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, without limitation:





  ? Market acceptance of our products and services;
  ? Competition from existing products or new products that may emerge;
  ? The implementation of our business model and strategic plans for our business
    and our products;
  ? Estimates of our future revenue, expenses, capital requirements and our need
    for financing;
  ? Our financial performance;
  ? Current and future government regulations;
  ? Developments relating to our competitors; and
  ? Other risks and uncertainties, including those listed under the section titled
    "Risk Factors" in our annual report filed on Form 10-K filed with the
    Securities and Exchange Commission on July 15, 2022.

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 our annual report filed on Form 10-K filed with the Securities and Exchange Commission on July 15, 2022. You can read these documents at www.sec.gov.





Overview



Our Business

We provide payment and check-out systems enabling shoppers on e-commerce sites to pay using cryptocurrencies and direct bank transfers. Currently our payment and check-out systems focus on B2C applications; we are currently developing B2B capabilities that will among other things enable businesses to receive payments on their invoices in cryptocurrencies. Our check-out systems are based upon blockchain technology and are designed to reduce costs and increase speed, security and ease of use. We believe that users of our systems enjoy a seamless check-out experience compared to current online shopping solutions, and that merchants will realize cost savings and other advantages over credit-card based payment systems.

We are developing versions of our payment systems for use for in-store purchases and other applications. Our check-out and payment systems 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 transaction information, metrics and reports. Our systems also include 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.





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Our merchant portal is updated instantly when a payment transaction is made on the merchant's website. The merchant is notified of the transaction and can see the transaction details, including the customer that made the transaction, the transaction amount and the items purchased. This information is available to the merchant on its dashboard, where various metrics are tracked and displayed to the merchant, including information about the various cryptocurrencies that are used for payments to that merchant, the different currencies received by the merchant as payment and transaction details such as the transaction hash. In addition to various metrics, merchants are able to generate a variety of reports, and are able to configure various options, including settlement options, from their portal.

Customers of merchants that use the RocketFuel payment solution are able to track their payments in their own online portal. They are also able to track payments they made to all the merchants that are integrated with the RocketFuel payment technology within a single consolidated user portal. They are currently able to connect to their accounts on Coinbase and Gemini, and in the future we plan to add connectivity to Binance, Kraken and other exchanges. Customers can also pay from any cryptocurrency wallet, such as Metamask and Electrum and are able to pay from their bank accounts as well. These customers are able to make payment with any of these payment options with 1, 2, or 3 clicks from the merchant checkout page. By default, these customers can choose from over 100 cryptocurrencies with which to pay.

Our payment user interface allows customers to easily onboard as well as to pay for merchants' products or services with a variety of cryptocurrencies or via bank transfers. The user interface is displayed as a stand-alone popup that allows the creation of new accounts as well as payment directly from crypto exchanges, crypto wallets, and bank accounts, with no redirects to browser tabs or pages. This can be integrated as a plugin on the merchant checkout page or as a browser extension. The plugin, which we are currently developing, will come integrated with popular ecommerce platforms including WooCommerce, Shopify, Prestashop and others. The browser extension is integrated with popular browsers including Chrome, Chromium, Opera, Firefox, and Edge. The payment interface is designed for both web and mobile checkout experiences. Merchants are able to integrate the RocketFuel payment interface to their checkout page with software development kits (SDKs) that are available via the merchant portal. Application programming interfaces (APIs) are also available to the merchant for deeper integration into backend systems, ERP platforms, and other third-party platforms.

Our solution is designed to be implemented on an eCommerce site's check-out page. The technology will also be used for different scenarios, including paying for services, paying invoices, and other payment strategies. In addition, we anticipate that a future version of our payment system will allow for advertisements in which the entire checkout process is embedded to be placed on third party websites where sales may be completely finalized. Thus, our technology will enable eCommerce strategies that can include advertisements with a fully integrated check-out process. We believe that this has never before been accomplished on any eCommerce platform. We believe that such advertisements could provide significant new sales channels to retailers that are simply not possible with legacy check-out solutions. We also believe that transactions costs on our system will be significantly less expensive than the cost of credit-card transactions.

The RocketFuel check-out solution is designed to operate identically across merchant channels with all participating merchants. eCommerce merchants are able to encode their check-out protocol to support our technology and the merchants will no longer have to administer complex check-out and payment gateways at their eCommerce websites. At the same time, consumers are able to experience enhanced data protection opportunities and significantly improved convenience.

With the RocketFuel check-out systems, consumers will no longer have to enter credit card information or shipping details every time they want to buy online. Payment and shipping information will be handled automatically. Using the RocketFuel payment solution, credit card data will no longer be shared or transmitted and exposed online. Rather, payments will be made via 100% secure cryptocurrency conveyance or direct bank transfer on the blockchain.

Our corporate headquarters are located in San Francisco, California.





Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the financial statements as of March 31, 2022 which are included in our Annual Report on Form 10-K. There were no changes to our significant accounting policies during the three and nine months ended December 31, 2022 as compared to the significant account policies described in our Annual Report on Form 10-K for the year ended March 31, 2022. 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.





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Results of Operations

For the Three Months Ended December 31, 2022 vs December 31, 2021





Revenues

During the three months ended December 31, 2022, we recorded revenues of $42,408, including $28,837 as a result of revenue recognized under a new software development contract, and a combined total of $13,571 of transaction fees and the recognition of amortization of deferred setup fee revenues in connection with the execution of contracts with customers. During the three months ended December 31, 2021, we recorded revenues of $2,500 for similar recognition of deferred revenues.

For the three months ended December 31, 2022, we recognized $26,890 in transaction costs, of which $14,268 was related to the software development contract, $7,988 in hosting fees, $2,296 in exchange fees, and $2,338 merchant processing fees, for a net positive margin of $15,518. We anticipate that the hosting fees and processing fee structure will contribute positive gross margin as the Company grows and these expenses remain static or grow ratably with revenues.

We anticipate that future revenues will continue to 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.

Research and Development Expenses

Research and development expenses for the three months ended December 31, 2022 were $210,342, a decrease of $83,984 as compared with expenses of $294,326 for the prior year period. Research and development expenses increased due to increases in software coding and development activities during the recent quarter compared to the same period of the prior year.

General and Administrative Expenses

General and administrative expenses for the three months ended December 31, 2022 were $1,140,603 as compared with $879,355 for the prior year period, an increase of $261,248. The increase is primarily a result of an increase in hiring expense and staffing costs for increased staffing and finance professional fees in designing and managing accounting systems to accommodate additional revenue stream opportunities.

For the Nine Months Ended December 31, 2022 vs December 31, 2021





Revenues

During the nine months ended December 31, 2022, we recorded revenues of $92,355, including $60,000 resulting from the new software development contract, and a combined total of $32,355 in transaction fees and the recognition of amortization of deferred setup fee revenues in connection with the execution of contracts with customers. During the nine months ended December 31, 2021, we recorded revenues of $11,875 for similar recognition of deferred revenues.

For the nine months ended December 31, 2022, we recognized $102,492 in transaction costs, of which $53,802 was related to the software development contract, $23,525 in hosting fees, $12,582 in exchange fees, and $12,583 merchant processing fees, for a net negative margin of $(10,137). We anticipate that the hosting fees and processing fee structure will contribute positive gross margin as the Company grows and these expenses remain static or grow ratably with revenues.

We anticipate that future revenues will continue to 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.

Research and Development Expenses

Research and development expenses for the nine months ended December 31, 2022 were $797,006, a increase of $146,244 as compared with expenses of $650,762 for the prior year period. Research and development expenses increased year over year by approximately 22.5% due to increased staffing in software coding and development activities, but was more than offset in the current period as a result of capitalization of software development costs, which practice was implemented after the completion of the nine-month period of the prior year.

General and Administrative Expenses

General and administrative expenses for the nine months ended December 31, 2022 were $5,398,527 as compared with $2,676,525 for the prior year period, an increase of $2,722,022. The increase is a result of an increase in hiring expense and staffing costs for increased staffing of accounting and consultancy costs not experienced in the prior period; and increases in travel, audit and other fees. These were partially offset by a decrease in legal fees in connection with decreased work on business development strategies.





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Liquidity and Capital Resources

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. Any potential future sale of equity or debt securities may result in dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, or at all. If we are required to raise additional financing, but are unable to obtain such financing, we may be required to delay, reduce the scope of, or eliminate one or more aspects of our operations or business development activities.

On December 31, 2022, we had total assets of $1,272,816 and total liabilities of $751,882. This compares to total assets of $2,650,619 and total liabilities of $513,550 on March 31, 2022. As of December 31, 2022, our assets consisted of $392,956,of cash and restricted cash, $0 of accounts receivable, $111,593 of prepaid expenses and other current assets and $768,267 of property and equipment, net of depreciation and amortization. The decrease in assets compared to March 31, 2022 is due to the use of cash to pay for operating costs as a result of increase business activities, an increase in prepaid expenses and other current assets and the capitalization of software development costs. As of December 31, 2022, our liabilities consist of $723,982 of accounts payable and accrued expenses, $24,396 due to related parties and $3,504 of deferred revenue. The increase in liabilities compared to March 31, 2022 is largely due to increases of accounts payables and accrued expenses, and an increase in amounts due to a related party.

On December 31, 2022, we had working capital of $(247,333) and a stockholders' equity of $520,934 compared to working capital of $2,137,069 and stockholders' equity of $2,597,245 at March 31, 2022. Working capital decreased during the nine months ended December 31, 2022 largely due to cash paid for prepaid expenses, and cash used in operating activities to expand on the Company's product offerings and capabilities of its software. Stockholders' equity decreased due to the operating loss for the nine-month period ended December 31, 2022, with an offset for the $700,000 additional private placement funds to offset the operating loss.

