UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
|
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices)
(ZIP Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB Venture Stage Marketplace |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were shares of common stock outstanding as of November 2, 2022.
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, growth, product development, sales, business strategy, statements related to any further expected effects on our business from the coronavirus (“COVID-19”) pandemic, inflation, the Russia-Ukraine conflict, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the continued duration and scope of the COVID-19 pandemic and any impact on the demand for our products; our ability to obtain needed raw materials and components from our suppliers; additional actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that we could take to reduce operating costs; our inability to sustain profitable sales growth, or reduce our costs to maintain competitive prices for our products; circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives; and those factors detailed by us in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A, Risk Factors, in our Annual Report on Form 1-K for the year ended December 31, 2021. In light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.
| ii |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deposits with credit card processor | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Operating lease right of use asset, net | ||||||||
| Acquired software and technology, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Government assistance notes payable, current portion | ||||||||
| Operating lease liability, current portion | ||||||||
| Convertible debt assumed upon reverse merger, including accrued interest of $ | ||||||||
| Acquisition notes payable, current portion, including accrued interest of $ | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Acquisition notes payable, including accrued interest of $ | ||||||||
| Government assistance notes payable, including accrued interest of $ | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value, shares authorized; issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable, shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficiency | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
RDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing costs | ( | ) | ||||||||||||||
| Gain on legal settlement | ||||||||||||||||
| Gain on vendor settlement | ||||||||||||||||
| Gain from forgiveness of government assistance notes payable | ||||||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
RDE, INC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
For the Three Months Ended September 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock to directors for services | ||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock to directors for services | - | - | ||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for vendor balance | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for GameIQ acquisition | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| F-3 |
For the Three Months Ended September 30, 2021
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Issuance of common stock for service | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2021
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for service | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for note payable extension | ||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock, net of offering costs | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
RDE, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Nine Months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Amortization of intangible assets | ||||||||
| Financing costs | ||||||||
| Fair value of vested options | ||||||||
| Fair value of vested restricted stock units to employees | ||||||||
| Fair value of vested restricted stock units to directors | ||||||||
| Fair value of common stock issued for services | ||||||||
| Gain in vendor settlement | ( | ) | ||||||
| Gain on legal settlement | ( | ) | ||||||
| Gain on forgiveness of government assistance note payable | ( | ) | ( | ) | ||||
| Change in right of use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Accrued interest payable | ||||||||
| Accrued payroll and advances – related party | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash acquired on GameIQ acquisition | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of acquisition notes payable | ( | ) | ||||||
| Repayment of bridge note payable | ( | ) | ||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Proceeds from notes payable – government assistance loans | ||||||||
| Proceeds from offering | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents beginning of period | ||||||||
| Cash and cash equivalents end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Acquired software and technology from acquisition of GameIQ | $ | $ | ||||||
| Fair value of common shares issued on acquisition of GameIQ | $ | $ | ||||||
| Notes payable issued from acquisition of GameIQ | $ | $ | ||||||
| Government assistance notes payable and accrued interest assumed on acquisition of GameIQ | $ | $ | ||||||
| Fair value of common shares issued in settlement of vendor payable | $ | $ | ||||||
The accompanying notes are integral part of these condensed consolidated financial statements.
| F-5 |
RDE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
1. Basis of Presentation
The accompanying interim condensed consolidated financial statements of RDE, Inc. (the “Company”, “we”, “us”, or “our”), are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position at September 30, 2022 and the results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021. Intercompany transactions and balances have been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. We believe that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 1-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 11, 2022.
The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022.
COVID-19 Considerations
In March 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (the “COVID-19 pandemic”). In response to the COVID-19 pandemic, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses. These government mandates have forced many of the customers on whom the Company’s business relies, including restaurants and hotels and other accommodation providers, to seek government support in order to continue operating, to curtail drastically their service offerings or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, and the Company’s workforce, operations and customers. The COVID-19 pandemic and the resulting economic conditions and government orders have resulted in a material decrease in consumer spending and an unprecedented decline in restaurants activities, travel and accommodation activities and consumer demand for related services. The Company’s financial results and prospects are dependent on the sale of these services.
The Company’s operations have been significantly and negatively impacted. Due to the uncertain and rapidly evolving nature of current conditions around the world, the Company is unable to predict accurately the impact that the COVID-19 pandemic will have on its business going forward. With the spread of COVID-19 to other regions, such as Europe and the United States, the Company expects the COVID-19 pandemic and its effects to continue to have a significant adverse impact on its business for the duration of the pandemic and during the subsequent economic recovery, which could be an extended period of time.
Going Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine
months ended September 30, 2022, the Company recorded an operating loss of $
| F-6 |
At
September 30, 2022, the Company had cash on hand in the amount of $
Reclassifications
Certain prior year insignificant amounts, consisting primarily of accrued acquisition obligations, have been reclassified as a component of accrued expenses for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations, total stockholders’ deficiency or cash flows from operations.
2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles (“GAAP”) in the United States.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in valuing equity instruments granted for services, and assumptions used in the determination of the Company’s liquidity.
Revenue Recognition
Revenue is recognized when, or as, control of a promised product transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue- producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process:
| 1) | identification of the agreement with a customer; | |
| 2) | identification of the performance obligations in the agreement; | |
| 3) | determination of the transaction price; | |
| 4) | allocation of the transaction price to the performance obligations in the agreement; and, | |
| 5) | recognition of revenue when or as a performance obligation is satisfied. |
| F-7 |
The Company operates on-line websites that sells discounted restaurant coupons, travel and vacation packages and other merchandise across a wide range of product categories including but not limited to computer products, consumer electronics, apparel, housewares, watches, jewelry, travel, sporting goods, automobiles, home improvement products and collectibles. In addition, we also generate revenues based upon the number of times a third party website(s) or products(s) are accessed or viewed by consumers from the Company’s website or platform.
Sale of Restaurant Coupons
We
derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Approximately
9-13 days each month we email our customers offers for restaurant discounts based on location and personal preferences. Consumers also
access our deals directly through our websites and mobile applications. A typical restaurant discount deal might offer a $
Sale of Travel, Vacation and Merchandise
We also derive revenue from transactions in which we sell complimentary entertainment and travel offerings and consumer products on behalf of third-party merchants. Additional deals include discounted pricing at theaters, movies or other merchants. Customers purchase restaurant deals from us and redeem them with our merchant partners. Approximately 9-13 days each month we email our customers offers for discounted experiences and products based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of our websites that can be redeemed with a third-party merchant for services or goods (or for discounts on services and goods). Revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid by us to our partners.
Advertising Revenues
We also have agreements with selected third party partners such as Google Ads wherein third party website(s) and/or product(s) are shown or incorporated in the Company’s platform or website. We generate revenues based upon the number of times the third party website(s) or product(s) are accessed or viewed by consumers from the Company’s platform or website. Revenue is recognized when its determinable, which is generally upon receipt of statement and/or proceeds from the third party partners.
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2022 and 2021:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| F-8 |
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2022 and 2021:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Basic earnings (loss) per share is computed using the weighted average number of common shares issued and outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes and stock issuable upon the exercise of stock options and warrants, have been excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all convertible notes and stock issuable upon the exercise of stock options and warrants outstanding were anti-dilutive.
September 30, 2022 | September 30, 2021 | |||||||
| Convertible notes payable | ||||||||
| Common stock issuable | ||||||||
| Common stock warrants | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period.
| F-9 |
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Advertising Costs
The
Company has marketing relationship agreements with various online companies such as portal networks, contextual sites, search engines
and affiliate partners. Advertising costs are generally charged to the Company monthly per vendor agreements, which typically are based
on visitors and/or registrations delivered to the site or at a set fee. Agreements do not provide for guaranteed renewal and may be terminated
by the Company without cause. Such advertising costs are charged to expense as incurred and included in selling, general and administrative
expenses in the statements of operations. During the nine months ended September 30, 2022 and 2021, advertising costs were $
Concentrations
Revenues.
During the three months ended September 30, 2022, no customer exceeded
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required. Fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying value of the Company’s financial instruments (consisting of cash, accounts receivables, deposits to credit card processor, prepaid expense and other current assets, accounts payable, accrued expenses, notes payable, and other liabilities) are considered to be representative of their respective fair values due to the short-term nature of those instruments.
| F-10 |
Acquisitions and Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Intangible Assets with Finite Useful Lives
The Company had certain finite-lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consisted of intellectual property, customer relationships, and capitalized software development costs. Intangible assets with finite useful lives were being amortized using an accelerated method over their respective estimated useful lives.
The
Company reviews all finite-lived intangible assets for impairment at least annually at fiscal year-end, or whenever events or
circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable,
the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations.
On February 28, 2022, the Company recorded a provisional intangible assets of $
While we have concluded that a triggering event did not occur during the nine months ended September 30, 2022, a worsening of the severity of the COVID-19 pandemic as well as inflationary pressure to our customers could result in future intangible asset impairment charges. We will continue to monitor the effects of these events on our business, and review for impairment indicators as necessary in the upcoming months.
Operating Segments
Management
has determined that the Company has
In reaching such a conclusion management evaluated the Company’s reporting units by first identifying its operating segments. The Company then evaluated each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments (“ASC 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables, which may result in the earlier recognition of allowance for losses. ASU 2016-13 is effective beginning January 1, 2023 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
| F-11 |
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination as if it had originated the contracts. This is a shift from existing guidance, which required the acquirer to recognize contract assets and contract liabilities at their fair value as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the guidance provided by ASU 2021-08 prospectively to business combinations occurring on or after January 1, 2023. Early adoption of ASU 2021-08 is permitted, including adoption in an interim period. An entity that early adopts the guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The adoption of ASU 2021-08 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosure.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
3. Acquisition of GameIQ
On
January 31, 2022, the Company, through its newly formed Delaware subsidiary, GameIQ Acquisition Corp., Inc., entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with GameIQ, a California corporation, that is a developer of consumer gamification
technologies for retail businesses. Under the terms of the Merger Agreement, the Company agreed to issue restricted shares of
its common stock with a fair value of $
The following is a provisional allocation of the purchase price as determined by the Company’s management. The Company determined that the entire purchase price be allocated to acquired software and technology. The following table summarizes the assets acquired, liabilities assumed and provisional purchase price allocation:
| Fair Value | ||||
| Consideration paid: | ||||
| Notes payable | $ | |||
| Government assistance note payable and accrued interest (EIDL) | ||||
| Common stock ( shares of common stock at $ per share) | ||||
| Total consideration paid | $ | |||
| Provisional Purchase price allocation | ||||
| Acquired assets (cash) | $ | |||
| Acquired software and technology | ||||
| Total purchase price | $ | |||
| F-12 |
The Company estimated that the recorded provisional intangible assets have a -year estimated life and are subject to amortization.
| Assigned Life | September 30, 2022 | |||||||
| Intangible Assets | ||||||||
| Acquired software and technology | ||||||||
| Accumulated amortization | ( | ) | ||||||
| Total acquired software and technology, net of amortization | $ | |||||||
During
the nine months ended September 30, 2022, the company recorded amortization expense of $
| Year Ending | Amortization | |||
| 2022 (remaining) | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total | $ | |||
The purchase price allocation is provisional as the Company is still in the process of finalizing revenue and cash flow projections. Pursuant to current accounting and SEC guidelines, the Company has period of one year to finalize the purchase price allocation. The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of GameIQ based on the historical financial statements of the Company and GameIQ. The unaudited pro forma statements of operations for the nine months ended September 30, 2022 and 2021 give effect to the transaction as if it had occurred on January 1, 2021.
Nine Month Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| (Proforma, unaudited) | (Proforma, unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses | ||||||||
| Direct cost of revenues | ||||||||
| Selling, general and administrative expenses | ||||||||
| Amortization of intangible assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Other income | ||||||||
| Total Other income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| F-13 |
Pursuant to the provisions of ASC 805, the following results of operations of GameIQ subsequent to the acquisitions are as follows:
| March 1, 2022 to September 30, 2022 | ||||
| (unaudited) | ||||
| Revenues | $ | |||
| Direct cost of revenues | ( | ) | ||
| Selling, general and administrative expense | ( | ) | ||
| Net loss | $ | ( | ) | |
These amounts were included in the accompanying Consolidated Statement of Operations.
4. Deposit with Credit Card Processor
The
Company utilizes a third-party processor to serve as an end-to-end processor of credit and debit card and automated clearing house (“ACH”)
payment transactions that focuses on processing omni-channel (internet, mobile, and point-of-sale) transactions and recurring billings
for traditional retailers, government and utility, and service providers. The Company was required to place a security deposit in order
to secure the third-party services. The security deposit does not bear interest and is refundable upon termination of the agreement.
The outstanding security deposit was $
5. Leases
The Company leases certain corporate office spaces under an operating lease agreement. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in the Company’s consolidated balance sheets.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in lease arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.
In
fiscal 2019, the Company executed lease agreements and as a result, recorded ROU assets and liabilities of approximately $
As
of December 31, 2021, the ROU assets were $
As
of December 31, 2021, ROU lease liabilities were $
6. Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Total principal balance | $ | $ | ||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | $ | $ | ||||||
| F-14 |
On
November 5, 2018, the Company completed a merger agreement dated October 23, 2018 with Incumaker, Inc., whereby all of the shareholders
of the Company exchanged their shares of common stock in exchange for shares of Incumaker, Inc. common stock. The merger was treated
as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger agreement with
Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. The notes payable had interest rates ranging from
7. Acquisition Notes Payable
Acquisition notes payable consists of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| GameIQ acquisition note payable | $ | $ | ||||||
| Restaurant.com acquisition note payable | ||||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ||||||
| Non-current portion | $ | $ | ||||||
GameIQ Acquisition Note Payable
On
February 1, 2022, notes payable for the purchase of GameIQ was issued to two holders, one for $
During
the nine months ended September 31, 2022, the Company made principal payments of $
Restaurant.com Note Payable
Pursuant
to the terms of the acquisition agreement with Restaurant.com, Inc. entered into on March 1, 2020, the Company executed an unsecured
promissory note in the principal amount of $
| F-15 |
As
of September 30, 2022 and December 31, 2021, the note payable had a principal balance outstanding of $
8. Government Assistance Notes Payable
Government Assistance Notes Payable consists of the following at September 30, 2022, and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Paycheck Protection Loan | $ | $ | ||||||
| Economic Injury/Disaster Loans | ||||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
Paycheck Protection Note Payable
On
March 22, 2021, the Company received loan proceeds of $
Effective
February 28, 2022, the Company received formal notice that the note payable, including accrued interest of $
Economic Injury Disaster Loans (EIDL):
On
June 17, 2020, the Company received $
The
loans bear interest at
9. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of September 30, 2022 and December 31, 2021, there were shares of preferred stock issued and outstanding.
| F-16 |
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of September 30, 2022 and December 31, 2021, the Company had shares and shares, respectively, of common stock issued, issuable and outstanding.
Common Stock Transactions
Issuance of Common Stock to Directors
During
the nine months ended September 30, 2022, the Company granted of shares to members of the Company’s Board of Directors
with a fair value of $ or $ per share. The shares vest over a two-year period from grant date. During the nine months ended
September 30, 2022, the Company issued of these shares of common stock with a fair value of $
Issuance of Restricted Stock to Employees
During
the nine months ended September 30, 2022, the Company granted shares of the Company’s restricted stock to employees with
a fair value $ or $ per share. The share vest over a two-year period from grant date. During the nine months ended September
30, 2022, the Company issued of these shares of restricted stock with a fair value of $ based upon its vesting term. As
of September 30, 2022, the aggregate amount of unvested compensation related to the restricted stock was approximately $
Issuance of Common Stock for Services
During
the nine months ended September 30, 2022, the Company issued shares of common stock with an aggregate value of $
During
the nine months ended September 30, 2021, the Company issued shares of common stock with an aggregate value of $
Issuance of Common Stock for Acquisition of GameIQ
During
the nine months ended September 30, 2022, the Company issued shares of common stock with a fair value of $
Issuance of Common Stock for Cash
During
the nine months ended September 30, 2022, the Company received proceeds of $
During
the nine months ended September 30, 2021, the Company received proceeds of $
Issuance of Common Stock for Settlement of Vendor Balance
During
the nine months ended September 30, 2022, the Company issued shares of common stock valued at $
Issuance of Common Stock for Note Payable Extension
During
the nine months ended September 30, 2021, the Company issued shares of common stock valued at $
| F-17 |
Summary of Stock Options
| |
Number of Options |
|
|
Weighted Average Exercise Price |
|
|||
| Balance outstanding, December 31, 2021 | ||||||||
| Options granted | ||||||||
| Options exercised | ||||||||
| Options expired or forfeited | ||||||||
| Balance outstanding, September 30, 2022 | $ | |||||||
| Balance exercisable, September 30, 2022 | $ | |||||||
On February 28, 2022, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, approved options exercisable into shares to be issued to its employees. Of the stock options issued, stock options had an exercise price of $ per share, with vesting of % on date of issuance, and then % on each subsequent anniversary date. The remaining stock options had an exercise price of $ per share, with stock options vesting on March 1, 2022, and stock options vesting each month thereafter beginning on April 1, 2022.
The stock options are exercisable at a weighted average price of $ per share with an average life to expiration of approximately . The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $ per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
During
the nine months ended September 30, 2022, the Company recognized $
The weighted average remaining contractual life of common stock options outstanding and exercisable at September 30, 2022 was years. Based on a fair market value of $ per share on September 30, 2022, the intrinsic value attributed to exercisable and unexercised common stock options were $ and $, respectively, at September 30, 2022.
Summary of Warrants
A summary of warrants for the nine months ended September 30, 2022, is as follows:
| |
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
|||
| Balance outstanding, December 31, 2021 | $ | |||||||
| Warrants expired or forfeited | ( | ) | ||||||
| Balance outstanding, September 30, 2022 | $ | |||||||
| Balance exercisable, September 30, 2022 | $ | |||||||
10. Contingencies
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceeding that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition, other than the following.
On
April 17, 2019, a lawsuit was filed by Dupree Productions, LLC against uBid Holdings, Inc. and Ketan Thakker (Case No. L2019000436) in
the Circuit Court of DuPage County, Illinois, alleging that a Partial Equity Payment Agreement dated August 1, 2016, which was intended
to compensate services in the amount of $
| F-18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 1-K for the year ended December 31, 2021, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Business Overview
Restaurant.com is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. Founded in 1999, we connect digital consumers, businesses, and communities offering dining and merchant deal options nationwide at over 182,500 restaurants and retailers to over 7.8 million customers. Our 12,500 core restaurants and 170,000 Dining Discount Pass restaurants and retailers extend nationwide. Our top three B2C markets are New York, Chicago and Los Angeles.
We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Approximately 9-13 days each month we email our customers offers for restaurant discounts based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. A typical restaurant discount deal might offer a $25 discount that can be used toward a $50 purchase at a restaurant. Additional deals include discounted pricing at theaters, movies or other merchants. Customers purchase restaurant deals from us and redeem them with our merchant partners. We charge, and only collect, a service fee from our customers which allows them to download the discount certificates and redeem them at the restaurant. We receive no revenue or commission from the restaurants offering the discount deals.
We derive our revenue from transactions in which we sell complimentary entertainment and travel offerings and consumer products on behalf of third-party merchants. Approximately 9-13 days each month we email our customers offers for discounted experiences and products based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of our websites that can be redeemed with a third-party merchant for services or goods (or for discounts on services and goods). Revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid by us to our partners.
Through our websites, www.restaurant.com, www.specials.restaurant.com, and mobile iOS and Android apps, we provide affordable dining and entertainment experiences. In addition to purchasing restaurant discount certificates, entertainment and travel deals and consumer products as well as company gift card redemption, our website and mobile platform provide additional information to assist the customer and encourage return visits to our websites, including restaurant menus, entrée pricing, mapping and directions, and extensive filtering options, including most popular, cuisine type and “Deals Near Me” for nearby restaurants. Paperless restaurant certificate redemption and validation can also occur on our mobile platforms. During the year ended December 31, 2020, there were an average of 700,000 unique visitors per month to our digital platforms including our mobile and Specials offerings. Since the launch of our mobile apps in 2012, mobile has grown from zero to 49% of our B2C revenue and over 60% of the B2C orders with over 6.4 million downloads of our apps for the year ended December 30, 2021.
Our B2B sales program has grown significantly since its introduction in 2004 and comprises 50% of revenue. Our high-value, low-cost features enable businesses to use Restaurant.com Gift Cards to entice new and existing customers to increase sales, promote customer satisfaction and incent desired behavior. The availability of use in every market, features like “never expire” and online exchange, and use by every customer demographic fit every business’s customer base; features no other incentive product can match.
| 1 |
In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally. The outbreak has negatively impacted our revenues as a result of the temporary closures of restaurants throughout the United States where our discount certificates and Discount Dining Passes are accepted and where dining is being restricted to outdoor locations or to capacity constraints for indoor dining. We expect that for the next several months, as the virus continues to limit visits to restaurants and as many prospective patrons choose to order delivery of meals from restaurants or take advantage of picking-up meals from restaurants, to continue to negatively impact our revenues from purchase of our discount certificates, since they can only be redeemed when dining in the restaurants. In addition, our dining certificates are not accepted for payment by third-party platforms that facilitate ordering and delivery of food on-demand. As the COVID-19 pandemic appears to be abating, we expect an improvement in our revenues during the second half of the year ending December 31, 2022.
Recent Developments
On January 31, 2022, the Company, through its newly formed Delaware subsidiary, GameIQ Acquisition Corp., Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GameIQ, a California corporation, that is a developer of consumer gamification technologies for retail businesses. Under the terms of the Merger Agreement, the Company agreed to issue 600,000 restricted shares of its common stock and issued promissory notes to Balazs Wellisch, President and co-founder, and Quentin Blackford, Director, of GameIQ, in the principal amounts of $78,813 and $62,101, respectively, bearing interest at 1% per annum, to repay loans by Mr. Wellisch and Mr. Blackford to GameIQ. Each note requires repayment in nine equal biannual installments, with the first installment due on the nine-month anniversary of the Closing Date as that term is defined in the Merger Agreement. Following the merger, GameIQ shall merge with and into the Company. In addition, Balazs Wellisch will become Chief Technology Officer of Restaurant.com, a subsidiary of the Company. The Merger Agreement closed on February 28, 2022. The closing price of the Company’s common stock was $0.50 per share on both January 31, 2022 and February 28, 2022.
Inflation
Global inflation also increased during 2021 and in 2022. The Russia and Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and the restaurant customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected.
Results of Operations - Three months ended September 30, 2022, compared to three months ended September 30, 2021
Overview
As reflected in the accompanying condensed consolidated financial statements, during the three months ended September 30, 2022, we realized a net loss of $596,342, compared to a net loss of $712,721 for the three months ended September 30, 2021.
The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.
Revenue
For the three months ended September 30, 2022 and 2021, the Company’s operating revenues consisted of revenues generated by the Restaurant.com business, and GameIQ, which we acquired on February 28, 2022.
| 2 |
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2022 and 2021:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | 158,564 | $ | 69,733 | $ | 44,704 | $ | 273,001 | ||||||||
| Business to business (B2B) | 547,357 | - | - | 547,357 | ||||||||||||
| Other | 4,389 | - | - | 4,389 | ||||||||||||
| Total | $ | 710,310 | $ | 69,733 | $ | 44,704 | $ | 824,747 | ||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||
| Business to consumer (B2C) | $ | 191,526 | $ | 81,273 | $ | 50,162 | $ | 322,961 | ||||||||
| Business to business (B2B) | 517,018 | - | - | 517,018 | ||||||||||||
| Other | 7,407 | - | - | 7,407 | ||||||||||||
| Total | $ | 735,951 | $ | 81,273 | $ | 50,162 | $ | 847,386 | ||||||||
Revenue for the three months ended September 30, 2022, was $824,747, a decrease of approximately $22,639 or 3%, as compared to $847,386 in the same period of the prior year. The decrease in revenue was from B2C and B2B performed well with our current clients and added new ones.
Operating Expenses
Cost of Revenues
Cost of revenues consists primarily of the costs incurred to generate revenues, consisting primarily of transaction fees. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.
Costs of revenues decreased to $38,798 during the three months ended September 30, 2022, as compared to $88,762 during the three months ended September 30, 2021. During the three months ended September 30, 2022 and 2021, our cost of revenues, as a percentage of revenue, was 5% and 10%, respectively. The decrease in cost of revenues, as a percentage of revenue, was due from B2B as it has lower cost to issue the discount certificates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Selling, general and administrative expenses were $1,315,717 during the three months ended September 30, 2022, as compared to $1,198,983 during the three months ended September 30, 2021, an increase of $116,734. The increase was related mainly to a $61,026 increase in stock-based compensation for directors, employees and contractors in the current period as compared to the prior year. Excluding stock-based compensation, our selling, general and administrative expenses increased $55,708 during the current period, related to general changes in our business and operations.
| 3 |
Amortization of Intangible Assets
Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $37,144 and $144,000 during the three months ended September 30, 2022 and 2021, respectively.
Loss from Operations
For the three months ended September 30, 2022, we incurred a loss from operations of $566,911, as compared to a loss from operations of $684,358 for the three months ended September 30, 2021. The decrease in loss from operations was due to the decrease in revenue and our decrease in operating expenses discussed above.
Other Income (Expenses)
The Company had other expenses of $29,431 for the three months ended September 30, 2022, as compared to other expense of $28,363 for the three months ended September 30, 2021, which was for interest expense related to our notes payable.
Net Loss
We realized a net loss of $596,342 for the three months ended September 30, 2022, as compared to realizing a net loss of $712,721 for the three months ended September 30, 2021. The decrease in net loss is primarily due to our decreased revenue, decreased operating expenses, and increased other expense, as discussed above.
Results of Operations - Nine months ended September 30, 2022, compared to nine months ended September 30, 2021
Overview
As reflected in the accompanying condensed consolidated financial statements, during the nine months ended September 30, 2022, we realized a net loss of $517,851 and used cash in operations of $717,244, compared to a net loss of $4,151,736 and used cash in operations of $1,294,711 for the nine months ended September 30, 2021. As of September 30, 2022, we had a stockholders’ deficit of approximately $2,341,006.
The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.
Revenue
For the nine months ended September 30, 2022 and 2021, the Company’s operating revenues consisted of revenues generated by the Restaurant.com business, and GameIQ, which we acquired on February 28, 2022.
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2022 and 2021:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | 513,578 | $ | 219,334 | $ | 136,166 | $ | 869,078 | ||||||||
| Business to business (B2B) | 2,501,066 | - | - | 2,501,066 | ||||||||||||
| Other | 25,537 | - | - | 25,537 | ||||||||||||
| Total | $ | 3,040,181 | $ | 219,334 | $ | 136,166 | $ | 3,395,681 | ||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||
| Business to consumer (B2C) | $ | 599,044 | $ | 250,429 | $ | 133,285 | $ | 982,758 | ||||||||
| Business to business (B2B) | 1,429,844 | - | - | 1,429,844 | ||||||||||||
| Other | 34,045 | - | - | 34,045 | ||||||||||||
| Total | $ | 2,062,933 | $ | 250,429 | $ | 133,285 | $ | 2,446,647 | ||||||||
| 4 |
Revenue for the nine months ended September 30, 2022, was $3,395,681, an increase of approximately $949,034 or 39%, as compared to $2,446,647 in the same period of the prior year. During the nine months ended September 30, 2022, we entered into an agreement with a national mobile telephone provider (“Provider”) to provide our coupon codes to the Provider’s mobile phone application user that are verified nurses and teachers. Each Provider participant who redeemed the promotion received a dining credit of $25.00 and two movie tickets. The dining credit can be redeemed for a certificate at any of our participating local restaurants. The movie tickets provided by us are through Fandango for use at participating theatres. The agreement started in May 2022 and ended in August 2022, and we earned $1,106,447 in revenues from this agreement during the nine months ended September 30, 2022.
Operating Expenses
Cost of Revenues
Cost of revenues consists primarily of the costs incurred to generate revenues, consisting primarily of transaction fees. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.
Costs of revenues increased to $637,096 during the nine months ended September 30, 2022 as compared to $299,115 during the nine months ended September 30, 2021, as a result of our increase in revenue. During the nine months ended September 30, 2022 and 2021, our cost of revenues, as a percentage of revenue, was 19% and 9%, respectively. The increase in cost of revenues, as a percentage of revenue, was from Fandango movie ticket costs related to the agreement with our Provider discussed above. No similar Provider agreement activity occurred during the prior year period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Selling, general and administrative expenses were $4,227,767 during the nine months ended September 30, 2022, as compared to $6,364,348 during the nine months ended September 30, 2021, a decrease of $2,136,582. The decrease was related mainly to a $1,991,683 decrease in stock-based compensation for directors, employees and contractors in the current period as compared to the prior year. Excluding stock-based compensation, our selling, general and administrative expenses decreased $144,899 during the current period, related to general changes in our business and operations.
Amortization of Intangible Assets
Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $86,668 and $480,000 during the nine months ended September 30, 2022 and 2021, respectively.
| 5 |
Loss from Operations
For the nine months ended September 30, 2022, we incurred a loss from operations of $1,555,849, as compared to a loss from operations of $4,696,816 for the nine months ended September 30, 2021. The decrease in loss from operations was due to the increase in revenue and decreased operating expenses discussed above.
Other Income (Expenses)
The Company had other income of $1,037,998 for the nine months ended September 30, 2022, as compared to other income of $545,080 for the nine months ended September 30, 2021. Other income for the nine months ended September 30, 2022, consisted of a gain on legal settlement of $69,000, a gain on vendor settlement of $28,600, a gain from the forgiveness of a government assistance loan of $1,025,535, offset by interest expense of $85,137. Other income for the nine months ended September 30, 2021, consisted of a gain from the forgiveness of a government assistance loan of $648,265, offset by financing costs of $7,500, and interest expense of $95,685.
Net Loss
We realized a net loss of $517,851 for the nine months ended September 30, 2022, as compared to realizing a net loss of $4,151,736 for the nine months ended September 30, 2021. The decrease in net loss is primarily due to a gain on forgiveness of government assistance notes payable, increased revenue and decreased operating expenses, as discussed above.
Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2022, the Company recorded an operating loss of $1,555,849, used cash in operations of $714,244, and had a stockholders’ deficit of $2,341,006 at September 30, 2022. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date of the financial statements being issued.
The ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
At September 30, 2022, we had cash on hand in the amount of $1,462,750. Our continuation as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
The Company’s consolidated statements of cash flows as discussed herein are presented below.
Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (717,244 | ) | $ | (1,294,711 | ) | ||
| Net cash provided by investing activities | 12,805 | - | ||||||
| Net cash provided by financing activities | 236,864 | 2,630,854 | ||||||
| Net increase (decrease) in cash | $ | (467,575 | ) | $ | 1,336,143 | |||
| 6 |
Operating Activities
Cash provided by or used in operating activities primarily consists of net income (loss) adjusted for certain non-cash items, including amortization of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, and the effect of changes in working capital and other activities.
Cash used in operating activities for the nine months ended September 30, 2022 was approximately $717,244 and consisted of a net loss of $517,851, adjustments for non-cash items, including amortization of intangible assets, gain on legal settlement, gain on forgiveness of government assistance notes payable, fair value of vested stock options, and the fair value of common stock and issued for directors, employees, and service providers, which in the aggregate total $340,751, and $141,358 in changes in working capital and other activities.
Cash used in operating activities for the nine months ended September 30, 2021 was $1,249,711 and consisted of a net loss of $4,151,736, adjustments for non-cash items, including amortization of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, which in the aggregate total approximately $2,2523,440, and approximately $333,585 in changes in working capital and other activities.
Investing Activities
Cash provided by investing activities for the nine months ended September 30, 2022 was $12,805 and was cash received on the acquisition of GameIQ. The Company had no investing activities for the nine months ended September 30, 2021.
Financing Activities
For the nine months ended September 30, 2022, cash provided by financing activities was $236,864, which was from proceeds received of $250,000 the sale of common stock, and $13,136 of principal payments on our acquisition notes payable. For the nine months ended September 30, 2021, cash provided by financing activities was $2,630,854, and included net proceeds of $1,958,466 received from the sale of common stock, and $1,375,535 in proceeds from government assistance loans, offset by the repayment of $303,147 of bridge notes payable, repayment of $400,000 of convertible notes payable.
Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Total principal balance | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest | 16,387 | 11,537 | ||||||
| Total principal and accrued interest | $ | 36,387 | $ | 31,537 | ||||
On November 5, 2018, the Company completed a merger agreement dated October 23, 2018 with Incumaker, Inc., whereby all of the shareholders of the Company exchanged their shares of common stock in exchange for shares of Incumaker, Inc. common stock. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger agreement with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. The notes payable had interest rates ranging from 8% to 22% per annum. At September 30, 2022 and December 31, 2021, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $16,387 and $11,537, respectively. As of September 30, 2022, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 24,258 shares of the Company’s common stock.
| 7 |
Acquisition Notes Payable
Acquisition notes payable consists of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| GameIQ acquisition note payable | $ | 127,788 | $ | - | ||||
| Restaurant.com acquisition note payable | 1,500,000 | 1,500,000 | ||||||
| Total principal balance | 1,627,778 | 1,500,000 | ||||||
| Accrued interest | 229,550 | 162,300 | ||||||
| Total principal and accrued interest | 1,857,328 | 1,662,300 | ||||||
| Less current portion | (1,762,905 | ) | - | |||||
| Non-current portion | $ | 94,424 | $ | 1,662,300 | ||||
GameIQ Acquisition Note Payable
On February 1, 2022, notes payable for the purchase of GameIQ was issued to two holders, one for $78,813. and another for $62,101. In accordance with Notes, RDE, Inc. promises to pay to the order of the Holders the principal amounts together with annual interest on the unpaid principal amount of 1% computed on the basis of the actual number of days elapsed and a year of 365 days from the date of the Notes (the “Total Amount”), which shall be paid upon the earlier of (i) nine (6) equal biannual installments with the first installment due on the nine-month anniversary of February 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”). Notwithstanding any other provision of this Note, the Holders does not intend to charge, and the RDE, Inc. shall not be required to pay, any fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the RDE, Inc. or credited to reduce the principal hereunder. All payments received by the Holder will be applied first to costs of collection, if any, then the balance to the unpaid principal and interest. In the event of default, the notes to the holders are secured, in the manner that such payment to be made in cash or shares of the RDE, Inc.’s common stock at the election of the Holders. These Notes may be prepaid in whole or in part by the RDE, Inc. For purposes of clarity, if RDE’s payments to the Holders pursuant to (i) of the agreement, do not in the aggregate equal the Total Amount, the amount remaining owed to the Holders shall be paid to the Holders on or before the Maturity Date. During the nine months ended September 31, 2022, the Company made principal payments of $13,136. As of September 30, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $481.
Restaurant.com Note Payable
Pursuant to the terms of the acquisition agreement with Restaurant.com, Inc. entered into on March 1, 2020, the Company executed an unsecured promissory note in the principal amount of $1,500,000 that matures on March 1, 2023. The promissory note bears interest at a rate of 6% per annum and is convertible at the option of the Company into common shares at a price to be determined on the date of conversion. As of September 30, 2022 and December 31, 2021, the note payable had a principal balance outstanding of $1,500,000 and accrued interest payable of $229,069 and $162,300 respectively.
Government Assistance Notes Payable
On September 30, 2022, and December 31, 2021, the notes payable balances and accrued interest payable are as follows:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Paycheck Protection Loan | $ | - | $ | 1,025,535 | ||||
| Economic Injury/Disaster Loans | 664,500 | 650,000 | ||||||
| Total principal balance | 664,500 | 1,675,535 | ||||||
| Accrued interest | 39,259 | 25,321 | ||||||
| Total principal and accrued interest | 703,759 | 1,700,856 | ||||||
| Less current portion | (11,359 | ) | (11,115 | ) | ||||
| Non-current portion | $ | 692,400 | $ | 1,689,741 | ||||
| 8 |
Paycheck Protection Note Payable
On March 22, 2021, the Company received loan proceeds of $1,025,535 pursuant to the Paycheck Protection Program (2nd draw). The note payable was scheduled to mature in March 2026, bears interest at the rate of 1% per annum, and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The loan and accrued interest payable are forgivable provided the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.
Effective February 28, 2022, the Company received formal notice that the note payable, including accrued interest of $9,743, was forgiven. As a result, the gain from the forgiveness of the government assistance notes payable aggregating $1,025,535 was recognized in the statement of operations during the nine months ended September 30, 2022.
Economic Injury Disaster Loans (EIDL):
On June 17, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ (see Note 3).
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of September 30, 2022, and December 31, 2021, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $39,259 and $25,321 respectively.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, , depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. There were no changes to our critical accounting policies described in the consolidated financial statements included in our Annual Report on Form 1-K for the fiscal year ended December 31, 2021, that impacted our condensed consolidated financial statements and related notes included herein.
| 9 |
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure control and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2022, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
| 10 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceeding that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition, other than the following.
