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 | ||
| OTC Market Groups Inc. |
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 May 5, 2023.
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 March 31, 2023 (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 10-K for the year ended December 31, 2022. 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. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (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 | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Government assistance notes payable, current portion | ||||||||
| Operating lease liability | ||||||||
| Convertible debt assumed upon reverse merger, including accrued interest of $ | ||||||||
| Acquisition notes payable, current portion, including accrued interest of $ | ||||||||
| Total current liabilities | ||||||||
| Acquisition notes payable, including accrued interest of $ | ||||||||
| Government assistance notes payable, including accrued interest of $ | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ deficiency: | ||||||||
| Preferred stock, $ par value, shares authorized; issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable, shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficiency | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficiency | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
RDE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2023 and 2022
(Unaudited)
| Three Months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses | ||||||||
| Cost of revenues | ||||||||
| Selling, general and administrative expenses | ||||||||
| Amortization of intangible assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest | ( | ) | ( | ) | ||||
| Gain on legal settlement | ||||||||
| Gain from forgiveness of government assistance notes payable | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Net loss per share – basic | $ | ( | ) | $ | ||||
| Net loss per share –diluted | $ | ( | ) | $ | ||||
| Weighted average common shares outstanding – basic | ||||||||
| Weighted average common shares outstanding – diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
RDE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
For the Three Months Ended March 31, 2023
(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, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | - | - | - | |||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for directors | - | - | - | |||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock on conversion of acquisition note | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Three Months Ended March 31, 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 for employees | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for GameIQ acquisition | - | - | ||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
RDE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2023 and 2022
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Amortization of intangible assets | ||||||||
| Fair value of vested stock options | ||||||||
| Fair value of common stock issued for board of directors | ||||||||
| Fair value of common stock issued for employees | ||||||||
| 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 | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash acquired on GameIQ acquisition | ||||||||
| Net cash provided by financing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of acquisition obligation | ( | ) | ||||||
| Repayment of notes payable - government assistance loans | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net 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: | ||||||||
| Common stock issued on conversion of acquisition note principal and interest | $ | $ | ||||||
| Goodwill and intangible assets acquired 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 | $ | $ | ||||||
The accompanying notes are integral part of these condensed consolidated financial statements.
| F-4 |
RDE, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(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 March 31, 2023 and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. 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 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 7, 2023.
The results of operations for the three months ended March 31, 2023 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 three
months ended March 31, 2023, the Company recorded a net loss of $
| F-5 |
At
March 31, 2023, the Company had cash on hand in the amount of $
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 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 accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
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-6 |
The Company operates online websites that sell 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, the Company also generates 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
The
Company derives its revenue from transactions in which it sells discount certificates for restaurants on behalf of third-party restaurants.
Approximately 9 to 13 days each month the Company emails its customers offers for restaurant discounts based on location and personal
preferences. Consumers also access deals offered by the Company directly through the Company’s websites and mobile applications.
A typical restaurant discount deal might offer a $
Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be used to redeem for restaurant coupons offered by the Company on its website. Based on the Company’s historical redemption rates of its promotional gift cards, a portion of the sale of gift card revenue is recorded as deferred revenue liability at the time of sale and recognized as revenue in future periods based on historical redemption trend rates, but no longer than 24 months from the date of sale. The Company continues to review historical promotional gift card redemption information and considers any changes in redemption patterns to assess when revenue is realized. Future redemption rates may be different than our historical experience and subject to inherent uncertainty. If actual redemption activity differs significantly from our historical experience, our deferred revenue and results of operations could be materially impacted.
Sale of Travel, Vacation and Merchandise
The Company also derives revenue from transactions in which it sells complementary 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 the Company and redeem them with the Company’s merchant partners. Approximately 9 to 13 days each month the Company emails its customers offers for discounted experiences and products based on location and personal preferences. Consumers also access the Company’s deals directly through the Company’s websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of the Company’s 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 the Company to its partners.
Advertising Revenues
The Company also has 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. The Company generates 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 a statement and/or proceeds from the third-party partners.
| F-7 |
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended March 31, 2022 | ||||||||||||||||
| 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.
March 31, 2023 | March 31, 2022 | |||||||
| 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.
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.
| F-8 |
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 three months ended March 31, 2023 and 2022, advertising costs were $
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.
Cash
The
Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured
by the Federal Deposit Insurance Corporation (the “FDIC”). The Company may periodically have cash balances in financial institutions
in excess of FDIC insurance limits of $
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.
| F-9 |
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 was effective beginning January 1, 2023 and early adoption is permitted. The Company adopted ASU 2016-13, and that adoption did not 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 did not 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. 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 $
4. Right-of-Use Assets and Operating Lease Liabilities
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 operating lease 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.
| F-10 |
As
of December 31, 2022, the ROU assets were $
As
of December 31, 2022, operating lease liabilities were $
5. Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at March 31, 2023 and December 31, 2022:
March 31, 2023 | December 31, 2022 | |||||||
| Total principal balance | $ | $ | ||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | $ | $ | ||||||
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
6. Acquisition Notes Payable
Acquisition notes payable consists of the following at March 31, 2023 and December 31, 2022:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| 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 (the “Holders”), one for $
| F-11 |
As
of December 31, 2022, the notes payable had an aggregate principal balance outstanding 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 $
As
of December 31, 2022, the note payable had a principal balance outstanding of $
7. Government Assistance Notes Payable
Government Assistance Notes Payable consists of the following at March 31, 2023, and December 31, 2022:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Economic Injury/Disaster Loans | $ | $ | ||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
Economic Injury Disaster Loans (EIDL):
On
June 17, 2020, the Company received $
The
loans bear interest at
| F-12 |
8. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022, the Company had shares and shares, respectively, of common stock issued and outstanding.
Common Stock Transactions
Issuance of Common Stock on Conversion of Acquisition Note
On
March 1, 2023, the principal and interest balance of approximately $
Issuance of Restricted Stock to Directors
During
the year ended December 31, 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 year ended December 31, 2022,
the Company issued of these shares of common stock with a fair value of $
Issuance of Restricted Stock to Employees
During
the year ended December 31, 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 year ended December 31, 2022, the
Company issued of these shares of restricted stock with a fair value of $ based upon its vesting term. During the three
months ended March 31, 2023, the Company recognized $
Summary of Stock Options
| Number of Options | Weighted Average Exercise Price | |||||||
| Balance outstanding, December 31, 2022 | ||||||||
| Options granted | ||||||||
| Options exercised | ||||||||
| Options expired or forfeited | ||||||||
| Balance outstanding, March 31, 2023 | $ | |||||||
| Balance exercisable, March 31, 2023 | $ | |||||||
During
the three months ended March 31, 2023, the Company recognized $
The weighted average remaining contractual life of common stock options outstanding and exercisable at March 31, 2023 was years. Based on a fair market value of $ per share on March 31, 2023, the intrinsic value attributed to exercisable but unexercised common stock options was $ at March 31, 2023.
9. 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.
10. Subsequent Events
Subsequent
to March 31, 2023, the Company received net proceeds of approximately $
| F-13 |
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 10-K for the year ended December 31, 2022, 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, 2022 , 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 31, 2022.
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 in fiscal 2023.
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.
Going Concern
During the three months ended March 31, 2023, we incurred a net loss of $424,916, utilized cash in operations of $350,814, and had a stockholders’ deficiency of $1,651,272 as of March 31, 2023. At March 31, 2023, we had cash of $755,478 available to fund its operations, including expansion plans, and to service its debt. Subsequent to March 31, 2023, we received net proceeds of approximately $1.88 million for the sale of 937,500 shares of common stock at $2.00 per share, as part of a private placement.
Our condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced operating losses and negative operating cash flows during 2022 and 2021. We have financed our working capital requirements through borrowings from various sources and the sale of our equity securities.
Our operations have been significantly and negatively impacted by the COVID-19 pandemic. Due to the uncertain and rapidly evolving nature of current conditions around the world, we are unable to predict accurately the impact that the COVID-19 pandemic will have on its business going forward. We expect 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 for an extended period of time.
As a result, management has concluded that there is substantial doubt about our 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, 2022, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus may have on the Company’s business plans and the amount and type of financing available to the Company in the future.
If the Company is unable to obtain the cash resources necessary to satisfy the Company’s ongoing cash requirements, the Company could be required to scale back its business activities or to discontinue its operations entirely.
| 2 |
Results of Operations - Three months ended March 31, 2023, compared to three months ended March 31, 2022
Revenue
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | 269,178 | $ | 60,270 | $ | 53,228 | $ | 382,676 | ||||||||
| Business to business (B2B) | 429,035 | - | - | 429,035 | ||||||||||||
| Other | - | - | - | - | ||||||||||||
| Total | $ | 698,213 | $ | 60,270 | $ | 53,228 | $ | 811,711 | ||||||||
| Three Months Ended March 31, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | 197,238 | $ | 76,728 | $ | 48,831 | $ | 322,797 | ||||||||
| Business to business (B2B) | 428,775 | - | - | 428,775 | ||||||||||||
| Other | 8,208 | - | - | 8,208 | ||||||||||||
| Total | $ | 634,221 | $ | 76,728 | $ | 48,831 | $ | 759,780 | ||||||||
Revenue for the three months ended March 31, 2023, was $811,711, an increase of approximately $51,931 or 7%, as compared to $759,780 in the same period of the prior year. The increase in revenue was from B2C and B2B, including the addition of new customers for these services.
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 $94,877 during the three months ended March 31, 2023, as compared to $100,565 during the three months ended March 31, 2022. During the three months ended March 31, 2023 and 2022, our cost of revenues, as a percentage of revenue, was 12% and 13%, respectively. The decrease in cost of revenues, as a percentage of revenue, was due from B2B services that had lower costs than B2C for the issuance of 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.
| 3 |
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 $1,116,020 during the three months ended March 31, 2023, as compared to $1,436,595 during the three months ended March 31, 2022, a decrease of $320,575. The decrease was related mainly to a $221,873 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 increased $98,703 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 $0 and $18,480 during the three months ended March 31, 2023 and 2022, respectively.
Loss from Operations
For the three months ended March 31, 2023, we incurred a loss from operations of $399,185, as compared to a loss from operations of $795,860 for the three months ended March 31, 2022. 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 expenses of $25,731 for the three months ended March 31, 2023, as compared to other income of $1,067,941 for the three months ended March 31, 2022. Other income for the three months ended March 31, 2022, consisted of a gain on legal settlement of $69,000, and a gain from the forgiveness of a government assistance loan of $1,025,535, both which did not occur in the current year period. Interest expense was $25,731 for the three months ended March 31, 2023, as compared to interest expense of $26,594 for the three months ended March 31, 2022.
Net Loss
We realized a net loss of $424,916 for the three months ended March 31, 2023, as compared to generating a net income of $272,081 for the three months ended March 31, 2022. The change to net loss from net income was primarily from recording a gain on legal settlement of $69,000, and a gain from the forgiveness of a government assistance loan of $1,025,535, which did not occur in the current year period, offset by the increase in revenue and decreased operating expenses during the three months ended March 31, 2023, as compared to the prior year period.
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 three months ended March 31, 2023, the Company recorded a net loss of $424,916, used cash in operations of $350,814, and had a stockholders’ deficit of $1,651,272 at March 31, 2023. 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.
| 4 |
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, 2022, 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 March 31, 2023, we had cash on hand in the amount of $755,478. Subsequent to March 31, 2023, we received net proceeds of approximately $1.88 million for the sale of 937,500 shares of common stock at $2.00 per share, as part of a private placement. 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.
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (350,814 | ) | $ | (431,356 | ) | ||
| Net cash provided by investing activities | - | 12,805 | ||||||
| Net cash provided by (used in) financing activities | (16,617 | ) | - | |||||
| Net increase (decrease) in cash | $ | (367,480 | ) | $ | (418,774 | ) | ||
Operating Activities
Cash provided by or used in operating activities primarily consists of net loss adjusted for certain non-cash items, including amortization of intangible assets, impairment 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 three months ended March 31, 2023 was approximately $350,814 and consisted of a net loss of $424,916, adjustments for non-cash vested stock options, which totaled $52,662, and $21,440 in changes in working capital and other activities.
Cash used in operating activities for the three months ended March 31, 2022 was approximately $431,356 and consisted of a net income of approximately $272,081, 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 $774,593, and $71,156 used in working capital and other activities.
Investing Activities
The Company had no investing activities for the three months ended March 31, 2023. Cash used in investing activities for the three months ended March 31, 2022 was $12,805 and was cash received on the acquisition of GameIQ.
Financing Activities
For the three months ended March 31, 2023, cash used in financing activities was $16,667, which was from $12,905 of principal payments on our acquisition notes payable, and $3,763 in principal payments on our note payable – government assistance loans. The Company had no financing activities for the three months ended March 31, 2022.
| 5 |
Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at March 31, 2023 and December 31, 2022:
March 31, 2023 | December 31, 2022 | |||||||
| Total principal balance | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest | 17,887 | 17,137 | ||||||
| Total principal and accrued interest | $ | 37,887 | $ | 37,137 | ||||
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 March 31, 2023 and December 31, 2022, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $17,887 and $17,137, respectively. As of March 31, 2023, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 25,258 shares of the Company’s common stock.
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.
As of December 31, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $688. During the three months ended March 31, 2023, the Company made principal payments of $12,675. As of March 31, 2023, the notes payable had an aggregate principal balance outstanding of $115,103 and accrued interest payable of $433.
Government Assistance Notes Payable
Government Assistance Notes Payable consists of the following at March 31, 2023, and December 31, 2022:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Economic Injury/Disaster Loans | $ | 657,274 | $ | 661,035 | ||||
| Accrued interest | 45,615 | 45,541 | ||||||
| Total principal and accrued interest | 702,889 | 706,576 | ||||||
| Less current portion | (15,217 | ) | (15,217 | ) | ||||
| Non-current portion | $ | 687,672 | $ | 691,359 | ||||
| 6 |
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.
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 March 31, 2023 and December 31, 2022, the note payable had a principal balance outstanding of $657,274 and $661,035 and accrued interest payable of $45,615 and $45,541 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 10-K for the fiscal year ended December 31, 2022, that impacted our condensed consolidated financial statements and related notes included herein.
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 March 31, 2023, 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.
| 7 |
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2023, 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.
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.
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
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
| 8 |
Item 5. Other Information
None.
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. |
| 9 |
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: | May 15, 2023 | By: | /s/ Ketan Thakker |
| Ketan Thakker | |||
| President, Chief Executive Officer and Principal Financial Officer | |||
| 10 |
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: | May 15, 2023 | /s/ Ketan Thakker |
| Ketan Thakker | ||
Chief Executive Officer (Principal 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: | May 15, 2023 | /s/ Ketan Thakker |
| Ketan Thakker | ||
| Principal Financial and Accounting 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 March 31, 2023 (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: | May 15, 2023 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
President and Chief Executive Officer (Principal 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 March 31, 2023 (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: | May 15, 2023 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
Chief Financial Officer (Principal Financial and Accounting 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 ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| 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 | 14,707,237 | 14,152,378 |
| Common stock, shares outstanding | 14,707,237 | 14,152,378 |
| Common stock issuable, shares | 383,343 | 383,343 |
| Convertible Debt [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable current | $ 17,887 | $ 17,137 |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable current | 0 | 251,507 |
| Interest payable non current | 433 | 687 |
| Government Assistance Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Interest payable non current | $ 45,615 | $ 45,541 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Revenues | $ 811,711 | $ 759,780 |
| Operating expenses | ||
| Cost of revenues | 94,877 | 100,565 |
| Selling, general and administrative expenses | 1,116,019 | 1,436,595 |
| Amortization of intangible assets | 18,480 | |
| Total operating expenses | 1,210,896 | 1,555,640 |
| Loss from operations | (399,185) | (795,860) |
| Other Income (Expense) | ||
| Interest | (25,731) | (26,594) |
| Gain on legal settlement | 69,000 | |
| Gain from forgiveness of government assistance notes payable | 1,025,535 | |
| Total other income (expense) | (25,731) | 1,067,941 |
| Net income (loss) | $ (424,916) | $ 272,081 |
| Net loss per share – basic | $ (0.03) | $ 0.02 |
| Net loss per share –diluted | $ (0.03) | $ 0.02 |
| Weighted average common shares outstanding – basic | 14,343,496 | 13,197,637 |
| Weighted average common shares outstanding – diluted | 14,343,496 | 14,127,647 |
Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Accounting Policies [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 March 31, 2023 and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. 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 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 7, 2023.
The results of operations for the three months ended March 31, 2023 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 three months ended March 31, 2023, the Company recorded a net loss of $424,916 and used cash in operations of $350,814 and had a stockholders’ deficit of $1,651,272 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, 2022, 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 March 31, 2023, the Company had cash on hand in the amount of $755,478. Subsequent to March 31, 2023, the Company received net proceeds of approximately $1.88 million for the sale of shares of common stock at $ per share, as part of a private placement (see Note 10). 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.
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Significant Accounting Policies |
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| 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 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 accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
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 online websites that sell 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, the Company also generates 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
The Company derives its revenue from transactions in which it sells discount certificates for restaurants on behalf of third-party restaurants. Approximately 9 to 13 days each month the Company emails its customers offers for restaurant discounts based on location and personal preferences. Consumers also access deals offered by the Company directly through the Company’s 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. The Company recognizes revenue on a gross basis upon sale and collection of the restaurant coupons from customers. The Company has 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 non-refundable. On an infrequent case-by-case basis, the Company will accept customer’s request to transfer a restaurant coupon from one third-party restaurant to another (for example, upon the closure of a restaurant).
Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be used to redeem for restaurant coupons offered by the Company on its website. Based on the Company’s historical redemption rates of its promotional gift cards, a portion of the sale of gift card revenue is recorded as deferred revenue liability at the time of sale and recognized as revenue in future periods based on historical redemption trend rates, but no longer than 24 months from the date of sale. The Company continues to review historical promotional gift card redemption information and considers any changes in redemption patterns to assess when revenue is realized. Future redemption rates may be different than our historical experience and subject to inherent uncertainty. If actual redemption activity differs significantly from our historical experience, our deferred revenue and results of operations could be materially impacted.
Sale of Travel, Vacation and Merchandise
The Company also derives revenue from transactions in which it sells complementary 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 the Company and redeem them with the Company’s merchant partners. Approximately 9 to 13 days each month the Company emails its customers offers for discounted experiences and products based on location and personal preferences. Consumers also access the Company’s deals directly through the Company’s websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of the Company’s 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 the Company to its partners.
Advertising Revenues
The Company also has 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. The Company generates 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 a 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 March 31, 2023 and 2022:
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 three months ended March 31, 2023 and 2022, advertising costs were $71,999 and $125,549, respectively.
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.
Cash
The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”). The Company may periodically have cash balances in financial institutions in excess of FDIC insurance limits of $250,000. The Company has not experienced any losses to date resulting from this practice.
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 was effective beginning January 1, 2023 and early adoption is permitted. The Company adopted ASU 2016-13, and that adoption did not 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 did not 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.
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Deposit with Credit Card Processor |
3 Months Ended |
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Mar. 31, 2023 | |
| Deposit with Credit Card Processor | 3. 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 March 31, 2023 and December 31, 2022.
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Right-of-Use Assets and Operating Lease Liabilities |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Right-of-use Assets And Operating Lease Liabilities | |
| Right-of-Use Assets and Operating Lease Liabilities | 4. Right-of-Use Assets and Operating Lease Liabilities
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 operating lease 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.
As of December 31, 2022, the ROU assets were $52,608. During the three months ended March 31, 2023, the Company reflected a change in its ROU asset of $22,391, resulting in a ROU asset balance of $30,217 as of March 31, 2023.
As of December 31, 2022, operating lease liabilities were $59,328. During the three months ended March 31, 2023, the Company made lease payments of $23,108 towards its operating lease liability. As of March 31, 2023, ROU lease liabilities under operating leases totaled $36,220.
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Convertible Debt Assumed Upon Reverse Merger - Past Due |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debt Assumed Upon Reverse Merger - Past Due | 5. Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible debt assumed upon reverse merger consists of the following at March 31, 2023 and December 31, 2022:
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 March 31, 2023 and December 31, 2022, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $17,887 and $17,137, respectively. As of March 31, 2023, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $ per share into shares of the Company’s common stock.
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Acquisition Notes Payable |
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| Acquisition Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition Notes Payable | 6. Acquisition Notes Payable
Acquisition notes payable consists of the following at March 31, 2023 and December 31, 2022:
GameIQ Acquisition Note Payable
On February 1, 2022, notes payable for the purchase of GameIQ was issued to two holders (the “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.
As of December 31, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $688. During the three months ended March 31, 2023, the Company made principal payments of $12,675. As of March 31, 2023, the notes payable had an aggregate principal balance outstanding of $115,103 and accrued interest payable of $433.
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 matured 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 December 31, 2022, the note payable had a principal balance outstanding of $1,500,000 and accrued interest payable of $251,507. On March 1, 2023, the principal and interest balance of approximately $1,770,000 was converted into shares of the Company’s common stock, and the note was retired.
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Government Assistance Notes Payable |
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| Government Assistance Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable | 7. Government Assistance Notes Payable
Government Assistance Notes Payable consists of the following at March 31, 2023, and December 31, 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.
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 March 31, 2023 and December 31, 2022, the note payable had a principal balance outstanding of $657,274 and $661,035 and accrued interest payable of $45,615 and $45,541 respectively.
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Stockholder’s Deficit |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholder’s Deficit | 8. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022, the Company had shares and shares, respectively, of common stock issued and outstanding.
Common Stock Transactions
Issuance of Common Stock on Conversion of Acquisition Note
On March 1, 2023, the principal and interest balance of approximately $1,770,000 for the Restaurant.com acquisition note payable (see Note 7) was converted into shares of the Company’s common stock, and the note was retired.
Issuance of Restricted Stock to Directors
During the year ended December 31, 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 year ended December 31, 2022, the Company issued of these shares of common stock with a fair value of $220,000 based upon its vesting term. As of December 31, 2022, the aggregate amount of unvested compensation related to this common stock was approximately $140,000. During the three months ended March 31, 2023, the Company recognized $30,000 of expense related to the vesting of restricted shares, leaving $110,000 remaining to be expensed upon vesting in future periods through February 28, 2024.
Issuance of Restricted Stock to Employees
During the year ended December 31, 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 year ended December 31, 2022, the Company issued of these shares of restricted stock with a fair value of $ based upon its vesting term. During the three months ended March 31, 2023, the Company recognized $4,167 of expense related to the vesting of restricted shares, leaving $15,496 remaining to be expensed upon vesting in future periods through February 28, 2024.
Summary of Stock Options
During the three months ended March 31, 2023, the Company recognized $18,494 of compensation expense relating to vested stock options. As of March 31, 2023, 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 March 31, 2023 was years. Based on a fair market value of $ per share on March 31, 2023, the intrinsic value attributed to exercisable but unexercised common stock options was $ at March 31, 2023.