As of December 31, 2022, we had cash and restricted cash of $392,956 as compared to $2,634,794 as of March 31, 2022.

During the nine months ended December 31, 2022, we had net cash of $483,865 used in operating activities, which was composed primarily of (i) our net loss of $3,527,170 (ii) a gain from a legal settlement of $540,059 (iii) increases in prepaid expenses and other current assets of $99,243. The cash flows used in operating activities were partially offset by (i) stock-based compensation of $1,287,048 primarily in connection with stock options granted pursuant to the 2018 Stock Option Plan, (ii) depreciation and amortization of $493,660, (iii) an increase in accounts payable and accrued expenses of $435,953, (iv) an increase in a payable to a related party of $36,680, and (v) an increase in deferred revenue of $1,004. During the nine months ended December 31, 2021, we had net cash of $483,865 used in operating activities, which was composed of our net loss of $3,527,170 and offset by (i) stock-based compensation of $1,287,048 and (ii) smaller incremental increases and decreases to prepaid expenses and other current assets, accounts payable and accrued expenses, payables to related parties and deferred revenues.

During the nine months ended December 31, 2022, we used cash of $651,832 for the purchase of property and equipment and the capitalization of software development costs. There were no such investments during the nine-month period ended December 31, 2021.

During the nine months ended December 31, 2022, we had $0 net cash provided by financing activities, compared with $808,750 net cash provided by the issuance of common stock in connection with exercise of common stock purchase warrants and issuance of convertible note payable during the nine-month period ended December 31, 2021.

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 nine months ended December 31, 2022, we reported a net loss of $3,527,170, which included non-cash stock-based compensation of $1,287,048 and $540,059 of gain from a legal settlement, and cash flows used in operating activities of $483,865. 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.





Commitments

We do not have any long-term commitments as of December 31, 2022.





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Subsequent Events

On January 13, 2023, we completed a private placement (the "Offering") of $150,000 principal amount of its secured convertible promissory notes (the "Notes"). The purchase price was $150,000. There were three purchasers, including Gert Funk, the Company's Chairman, and Peter M. Jensen, the Company's Chief Executive Officer and a member of its Board of Directors. The third purchaser was a private investor. Each investor purchased a Note for $50,000.

The Notes bear interest at 10% per annum and mature on July 13, 2023 (the "Maturity Date"). The Notes may be prepaid by the Company at any time. If the Company shall prepay the entire outstanding principal amount of a Note on or before April 13, 2023, then there is no prepayment premium. If the Company shall prepay the entire outstanding principal amount of a Note between April 14, 2023 and the Maturity Date, then it shall also pay accrued interest on such principal amount in an amount equal to 50% of such principal amount. If the Company shall repay the outstanding principal amount of a Note on or after the Maturity Date, then it shall also pay accrued interest on such principal amount in an amount equal to 100% of such principal amount.

The Notes are convertible into shares of the Company's Series A Preferred Stock ("Series A Preferred") at a conversion price equal to (a) the outstanding principal amount of, plus all accrued interest on, the Note divided by (b) $0.2065. The conversion price is subject to adjustment for certain stock splits, recapitalizations and other similar events. The Notes are secured by a security interest in all of the Company's assets.

Up to 1,000,000 shares of Series A Preferred were approved by the Board. The Series A Preferred has a 200% liquidation preference over the common stock and any other future series of preferred stock, payable in the event of a liquidation or merger of the Company. In such event, the holders of the Series A Preferred will be entitled to a priority distribution equal to 200% of the deemed issue price of $0.2065 per share, (i.e., $0.4130 per share). The Series A Preferred is convertible at the option of the stockholder into shares of common stock at a conversion price of $0.2065 per share, subject to adjustment for certain stock splits, recapitalizations and other similar events.

On January 13, 2023, in connection with the Offering, the Company entered into a Convertible Notes Subscription Agreement (the "Subscription Agreement") with three investors. The Subscription Agreement sets forth the economic terms set forth above.

The Company intends to use the $150,000 net proceeds of the Offering for general corporate purposes and to fund ongoing operations and expansion of its business.

On February 8, 2023 we entered into a settlement agreement with EGS, pursuant to which EGS agreed to pay us $750,000 in full settlement of the lawsuit. After payment of our legal fees, the net payment to us, which was received on February 14, 2023, was $525,000. As part of the settlement (i) we have agreed to dismiss the lawsuit with prejudice and (ii) each party has agreed to grant a mutual general release to the other party and its affiliates, related parties and agents.

On January 18, 2023, we borrowed $200,000 from Peter M. Jensen, our CEO, pursuant to a convertible promissory note. The proceeds were to be used to support a transaction that ultimately was not consummated. On February 15, 2023, we repaid the loan in full together with $1,535 representing accrued interest at a rate of 10% per annum.





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Off-Balance Sheet Arrangements

As of December 31, 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

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 nine months ended December 31, 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.

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