On April 17, 2019, a lawsuit was filed by Dupree Productions, LLC against uBid Holdings, Inc. and Ketan Thakker (Case No. L2019000436) in the Circuit Court of DuPage County, Illinois, alleging that a Partial Equity Payment Agreement dated August 1, 2016, which was intended to compensate services in the amount of $60,000 in return for shares of uBid common stock, was inadequate to compensate for the alleged higher value of advertising and endorsement services of approximately $195,000. The case was dismissed on the basis that there was a binding arbitration clause in the Partial Equity Payment Agreement. On February 3, 2021, the arbitrator awarded DuPree Productions $195,000, and $24,000 in attorneys’ fees, which was included in accrued expenses in the consolidated balance sheets as of December 31, 2021. The Company filed an appeal of the arbitrator’s award. On January 28, 2022, a final settlement of $150,000 was reached, which was paid on May 9, 2022. Since the final settlement was $69,000 less than the amount accrued by the Company, a gain on legal settlement of $69,000 was recognized in the statement of operations during the nine months ended September 30, 2022.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We sold for $250,000 shares of our common stock to an investor under the terms of our Form 1-A Offering Circular for our Tier 2 offering under SEC Rule 251. The proceeds of such sale were used for general corporate purposes, including marketing, sales, operations and accounting and legal expenses.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
| 11 |
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
| (1) | Previously filed as an Exhibit to the Company’s Form 1-A filed with the Commission on November 17, 2020. |
| (2) | Previously filed as an Exhibit to the Company’s Form 8-K filed with the Commission on February 2, 2022. |
| * | Filed herewith | |
| ** | The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in such filing. |
| 12 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RDE, INC. | |||
| Date: | November 4, 2022 | By: | /s/ Ketan Thakker |
| Ketan Thakker | |||
| President, Chief Executive Officer and Principal Financial Officer | |||
| 13 |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ketan Thakker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of RDE, INC. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | November 4, 2022 | /s/ Ketan Thakker |
| Ketan Thakker | ||
| Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ketan Thakker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of RDE, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | November 4, 2022 | /s/ Ketan Thakker |
| Ketan Thakker | ||
| Principal Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of RDE, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: | November 4, 2022 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
| President and Chief Executive Officer |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RDE, Inc. and will be retained by RDE, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Principal Financial Officer of RDE, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: | November 4, 2022 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
| Principal Financial Officer |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RDE, Inc. and will be retained by RDE, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 750,000,000 | 750,000,000 |
| Common stock, shares issued | 14,152,378 | 12,879,428 |
| Common stock, shares outstanding | 14,152,378 | 12,879,428 |
| Common stock issuable, shares | 383,343 | 383,343 |
| Convertible Debt [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable current | $ 16,387 | $ 11,537 |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable current | 229,069 | |
| Interest payable non current | 481 | 162,300 |
| Government Assistance Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable non current | $ 39,259 | $ 25,321 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 824,747 | $ 847,386 | $ 3,395,681 | $ 2,446,647 |
| Operating expenses | ||||
| Cost of revenues | 38,798 | 88,762 | 637,096 | 299,115 |
| Selling, general and administrative expenses | 1,315,716 | 1,298,982 | 4,227,766 | 6,364,348 |
| Amortization of intangible assets | 37,144 | 144,000 | 86,668 | 480,000 |
| Total operating expenses | 1,391,658 | 1,531,744 | 4,951,530 | 7,143,463 |
| Loss from operations | (566,911) | (684,358) | (1,555,849) | (4,696,816) |
| Other income (expenses) | ||||
| Interest | (29,431) | (28,363) | (85,137) | (95,685) |
| Financing costs | (7,500) | |||
| Gain on legal settlement | 69,000 | |||
| Gain on vendor settlement | 28,600 | |||
| Gain from forgiveness of government assistance notes payable | 1,025,535 | 648,265 | ||
| Total other income (expenses) | (29,431) | (28,363) | 1,037,998 | 545,080 |
| Net loss | $ (596,342) | $ (712,721) | $ (517,851) | $ (4,151,736) |
| Net loss per share – basic and diluted | $ (0.04) | $ (0.06) | $ (0.04) | $ (0.32) |
| Weighted average common shares outstanding – basic and diluted | 14,148,393 | 12,735,087 | 13,646,878 | 12,819,502 |
Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | 1. Basis of Presentation
The accompanying interim condensed consolidated financial statements of RDE, Inc. (the “Company”, “we”, “us”, or “our”), are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position at September 30, 2022 and the results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021. Intercompany transactions and balances have been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. We believe that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 1-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 11, 2022.
The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022.
COVID-19 Considerations
In March 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (the “COVID-19 pandemic”). In response to the COVID-19 pandemic, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses. These government mandates have forced many of the customers on whom the Company’s business relies, including restaurants and hotels and other accommodation providers, to seek government support in order to continue operating, to curtail drastically their service offerings or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, and the Company’s workforce, operations and customers. The COVID-19 pandemic and the resulting economic conditions and government orders have resulted in a material decrease in consumer spending and an unprecedented decline in restaurants activities, travel and accommodation activities and consumer demand for related services. The Company’s financial results and prospects are dependent on the sale of these services.
The Company’s operations have been significantly and negatively impacted. Due to the uncertain and rapidly evolving nature of current conditions around the world, the Company is unable to predict accurately the impact that the COVID-19 pandemic will have on its business going forward. With the spread of COVID-19 to other regions, such as Europe and the United States, the Company expects the COVID-19 pandemic and its effects to continue to have a significant adverse impact on its business for the duration of the pandemic and during the subsequent economic recovery, which could be an extended period of time.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2022, the Company recorded an operating loss of $1,555,849 and used cash in operations of $717,244 and had a stockholders’ deficit of $2,341,006 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
At September 30, 2022, the Company had cash on hand in the amount of $1,462,750. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
Reclassifications
Certain prior year insignificant amounts, consisting primarily of accrued acquisition obligations, have been reclassified as a component of accrued expenses for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations, total stockholders’ deficiency or cash flows from operations.
|
Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies | 2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles (“GAAP”) in the United States.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in valuing equity instruments granted for services, and assumptions used in the determination of the Company’s liquidity.
Revenue Recognition
Revenue is recognized when, or as, control of a promised product transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue- producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process:
The Company operates on-line websites that sells discounted restaurant coupons, travel and vacation packages and other merchandise across a wide range of product categories including but not limited to computer products, consumer electronics, apparel, housewares, watches, jewelry, travel, sporting goods, automobiles, home improvement products and collectibles. In addition, we also generate revenues based upon the number of times a third party website(s) or products(s) are accessed or viewed by consumers from the Company’s website or platform.
Sale of Restaurant Coupons
We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Approximately 9-13 days each month we email our customers offers for restaurant discounts based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. A typical restaurant discount deal might offer a $25 discount that can be used toward a $50 purchase at a restaurant. We recognize revenue at a gross basis upon sale and collection of the restaurant coupons from customers. We have no further commitment or obligation to third-party restaurants or the coupon purchasers upon the sale of restaurant coupons and no amounts are due to the third-party restaurants for these sales. Sale of restaurant coupons are generally nonrefundable. The Company accepts a customer’s request to transfer a restaurant coupon from one third-party restaurant to another (e.g. closure of restaurant).
Sale of Travel, Vacation and Merchandise
We also derive revenue from transactions in which we sell complimentary entertainment and travel offerings and consumer products on behalf of third-party merchants. Additional deals include discounted pricing at theaters, movies or other merchants. Customers purchase restaurant deals from us and redeem them with our merchant partners. Approximately 9-13 days each month we email our customers offers for discounted experiences and products based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of our websites that can be redeemed with a third-party merchant for services or goods (or for discounts on services and goods). Revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid by us to our partners.
Advertising Revenues
We also have agreements with selected third party partners such as Google Ads wherein third party website(s) and/or product(s) are shown or incorporated in the Company’s platform or website. We generate revenues based upon the number of times the third party website(s) or product(s) are accessed or viewed by consumers from the Company’s platform or website. Revenue is recognized when its determinable, which is generally upon receipt of statement and/or proceeds from the third party partners.
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2022 and 2021:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2022 and 2021:
Basic earnings (loss) per share is computed using the weighted average number of common shares issued and outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes and stock issuable upon the exercise of stock options and warrants, have been excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all convertible notes and stock issuable upon the exercise of stock options and warrants outstanding were anti-dilutive.
The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Advertising Costs
The Company has marketing relationship agreements with various online companies such as portal networks, contextual sites, search engines and affiliate partners. Advertising costs are generally charged to the Company monthly per vendor agreements, which typically are based on visitors and/or registrations delivered to the site or at a set fee. Agreements do not provide for guaranteed renewal and may be terminated by the Company without cause. Such advertising costs are charged to expense as incurred and included in selling, general and administrative expenses in the statements of operations. During the nine months ended September 30, 2022 and 2021, advertising costs were $359,987 and $513,539, respectively.
Concentrations
Revenues. During the three months ended September 30, 2022, no customer exceeded 10% of revenues. During the nine months ended September 30, 2022, one customer accounted for 33% of revenues. No customer exceeded 10% of revenues during the prior year periods.
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required. Fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying value of the Company’s financial instruments (consisting of cash, accounts receivables, deposits to credit card processor, prepaid expense and other current assets, accounts payable, accrued expenses, notes payable, and other liabilities) are considered to be representative of their respective fair values due to the short-term nature of those instruments.
Acquisitions and Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Intangible Assets with Finite Useful Lives
The Company had certain finite-lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consisted of intellectual property, customer relationships, and capitalized software development costs. Intangible assets with finite useful lives were being amortized using an accelerated method over their respective estimated useful lives.
The Company reviews all finite-lived intangible assets for impairment at least annually at fiscal year-end, or whenever events or circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. On February 28, 2022, the Company recorded a provisional intangible assets of $443,509 as a result of the acquisition of GameIQ (see Note 3).