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Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingencies | 9. 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.
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Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 10. Subsequent Events
Subsequent to March 31, 2023, the Company received net proceeds of approximately $1.88 million for the sale of shares of common stock at $ per share, as part of a private placement.
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Significant Accounting Policies (Policies) |
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| 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.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with 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 accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
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| 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 online websites that sell 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, the Company also generates 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
The Company derives its revenue from transactions in which it sells discount certificates for restaurants on behalf of third-party restaurants. Approximately 9 to 13 days each month the Company emails its customers offers for restaurant discounts based on location and personal preferences. Consumers also access deals offered by the Company directly through the Company’s 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. The Company recognizes revenue on a gross basis upon sale and collection of the restaurant coupons from customers. The Company has 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 non-refundable. On an infrequent case-by-case basis, the Company will accept customer’s request to transfer a restaurant coupon from one third-party restaurant to another (for example, upon the closure of a restaurant).
Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be used to redeem for restaurant coupons offered by the Company on its website. Based on the Company’s historical redemption rates of its promotional gift cards, a portion of the sale of gift card revenue is recorded as deferred revenue liability at the time of sale and recognized as revenue in future periods based on historical redemption trend rates, but no longer than 24 months from the date of sale. The Company continues to review historical promotional gift card redemption information and considers any changes in redemption patterns to assess when revenue is realized. Future redemption rates may be different than our historical experience and subject to inherent uncertainty. If actual redemption activity differs significantly from our historical experience, our deferred revenue and results of operations could be materially impacted.
Sale of Travel, Vacation and Merchandise
The Company also derives revenue from transactions in which it sells complementary 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 the Company and redeem them with the Company’s merchant partners. Approximately 9 to 13 days each month the Company emails its customers offers for discounted experiences and products based on location and personal preferences. Consumers also access the Company’s deals directly through the Company’s websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of the Company’s 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 the Company to its partners.
Advertising Revenues
The Company also has 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. The Company generates 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 a 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 March 31, 2023 and 2022:
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| 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.
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| 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.
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| 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 three months ended March 31, 2023 and 2022, advertising costs were $71,999 and $125,549, respectively.
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| 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.
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| Cash | Cash
The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”). The Company may periodically have cash balances in financial institutions in excess of FDIC insurance limits of $250,000. The Company has not experienced any losses to date resulting from this practice.
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| 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.
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| 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 was effective beginning January 1, 2023 and early adoption is permitted. The Company adopted ASU 2016-13, and that adoption did not 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 did not 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. |
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Significant Accounting Policies (Tables) |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 March 31, 2023 and 2022:
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| Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share |
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Convertible Debt Assumed Upon Reverse Merger - Past Due (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Debt | Convertible debt assumed upon reverse merger consists of the following at March 31, 2023 and December 31, 2022:
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Acquisition Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Acquisition Notes Payable | Acquisition notes payable consists of the following at March 31, 2023 and December 31, 2022:
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Government Assistance Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable | Government Assistance Notes Payable consists of the following at March 31, 2023, and December 31, 2022:
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Stockholder’s Deficit (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options |
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Basis of Presentation (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | ||||
| Net loss | $ 424,916 | $ (272,081) | ||
| Net cash in operations | 350,814 | 431,356 | ||
| Stockholders' deficiency | 1,651,272 | $ 2,173,123 | $ 3,049,017 | $ 3,019,739 |
| Cash | 755,478 | $ 1,122,958 | ||
| Net proceeds of issuance of shares | $ 1,880,000 | |||
| Issuance of shares | 937,500 | |||
| Sale of stock price per share | $ 2.00 | |||
Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 1,056,717 | 688,069 |
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 25,258 | 19,286 |
| Common Stock Issuable [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 383,343 | |
| Common Stock Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 20,667 | |
| Common Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 648,116 | 648,116 |
Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Accounting Policies [Abstract] | ||
| Discounted deals on online purchase | $ 25 | |
| Purchase from restaurant | 50 | |
| Advertising expense | 71,999 | $ 125,549 |
| Cash, FDIC Insured Amount | $ 250,000 | |
Deposit with Credit Card Processor (Details Narrative) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Outstanding security deposit | $ 87,237 | $ 87,237 |
Right-of-Use Assets and Operating Lease Liabilities (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Right-of-use Assets And Operating Lease Liabilities | ||
| Operating lease right of use asset | $ 30,217 | $ 52,608 |
| Changes in operating lease right of use asset | 22,391 | |
| Operating lease liabilities | 36,220 | $ 59,328 |
| Operating lease payments | $ 23,108 |
Schedule of Convertible Debt (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Business Combination, Separately Recognized Transactions [Line Items] | ||
| Total principal and accrued interest | $ 37,887 | $ 37,137 |
| Reverse Merger [Member] | ||
| Business Combination, Separately Recognized Transactions [Line Items] | ||
| Total principal balance | 20,000 | 20,000 |
| Accrued interest | 17,887 | 17,137 |
| Total principal and accrued interest | $ 37,887 | $ 37,137 |
Convertible Debt Assumed Upon Reverse Merger - Past Due (Details Narrative) - Merger Agreement [Member] - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Nov. 05, 2018 |
|
| Convertible Debt [Member] | |||
| Debt Instrument [Line Items] | |||
| Convertible debt assumed transaction principal balance outstanding | $ 20,000 | ||
| Interest payable | $ 17,887 | $ 17,137 | |
| Shares issued price per share | $ 1.50 | ||
| Convertible of common shares | shares | 25,258 | ||
| Minimum [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt interest rate | 8.00% | ||
| Maximum [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt interest rate | 22.00% |
Schedule of Acquisition Notes Payable (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total principal balance | $ 115,103 | $ 127,788 |
| Accrued interest | 433 | 688 |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total principal balance | 115,103 | 1,627,778 |
| Accrued interest | 433 | 252,194 |
| Total principal and accrued interest | 115,536 | 1,879,972 |
| Less current portion | (34,066) | (1,798,478) |
| Non-current portion | 81,470 | 81,494 |
| Acquisition Note Payable [Member] | GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total principal balance | 115,103 | 127,778 |
| Acquisition Note Payable [Member] | Restaurant.com, Inc. [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total principal balance | $ 1,500,000 |
Schedule of Notes Payable (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| Accrued interest | $ 45,615 | $ 45,541 |
| Total principal and accrued interest | 702,889 | 706,576 |
| Less current portion | (39,876) | (15,217) |
| Non-current portion | 663,013 | 691,359 |
| Economic Injury Disaster Loans [Member] | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| Economic Injury/Disaster Loans | $ 657,274 | $ 661,035 |
Government Assistance Notes Payable (Details Narrative) - Economic Injury Disaster Loans [Member] - USD ($) |
Jul. 14, 2021 |
Jul. 21, 2020 |
Jun. 17, 2020 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Jan. 31, 2020 |
|---|---|---|---|---|---|---|
| Financing Receivable, Credit Quality Indicator [Line Items] | ||||||
| Accrued interest | $ 45,615 | $ 45,541 | ||||
| Debt instrument interest rate | 3.75% | |||||
| Repayment of principal and interest in notes payable | $ 3,500 | |||||
| Debt instrument term | 30 years | |||||
| Notes payable outstanding | $ 657,274 | $ 661,035 | ||||
| SBA [Member] | ||||||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||||||
| Proceeds from loans | $ 350,000 | $ 150,000 | $ 150,000 | |||
| Debt instrument face amount | $ 14,500 | |||||
| Accrued interest | $ 900 |
Subsequent Events (Details Narrative) $ / shares in Units, $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
$ / shares
shares
| |
| Subsequent Events [Abstract] | |
| Proceeds from issuance or sale of equity | $ | $ 1,880 |
| Stock issued during the period new isssues | shares | 937,500 |
| Sale of stock price per share | $ / shares | $ 2.00 |
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