The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
NOTES
TO FINANCIAL STATEMENTS
JUNE
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 June 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 months ended June 30, 2022 and cash flows for the three months ended June 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.
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.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
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 in connection with the implementation
of our blockchain technology; and (ii) ongoing daily transactional fees derived as a negotiated percentage of the transactional revenues
earned by our merchant customers.
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.
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 months ended June 30, 2022 and 2021.
The
following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these
potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than the
average market price of the common shares:
Schedule of Anti-dilutive Securities Excluded from Diluted Per Share Calculation
| | |
June 30, 2022 | | |
June 30, 2021 | |
| Stock options – vested and exercisable | |
| 2,735,290 | | |
| 1,388,327 | |
| Warrants | |
| 10,665,982 | | |
| 2,515,982 | |
| Total potential dilution | |
| 13,401,272 | | |
| 3,904,309 | |
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
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.
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 has already disrupted global travel, supply chains and the labor market and adversely impacted global
commercial activity. 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. The travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other
efforts to curb the spread of COVID-19 have significantly disrupted business activity globally and there is uncertainty as to when these
disruptions will fully subside.
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 months ended June 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. The uncertainty related to COVID-19 may also result in increased volatility
in the financial projections we use as the basis for estimates and assumptions used in our financial statements. We have adapted our
operations to meet the challenges of this uncertain and rapidly evolving situation, including establishing remote working arrangements
for our employees, limiting non-essential business travel, and cancelling or shifting our customer, employee, and industry events to
a virtual-only format for the foreseeable future. We have not received any government assistance from various relief packages available
in countries where we operate.
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 months ended June 30, 2022 and 2021, we reported a
net loss of $948,728 and $1,204,591, respectively, which included as a component of general and administrative expenses in the statements
of operations a non-cash stock-based compensation charge of $291,382 and $316,896, respectively, and cash flows used in operating activities
during the three months ended June 30, 2022 and 2021 of $974,067 and $876,340, respectively. 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 year ended March 31, 2022, we raised $882,500
through the exercise by certain investors of common stock purchase warrants and completed a public offering of 6,666,667 shares of Common
Stock and accompanying warrants to purchase 6,666,667 shares of Common Stock and raised approximately $4.4 million in proceeds,
net of the issuance costs. We have used and plan to continue
using the net proceeds of the public offering 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
public offering, 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 | |
June 30, 2022 | | |
March 31, 2022 | |
| Capitalized software development costs | |
2 years | |
$ | 749,188 | | |
$ | 586,700 | |
| Computer equipment | |
3 years | |
| 28,788 | | |
| 23,395 | |
| Less: Accumulated depreciation and amortization | |
| |
| (237,000 | ) | |
| (149,919 | ) |
| Property and equipment, net | |
| |
$ | 540,976 | | |
$ | 460,176 | |
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
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 $87,081 and $nil for the three months ended June 30, 2022 and 2021, respectively.
5.
Related Party Transactions
During
the three months ended June 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 $58,058 and $24,160 for the three months
ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and March 31, 2022, we had $47,679 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. During the three months ended June 30, 2022 and 2021, we recorded revenues of
$8,132 and $2,500, respectively. Deferred revenue was $11,292
and $15,073 as of June 30,
2022 and March 31, 2022, respectively.
7.
Stockholders’ Equity
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 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 three months ended June 30, 2022 in the accompanying consolidated statements of operations. Immediately after
these shares were transferred to the Company, the 3,600,394 shares were cancelled and we recorded cancellation of these treasury shares
for the three months ended June 30, 2022.
As
of June 30, 2022, and March 31, 2022, we had 28,364,689 shares and 31,965,083 shares of our common stock outstanding, respectively.
Warrants:
As
of June 30, 2022, the total outstanding warrants to purchase of the Company’s common stock were 10,665,982
with a weighted average exercise price of $0.84.
There were no new warrants issued during the three months ended June 30, 2022. As of June 30, 2022 and March 31, 2022, the weighted average
remaining contractual terms were 3.86 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 June 30, 2022 and March 31, 2022, there were 2,176,198 and 393,987 shares, respectively,
of our common stock available for grant pursuant to the 2018 Plan.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Service-Based
Stock Option Grants
In
determining the fair value of the service-based options during the three months ended June 30, 2022, we utilized the Black-Scholes pricing
model utilizing the following assumptions:
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
June 30, 2022 of $0.16 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 June 30, 2022. There were no performance-based stock options exercised under the 2018 Plan
for the three months ended June 30, 2022 and 2021.
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. On January 13, 2021, the case was transferred to the U.S. District Court for the District of Nevada,
Las Vegas Division. 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.
On
May 29, 2019, Mr. Page resigned from our board. After 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 were 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 the Company acquired RBC in exchange for shares of the Company’s Common
Stock. Mr. Page filed an answer denying the Company’s claims and asserted cross- and counterclaims against the Company and several
of the Company’s shareholders alleging breach of contract and fraud. In September 2021, Mr. Page voluntarily dismissed all of the
counterclaims against the shareholders.
ROCKETFUEL
BLOCKCHAIN, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
June 7, 2022, RBC entered into a settlement agreement in the legal proceedings between the Company as plaintiff, and Joseph Page as defendant,
whereunder Page surrendered 3,600,394
shares of the Company’s
common stock, and kept 1,500,000
shares. Mr. Page represents
and warrants that he has not filed or assisted anyone else in filing any patent applications that would preempt or infringe upon the
Company’s patent applications. Plaintiff and defendant have each released their claims against each other and covenanted not to
sue the other, including related parties and stakeholders, with the exclusion of current or future claims against EGS. The parties agreed
to a Stipulated Dismissal of the Action with Prejudice filed with the court. 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 three months ended June 30, 2022 in the accompanying consolidated statements of operations
(see Note 7).
On
March 2, 2021, we filed a lawsuit in the U.S. District Court for the Southern District of New York against Ellenoff Grossman & Schole
LLP (“EGS”) for negligence and legal malpractice, breach of contract and breach of fiduciary duty. EGS had represented RBC
prior to the Business Combination and represented us after the closing of the Business Combination through August 2019. In the litigation
against Mr. Page, he has alleged that he provided information to an EGS partner that the patent applications had been abandoned and that
EGS failed to inform RBC and us of the fact. We are seeking damages and the return of legal fees previously paid.
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.
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, other than the matters discussed below, we did not have any other material recognizable subsequent events during this period.
We
entered into a marketing service agreement on July 20, 2022 with a certain marketing firm whereby the marketing firm provides various
marketing services for us. In connection with this agreement, we issued 333,943 shares in consideration for the performance of the services
by this firm.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations