issuable upon exercise
of the Warrants.
The
net proceeds to the Company from the Offering, excluding the proceeds, if any, from the exercise of the Warrants, are $700,000. In connection
with the Offering, the Company issued 338,983 shares of its common stock to one of the investors for a commission.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
Issuance of common stock:
The Company entered the marketing service agreement in July 2022 with a firm. In connection with this service agreement, the Company issued
333,943 restricted shares and recognized $17,491 of stock compensation expense for the three and six months ended September 30, 2022.
Total unrecognized stock compensation expense as of September 30, 2022 was $27,591.
Cancellations
of Stock:
On
October 6, 2021, we entered into a contract with one customer having a one-year term from the date of execution that provided for (1)
the payment of $10,000 in connection with the implementation of our blockchain technology and (2) the issuance of 10,000 shares of our
common stock valued at $1.00 per share in consideration of being an early adopter of our blockchain technology. In March 2022, in settlement
of a customer dispute, we repurchased the 10,000 shares of stock issued in October 2021 for $3,000. During the three months ended June
30, 2022, the 10,000 shares were cancelled.
On
June 7, 2022, we entered into a settlement agreement in the legal proceedings with Joseph Page, our
former director and chief technology officer, as defendant, whereunder Page surrendered 3,600,394
shares of the Company’s common stock. In connection with this settlement, we recognized a gain of $540,059,
calculated based on the Company’s share price of $0.15 per
share on the date of settlement of the legal proceedings. This gain was recorded in other income for the six months
ended September 30, 2022 in the accompanying consolidated statements of operations (see Note 9). Immediately after these shares were
transferred to the Company, the 3,600,394
shares were cancelled and we recorded cancellation of these treasury shares during the three months ended June 30,
2022.
As
of September 30, 2022, and March 31, 2022, we had 32,427,446 and 31,965,083 shares of our common stock outstanding, respectively.
Warrants:
As
of September 30, 2022 and March 31, 2022, the total outstanding warrants to purchase of the Company’s common stock were 12,360,897
and 10,665,982 with a weighted average exercise price of $0.75
and $0.84, respectively. There were 1,694,915
new warrants issued with an average exercise price of $0.21
during the three and six months ended September 30, 2022. There were no warrants exercised, cancelled or expired during the three
and six months ended September 30, 2022. As of September 30, 2022 and March 31, 2022, the weighted average remaining
contractual terms were 3.80 and 4.11
years, respectively.
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 September 30, 2022 and March 31, 2022, there were 1,908,114 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 six months ended September 30, 2022, we utilized the Black-Scholes
pricing model utilizing the following assumptions:
Schedule
of Share-based Payment Award, Stock Options, Valuation Assumptions
| Option
exercise price per share | |
| $0.21
- $0.30 | |
| Grant
date fair value per share | |
| $0.20
- $0.29 | |
| Range
of expected volatility | |
| 151%
- 163% |
| Expected
term of option in years | |
| 6.25 | |
| Range
of risk-free interest rate | |
| 2.5%
- 3.3% | |
| Dividend
yield | |
| - | |
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
Activity
under the 2018 Plan for all service-based stock options for the six months ended September 30, 2022 are as follows:
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 September
30, 2022 of $0.17 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 September 30, 2022. There were no performance-based stock options exercised under the 2018 Plan for
the three and six months ended September 30, 2022.
For the three months ended
September 30, 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 six months ended September 30, 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 September 30, 2022 and March 31, 2022, we had $260,869 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 six months ended September 30, 2022 and 2021.
At the date of this report, the
Company is unable to estimate the probability of success or dollar amount of rulings in the March 2, 2021 case against EGS, and as a result,
has not accrued any potential benefit to the Company’s balance sheet. Attorney fees related to these proceedings are expensed as
incurred.
In January 2022, the Company terminated its agreement with Scarola Schaffzib Zubatov PLLC (“SSZ”), which
the Company had retained to represent it in the litigation against EGS. The reason for the termination was that the Company believed that
SSZ had overcharged for legal services provided. Subsequent to the termination, SSZ sent the Company additional invoices, to which the
Company also objected. In August 2022 SZZ filed a lawsuit in the Supreme Court of the State of New York, County of New York, claiming
it is owed approximately $120,000 in legal fees. The Company disputes that this amount is owed, and contends that a portion of the legal
fees previously paid should be refunded. Discovery has commenced; a trial date has not been set.” The Company has accrued approximately $120,000 in accounts payable.
On November 11, 2022, our chief
technology officer tendered his resignation, effective as of December 11, 2022.