While we have concluded that a triggering event did not occur during the nine months ended September 30, 2022, a worsening of the severity of the COVID-19 pandemic as well as inflationary pressure to our customers could result in future intangible asset impairment charges. We will continue to monitor the effects of these events on our business, and review for impairment indicators as necessary in the upcoming months.
Operating Segments
Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
In reaching such a conclusion management evaluated the Company’s reporting units by first identifying its operating segments. The Company then evaluated each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments (“ASC 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables, which may result in the earlier recognition of allowance for losses. ASU 2016-13 is effective beginning January 1, 2023 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination as if it had originated the contracts. This is a shift from existing guidance, which required the acquirer to recognize contract assets and contract liabilities at their fair value as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the guidance provided by ASU 2021-08 prospectively to business combinations occurring on or after January 1, 2023. Early adoption of ASU 2021-08 is permitted, including adoption in an interim period. An entity that early adopts the guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The adoption of ASU 2021-08 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosure.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of GameIQ |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of GameIQ | 3. Acquisition of GameIQ
On January 31, 2022, the Company, through its newly formed Delaware subsidiary, GameIQ Acquisition Corp., Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GameIQ, a California corporation, that is a developer of consumer gamification technologies for retail businesses. Under the terms of the Merger Agreement, the Company agreed to issue restricted shares of its common stock with a fair value of $300,000 and issued promissory notes totaling $140,914, bearing interest at 1% per annum, payable in nine equal biannual installments, with the first installment due on the nine-month anniversary of the Closing Date as that term is defined in the Merger Agreement. The Merger Agreement closed on February 28, 2022. The closing price of the Company’s common stock was $ per share on both January 31, 2022 and February 28, 2022. The Company accounted for the acquisition as a business combination in accordance with ASC 805, Business Combinations. The Company has also determined that the acquisition does not qualify as significant acquisition under the guidance of SEC S-X Rules 3-05 and 1-02.
The following is a provisional allocation of the purchase price as determined by the Company’s management. The Company determined that the entire purchase price be allocated to acquired software and technology. The following table summarizes the assets acquired, liabilities assumed and provisional purchase price allocation:
The Company estimated that the recorded provisional intangible assets have a -year estimated life and are subject to amortization.
During the nine months ended September 30, 2022, the company recorded amortization expense of $86,668. The following table summarizes the amortization expense to be recorded in future periods for intangible assets that are subject to amortization:
The purchase price allocation is provisional as the Company is still in the process of finalizing revenue and cash flow projections. Pursuant to current accounting and SEC guidelines, the Company has period of one year to finalize the purchase price allocation. The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of GameIQ based on the historical financial statements of the Company and GameIQ. The unaudited pro forma statements of operations for the nine months ended September 30, 2022 and 2021 give effect to the transaction as if it had occurred on January 1, 2021.
Pursuant to the provisions of ASC 805, the following results of operations of GameIQ subsequent to the acquisitions are as follows:
These amounts were included in the accompanying Consolidated Statement of Operations.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposit with Credit Card Processor |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Deposit with Credit Card Processor | 4. Deposit with Credit Card Processor
The Company utilizes a third-party processor to serve as an end-to-end processor of credit and debit card and automated clearing house (“ACH”) payment transactions that focuses on processing omni-channel (internet, mobile, and point-of-sale) transactions and recurring billings for traditional retailers, government and utility, and service providers. The Company was required to place a security deposit in order to secure the third-party services. The security deposit does not bear interest and is refundable upon termination of the agreement. The outstanding security deposit was $87,237 as of September 30, 2022 and December 31, 2021.
|
Leases |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Leases | |
| Leases | 5. Leases
The Company leases certain corporate office spaces under an operating lease agreement. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in the Company’s consolidated balance sheets.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in lease arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.
In fiscal 2019, the Company executed lease agreements and as a result, recorded ROU assets and liabilities of approximately $368,000.
As of December 31, 2021, the ROU assets were $219,739. During the nine months ended September 30, 2022, the Company reflected a change in its ROU asset of $85,533, resulting in a ROU asset balance of $134,206 as of September 30, 2022.
As of December 31, 2021, ROU lease liabilities were $222,096. During the nine months ended September 30, 2022, the Company made lease payments of $81,296 towards its ROU lease liability. As of September 30, 2022, ROU lease liabilities under operating leases totaled $140,800, of which $113,675 were reflected as current due.
|
Convertible Debt Assumed Upon Reverse Merger - Past Due |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debt Assumed Upon Reverse Merger - Past Due | 6. Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at September 30, 2022 and December 31, 2021:
On November 5, 2018, the Company completed a merger agreement dated October 23, 2018 with Incumaker, Inc., whereby all of the shareholders of the Company exchanged their shares of common stock in exchange for shares of Incumaker, Inc. common stock. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger agreement with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. The notes payable had interest rates ranging from 8% to 22% per annum. At September 30, 2022 and December 31, 2021, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $16,387 and $11,537, respectively. As of September 30, 2022, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $ per share into shares of the Company’s common stock.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition Notes Payable |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition Notes Payable | 7. Acquisition Notes Payable
Acquisition notes payable consists of the following at September 30, 2022 and December 31, 2021:
GameIQ Acquisition Note Payable
On February 1, 2022, notes payable for the purchase of GameIQ was issued to two holders, one for $78,813. and another for $62,101. In accordance with Notes, RDE, Inc. promises to pay to the order of the Holders the principal amounts together with annual interest on the unpaid principal amount of 1% computed on the basis of the actual number of days elapsed and a year of 365 days from the date of the Notes (the “Total Amount”), which shall be paid upon the earlier of (i) nine (6) equal biannual installments with the first installment due on the nine-month anniversary of February 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”). Notwithstanding any other provision of this Note, the Holders does not intend to charge, and the RDE, Inc. shall not be required to pay, any fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the RDE, Inc. or credited to reduce the principal hereunder. All payments received by the Holder will be applied first to costs of collection, if any, then the balance to the unpaid principal and interest. In the event of default, the notes to the holders are secured, in the manner that such payment to be made in cash or shares of the RDE, Inc.’s common stock at the election of the Holders. These Notes may be prepaid in whole or in part by the RDE, Inc. For purposes of clarity, if RDE’s payments to the Holders pursuant to (i) of the agreement, do not in the aggregate equal the Total Amount, the amount remaining owed to the Holders shall be paid to the Holders on or before the Maturity Date.
During the nine months ended September 31, 2022, the Company made principal payments of $13,136. As of September 30, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $481.
Restaurant.com Note Payable
Pursuant to the terms of the acquisition agreement with Restaurant.com, Inc. entered into on March 1, 2020, the Company executed an unsecured promissory note in the principal amount of $1,500,000 that matures on March 1, 2023. The promissory note bears interest at a rate of 6% per annum and is convertible at the option of the Company into common shares at a price to be determined on the date of conversion.
As of September 30, 2022 and December 31, 2021, the note payable had a principal balance outstanding of $1,500,000 and accrued interest payable of $229,069 and $162,300 respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Government Assistance Notes Payable |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable | 8. Government Assistance Notes Payable
Government Assistance Notes Payable consists of the following at September 30, 2022, and December 31, 2021:
Paycheck Protection Note Payable
On March 22, 2021, the Company received loan proceeds of $1,025,535 pursuant to the Paycheck Protection Program (2nd draw). The note payable was scheduled to mature in March 2026, bears interest at the rate of 1% per annum, and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The loan and accrued interest payable are forgivable provided the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.
Effective February 28, 2022, the Company received formal notice that the note payable, including accrued interest of $9,743, was forgiven. As a result, the gain from the forgiveness of the government assistance notes payable aggregating $1,025,535 was recognized in the statement of operations during the nine months ended September 30, 2022.
Economic Injury Disaster Loans (EIDL):
On June 17, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ (see Note 3).
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of September 30, 2022, and December 31, 2021, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $39,259 and $25,321 respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholder’s Deficit |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholder’s Deficit | 9. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of September 30, 2022 and December 31, 2021, there were shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of September 30, 2022 and December 31, 2021, the Company had shares and shares, respectively, of common stock issued, issuable and outstanding.
Common Stock Transactions
Issuance of Common Stock to Directors
During the nine months ended September 30, 2022, the Company granted of shares to members of the Company’s Board of Directors with a fair value of $ or $ per share. The shares vest over a two-year period from grant date. During the nine months ended September 30, 2022, the Company issued of these shares of common stock with a fair value of $190,000 based upon its vesting term.. As of September 30, 2022, the aggregate amount of unvested compensation related to this common stock was approximately $170,000 which will be recognized as an expense as the common shares vest in future periods through February 28, 2024.
Issuance of Restricted Stock to Employees
During the nine months ended September 30, 2022, the Company granted shares of the Company’s restricted stock to employees with a fair value $ or $ per share. The share vest over a two-year period from grant date. During the nine months ended September 30, 2022, the Company issued of these shares of restricted stock with a fair value of $ based upon its vesting term. As of September 30, 2022, the aggregate amount of unvested compensation related to the restricted stock was approximately $23,797 which will be recognized as an expense as the restricted shares vest in future periods through February 28, 2024.
Issuance of Common Stock for Services
During the nine months ended September 30, 2022, the Company issued shares of common stock with an aggregate value of $230,508 to consultants for services rendered.
During the nine months ended September 30, 2021, the Company issued shares of common stock with an aggregate value of $2,164,000 to consultants for services rendered.
Issuance of Common Stock for Acquisition of GameIQ
During the nine months ended September 30, 2022, the Company issued shares of common stock with a fair value of $300,000, or $ per share, as partial consideration paid on the acquisition of GameIQ (see Note 3).
Issuance of Common Stock for Cash
During the nine months ended September 30, 2022, the Company received proceeds of $250,000, from the sale of shares of common stock at an average price of $ per share.
During the nine months ended September 30, 2021, the Company received proceeds of $1,958,466, net of offering costs of $21,686, from the sale of shares of common stock at an average price of $ per share.
Issuance of Common Stock for Settlement of Vendor Balance
During the nine months ended September 30, 2022, the Company issued shares of common stock valued at $36,400 to extinguishment a vendor payable balance of $65,000, and recorded a gain on vendor settlement of $28,600, which was included in other income in the statement of operations during the nine months ended September 30, 2022.
Issuance of Common Stock for Note Payable Extension
During the nine months ended September 30, 2021, the Company issued shares of common stock valued at $7,500 to a noteholder as an extension fee.
Summary of Stock Options
On February 28, 2022, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, approved options exercisable into shares to be issued to its employees. Of the stock options issued, stock options had an exercise price of $ per share, with vesting of % on date of issuance, and then % on each subsequent anniversary date. The remaining stock options had an exercise price of $ per share, with stock options vesting on March 1, 2022, and stock options vesting each month thereafter beginning on April 1, 2022.
The stock options are exercisable at a weighted average price of $ per share with an average life to expiration of approximately . The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $ per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
During the nine months ended September 30, 2022, the Company recognized $138,223 of compensation expense relating to vested stock options. As of September 30, 2022, the aggregate amount of unvested compensation related to stock options was approximately $ which will be recognized as an expense as the options vest in future periods through February 28, 2024.
The weighted average remaining contractual life of common stock options outstanding and exercisable at September 30, 2022 was years. Based on a fair market value of $ per share on September 30, 2022, the intrinsic value attributed to exercisable and unexercised common stock options were $ and $, respectively, at September 30, 2022.
Summary of Warrants
A summary of warrants for the nine months ended September 30, 2022, is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingencies | 10. Contingencies
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceeding that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition, other than the following.
On April 17, 2019, a lawsuit was filed by Dupree Productions, LLC against uBid Holdings, Inc. and Ketan Thakker (Case No. L2019000436) in the Circuit Court of DuPage County, Illinois, alleging that a Partial Equity Payment Agreement dated August 1, 2016, which was intended to compensate services in the amount of $60,000 in return for shares of uBid common stock, was inadequate to compensate for the alleged higher value of advertising and endorsement services of approximately $195,000. The case was dismissed on the basis that there was a binding arbitration clause in the Partial Equity Payment Agreement. On February 3, 2021, the arbitrator awarded DuPree Productions $195,000, and $24,000 in attorneys’ fees, which was included in accrued expenses in the consolidated balance sheets as of December 31, 2021. The Company filed an appeal of the arbitrator’s award. On January 28, 2022, a final settlement of $150,000 was reached, which was paid on May 9, 2022. Since final settlement was $69,000 less than the amount accrued by the Company, a gain on legal settlement of $69,000 was recognized in the statements of operations during the nine months ended September 30, 2022. |
Significant Accounting Policies (Policies) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying consolidated financial statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles (“GAAP”) in the United States.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in valuing equity instruments granted for services, and assumptions used in the determination of the Company’s liquidity.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Recognition | Revenue Recognition
Revenue is recognized when, or as, control of a promised product transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue- producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process:
The Company operates on-line websites that sells discounted restaurant coupons, travel and vacation packages and other merchandise across a wide range of product categories including but not limited to computer products, consumer electronics, apparel, housewares, watches, jewelry, travel, sporting goods, automobiles, home improvement products and collectibles. In addition, we also generate revenues based upon the number of times a third party website(s) or products(s) are accessed or viewed by consumers from the Company’s website or platform.
Sale of Restaurant Coupons
We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Approximately 9-13 days each month we email our customers offers for restaurant discounts based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. A typical restaurant discount deal might offer a $25 discount that can be used toward a $50 purchase at a restaurant. We recognize revenue at a gross basis upon sale and collection of the restaurant coupons from customers. We have no further commitment or obligation to third-party restaurants or the coupon purchasers upon the sale of restaurant coupons and no amounts are due to the third-party restaurants for these sales. Sale of restaurant coupons are generally nonrefundable. The Company accepts a customer’s request to transfer a restaurant coupon from one third-party restaurant to another (e.g. closure of restaurant).
Sale of Travel, Vacation and Merchandise
We also derive revenue from transactions in which we sell complimentary entertainment and travel offerings and consumer products on behalf of third-party merchants. Additional deals include discounted pricing at theaters, movies or other merchants. Customers purchase restaurant deals from us and redeem them with our merchant partners. Approximately 9-13 days each month we email our customers offers for discounted experiences and products based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of our websites that can be redeemed with a third-party merchant for services or goods (or for discounts on services and goods). Revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid by us to our partners.
Advertising Revenues
We also have agreements with selected third party partners such as Google Ads wherein third party website(s) and/or product(s) are shown or incorporated in the Company’s platform or website. We generate revenues based upon the number of times the third party website(s) or product(s) are accessed or viewed by consumers from the Company’s platform or website. Revenue is recognized when its determinable, which is generally upon receipt of statement and/or proceeds from the third party partners.
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2022 and 2021:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2022 and 2021:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (Loss) Per Share |
Basic earnings (loss) per share is computed using the weighted average number of common shares issued and outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes and stock issuable upon the exercise of stock options and warrants, have been excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all convertible notes and stock issuable upon the exercise of stock options and warrants outstanding were anti-dilutive.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising Costs | Advertising Costs
The Company has marketing relationship agreements with various online companies such as portal networks, contextual sites, search engines and affiliate partners. Advertising costs are generally charged to the Company monthly per vendor agreements, which typically are based on visitors and/or registrations delivered to the site or at a set fee. Agreements do not provide for guaranteed renewal and may be terminated by the Company without cause. Such advertising costs are charged to expense as incurred and included in selling, general and administrative expenses in the statements of operations. During the nine months ended September 30, 2022 and 2021, advertising costs were $359,987 and $513,539, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Concentrations | Concentrations
Revenues. During the three months ended September 30, 2022, no customer exceeded 10% of revenues. During the nine months ended September 30, 2022, one customer accounted for 33% of revenues. No customer exceeded 10% of revenues during the prior year periods.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required. Fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying value of the Company’s financial instruments (consisting of cash, accounts receivables, deposits to credit card processor, prepaid expense and other current assets, accounts payable, accrued expenses, notes payable, and other liabilities) are considered to be representative of their respective fair values due to the short-term nature of those instruments.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions and Business Combinations | Acquisitions and Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets with Finite Useful Lives | Intangible Assets with Finite Useful Lives
The Company had certain finite-lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consisted of intellectual property, customer relationships, and capitalized software development costs. Intangible assets with finite useful lives were being amortized using an accelerated method over their respective estimated useful lives.
The Company reviews all finite-lived intangible assets for impairment at least annually at fiscal year-end, or whenever events or circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. On February 28, 2022, the Company recorded a provisional intangible assets of $443,509 as a result of the acquisition of GameIQ (see Note 3).
While we have concluded that a triggering event did not occur during the nine months ended September 30, 2022, a worsening of the severity of the COVID-19 pandemic as well as inflationary pressure to our customers could result in future intangible asset impairment charges. We will continue to monitor the effects of these events on our business, and review for impairment indicators as necessary in the upcoming months.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Segments | Operating Segments
Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
In reaching such a conclusion management evaluated the Company’s reporting units by first identifying its operating segments. The Company then evaluated each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments (“ASC 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables, which may result in the earlier recognition of allowance for losses. ASU 2016-13 is effective beginning January 1, 2023 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination as if it had originated the contracts. This is a shift from existing guidance, which required the acquirer to recognize contract assets and contract liabilities at their fair value as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the guidance provided by ASU 2021-08 prospectively to business combinations occurring on or after January 1, 2023. Early adoption of ASU 2021-08 is permitted, including adoption in an interim period. An entity that early adopts the guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The adoption of ASU 2021-08 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosure.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregation of Revenue | In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2022 and 2021:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2022 and 2021:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Anti-dilutive Securities Excluded from Computation of Earning Loss Per Share |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of GameIQ (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The following is a provisional allocation of the purchase price as determined by the Company’s management. The Company determined that the entire purchase price be allocated to acquired software and technology. The following table summarizes the assets acquired, liabilities assumed and provisional purchase price allocation:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Amortization Expense |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Pro Forma Statements of Operations |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GameIQ Acquisition Corp., Inc [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Provisions of Operations Subsequent Acquisitions | Pursuant to the provisions of ASC 805, the following results of operations of GameIQ subsequent to the acquisitions are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt Assumed Upon Reverse Merger - Past Due (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Debt | Convertible debt assumed upon reverse merger consists of the following at September 30, 2022 and December 31, 2021:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition Notes Payable (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Acquisition Notes Payable | Acquisition notes payable consists of the following at September 30, 2022 and December 31, 2021:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Government Assistance Notes Payable (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable | Government Assistance Notes Payable consists of the following at September 30, 2022, and December 31, 2021:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholder’s Deficit (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Warrants | A summary of warrants for the nine months ended September 30, 2022, is as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2022 |
Dec. 31, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||
| Net loss | $ 566,911 | $ 684,358 | $ 1,555,849 | $ 4,696,816 | ||||
| Net cash used in operations | 717,244 | 1,294,711 | ||||||
| Shareholders' deficit | 2,341,006 | $ 2,189,253 | 2,341,006 | $ 2,189,253 | $ 1,817,371 | $ 3,019,739 | $ 1,528,283 | $ 2,605,359 |
| Cash | $ 1,462,750 | $ 1,462,750 | $ 1,930,325 | |||||
Schedule of Anti-dilutive Securities Excluded from Computation of Earning Loss Per Share (Details) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 1,055,717 | 643,737 |
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 24,258 | 19,286 |
| Common Stock Issuable [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 383,343 | 383,343 |
| Common Stock Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 54,000 | |
| Common Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 648,116 | 187,108 |
Significant Accounting Policies (Details Narrative) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022
USD ($)
Integer
|
Sep. 30, 2021
USD ($)
|
Feb. 28, 2022
USD ($)
|
|
| Product Information [Line Items] | ||||
| Discounted deals on online purchase | $ 25 | |||
| Purchase from restaurant | 50 | |||
| Advertising expense | $ 359,987 | $ 513,539 | ||
| Operating segment | Integer | 1 | |||
| Game iQ [Member] | ||||
| Product Information [Line Items] | ||||
| Intangible asset | $ 443,509 | |||
| Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
| Product Information [Line Items] | ||||
| Concentration risk percentage | 10.00% | |||
| One Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
| Product Information [Line Items] | ||||
| Concentration risk percentage | 33.00% | |||
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) |
Jan. 31, 2022
USD ($)
|
|---|---|
| Business Acquisition [Line Items] | |
| Acquired assets (cash) | $ 12,805 |
| Acquired software and technology | 443,509 |
| Total purchase price | 456,314 |
| GameIQ Acquisition Corp., Inc [Member] | |
| Business Acquisition [Line Items] | |
| Notes payable | 140,914 |
| Government assistance note payable and accrued interest (EIDL) | 15,400 |
| Common stock (600,000 shares of common stock at $0.50 per share) | 300,000 |
| Total consideration paid | $ 456,314 |
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) (Parenthetical) - GameIQ Acquisition Corp., Inc [Member] |
Jan. 31, 2022
$ / shares
shares
|
|---|---|
| Business Acquisition [Line Items] | |
| Number of stock issued | shares | 600,000 |
| Price per share | $ / shares | $ 0.50 |
Schedule of Finite-Lived Intangible Assets (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Acquired Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | $ 443,509 | |
| Intangible asset assigned life | 2 years | |
| Accumulated amortization | $ (86,667) | |
| Total acquired software and technology, net of amortization | 356,842 | |
| Software and Technology [Member] | ||
| Acquired Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | $ 443,509 | |
| Intangible asset assigned life | 24 months |
Schedule of Future Amortization Expense (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Business Combination and Asset Acquisition [Abstract] | ||
| 2022 (remaining) | $ 98,129 | |
| 2023 | 221,754 | |
| 2024 | 36,959 | |
| Total acquired software and technology, net of amortization | $ 356,842 |
Schedule of Pro Forma Statements of Operations (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Business Combination and Asset Acquisition [Abstract] | ||
| Revenues | $ 3,400,253 | $ 1,610,648 |
| Operating expenses | ||
| Direct cost of revenues | 637,992 | 213,221 |
| Selling, general and administrative expenses | 4,245,233 | 5,223,794 |
| Amortization of intangible assets | 61,905 | 484,574 |
| Total operating expenses | 4,945,130 | 5,921,589 |
| Loss from operations | (1,544,877) | (4,310,941) |
| Other income | ||
| Other income | 1,037,998 | 573,443 |
| Total Other income | 1,037,998 | 573,443 |
| Net loss | $ (506,879) | $ (3,737,498) |
Schedule of Provisions of Operations Subsequent Acquisitions (Details) - USD ($) |
3 Months Ended | 7 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Business Acquisition [Line Items] | |||||
| Revenues | $ 824,747 | $ 847,386 | $ 3,395,681 | $ 2,446,647 | |
| Selling, general and administrative expense | (1,315,716) | (1,298,982) | (4,227,766) | (6,364,348) | |
| Net loss | $ (596,342) | $ (712,721) | $ (517,851) | $ (4,151,736) | |
| Game iQ [Member] | |||||
| Business Acquisition [Line Items] | |||||
| Revenues | $ 12,514 | ||||
| Direct cost of revenues | (15,335) | ||||
| Selling, general and administrative expense | (14,930) | ||||
| Net loss | $ (17,752) | ||||
Acquisition of GameIQ (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Jan. 31, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Feb. 28, 2022 |
Feb. 01, 2022 |
|
| Business Acquisition [Line Items] | |||||||
| Intangible asset assigned life | 2 years | ||||||
| Amortization expense | $ 37,144 | $ 144,000 | $ 86,668 | $ 480,000 | |||
| GameIQ Acquisition Corp., Inc [Member] | |||||||
| Business Acquisition [Line Items] | |||||||
| Notes payable | $ 140,914 | ||||||
| Bearing interest | 1.00% | 1.00% | |||||
| Share price | $ 0.50 | $ 0.50 | |||||
| Restricted Stock [Member] | GameIQ Acquisition Corp., Inc [Member] | |||||||
| Business Acquisition [Line Items] | |||||||
| Restricted shares issued | 600,000 | ||||||
| Fair value of common stock | $ 300,000 | ||||||
Deposit with Credit Card Processor (Details Narrative) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Outstanding security deposit | $ 87,237 | $ 87,237 |
Leases (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2019 |
Dec. 31, 2021 |
|
| Leases | |||
| Payments for rent | $ 368,000 | ||
| Operating lease right-of-use assets | $ 134,206 | $ 219,739 | |
| Changes in operating lease right of use asset | 85,533 | ||
| Operating lease liabilities | 140,800 | 222,096 | |
| Operating lease payments | 81,296 | ||
| Operating lease liability, current portion | $ 113,675 | $ 110,499 |
Schedule of Convertible Debt (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Total principal and accrued interest | $ 36,387 | $ 31,537 |
| Convertible Debt [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total principal balance | 20,000 | 20,000 |
| Accrued interest | 16,387 | 11,537 |
| Total principal and accrued interest | $ 36,387 | $ 31,537 |
Convertible Debt Assumed Upon Reverse Merger - Past Due (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Convertible Debt [Member] | ||
| Debt Instrument [Line Items] | ||
| Convertible debt assumed transaction principal balance outstanding | $ 20,000 | $ 20,000 |
| Interest payable | 16,387 | 11,537 |
| Merger Agreement [Member] | Convertible Debt [Member] | ||
| Debt Instrument [Line Items] | ||
| Convertible debt assumed transaction principal balance outstanding | 20,000 | |
| Interest payable | $ 16,387 | $ 11,537 |
| Shares issued price per share | $ 1.50 | |
| Convertible of common shares | shares | 24,258 | |
| Minimum [Member] | Merger Agreement [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt interest rate | 8.00% | |
| Maximum [Member] | Merger Agreement [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt interest rate | 22.00% |
Schedule of Acquisition Notes Payable (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | $ 127,788 | |
| Accrued interest | 481 | |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 1,627,778 | $ 1,500,000 |
| Accrued interest | 229,550 | 162,300 |
| Total principal and accrued interest | 1,857,328 | 1,662,300 |
| Less current portion | (1,762,905) | |
| Non-current portion | 94,424 | 1,662,300 |
| Acquisition Note Payable [Member] | GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 127,788 | |
| Acquisition Note Payable [Member] | Restaurant.com, Inc. [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | $ 1,500,000 | $ 1,500,000 |
Schedule of Notes Payable (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| Total principal balance | $ 664,500 | $ 1,675,535 |
| Accrued interest | 39,259 | 25,321 |
| Total principal and accrued interest | 703,759 | 1,700,856 |
| Less current portion | (11,359) | (11,115) |
| Non-current portion | 692,400 | 1,689,741 |
| Paycheck Protection Loan [Member] | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| Total principal balance | 1,025,535 | |
| Economic Injury Disaster Loans [Member] | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| Total principal balance | $ 664,500 | $ 650,000 |
Summary of Stock Options (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Feb. 28, 2022 |
Sep. 30, 2022 |
|
| Equity [Abstract] | ||
| Number of Options beginning balance outstanding | $ 187,116 | |
| Weighted Average Exercise Price Options begining balance outstanding | 12.38 | |
| Number of Options, granted | 461,000 | |
| Weighted Average Exercise Price, Options granted | 1.43 | |
| Number of Options, exercised | ||
| Weighted Average Exercise Price, Options exercised | ||
| Number of Options expired or forfeited | ||
| Weighted Average Exercise Price, Options expired or forfeited | $ 1.25 | |
| Number of Options ending balance outstanding | 648,116 | |
| Weighted Average Exercise Price Options ending balance outstanding | 4.59 | |
| Number of Options balance exercisable | 439,162 | |
| Weighted Average Exercise Price Options balance exercisable | $ 6.10 |
Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Jan. 28, 2022 |
Feb. 03, 2021 |
Apr. 17, 2019 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Commitments and Contingencies Disclosure [Abstract] | |||||||
| Return for shares of uBid common stock | $ 60,000 | $ 1,958,466 | |||||
| Advertising and endorsement services | $ 195,000 | ||||||
| Accrued bonuses, current | $ 195,000 | ||||||
| Legal fees | $ 24,000 | ||||||
| Final litigation settlement, expense | $ 150,000 | $ 69,000 | |||||
| Gain litigation settlement, expense | $ 69,000 | ||||||