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 October 31, 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 September 30, 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
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deposits with credit card processor | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Operating lease right of use asset, net | ||||||||
| Deposits | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Government assistance notes payable-SBA loans, current portion | ||||||||
| Operating lease liability, current portion | ||||||||
| Convertible note payable, past due, including accrued interest of $ | ||||||||
| Notes payable, acquisitions, current portion, including accrued interest of $ | ||||||||
| Total current liabilities | ||||||||
| Notes payable, acquisitions, including accrued interest of $ | ||||||||
| Government assistance notes payable -SBA loans, including accrued interest of $ | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ equity (deficiency): | ||||||||
| Preferred stock, $ par value, shares authorized; issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable, shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficiency) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficiency) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
RDE, INC. AND SUBSDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 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 (expenses) | ||||||||||||||||
| Interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on legal settlement | ||||||||||||||||
| Gain on vendor settlement | ||||||||||||||||
| Gain from forgiveness of government assistance notes payable | ||||||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
RDE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
For the Three Months Ended September 30, 2023
(Unaudited)
| Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Fair value of vested options | - | - | ||||||||||||||||||||||||||
| Cashless exercise of stock options | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | - | |||||||||||||||||||||||||||
| Issuance of common stock for cash | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the Nine Months Ended September 30, 2023
(Unaudited)
| Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Fair value of vested options | - | - | ||||||||||||||||||||||||||
| Cashless exercise of stock options | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock units for directors | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | - | |||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||
| Issuance of common stock for cash | - | |||||||||||||||||||||||||||
| Issuance of common stock on conversion of acquisition note | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| F-3 |
For the Three Months Ended September 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock to directors for services | - | |||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2022
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock to directors for services | - | - | ||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units for employees | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for vendor balance | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for GameIQ acquisition | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
RDE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Amortization of intangible assets | ||||||||
| Fair value of vested stock options | ||||||||
| Fair value of vested restricted stock for directors | ||||||||
| Fair value of vested restricted stock for employees | ||||||||
| Fair value of common stock issued for services | ||||||||
| Gain on vendor settlement | ( | ) | ||||||
| Gain on legal settlement | ( | ) | ||||||
| Gain on forgiveness of government assistance note payable | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Deposits with credit card processor | ||||||||
| Decrease in operating lease right of use assets | ||||||||
| Deposits | ( | ) | ||||||
| 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 investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock for cash | ||||||||
| Repayment of acquisition obligation | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase 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 | $ | $ | ||||||
| Operating lease right of use asset and related lease liability | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Fair value of common shares issued in settlement of vendor payable | $ | $ | ||||||
The accompanying notes are integral part of these condensed consolidated financial statements.
| F-5 |
RDE, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 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 September 30, 2023 and the results of operations and cash flows for the three and nine months ended September 30, 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 (“GAAP”) 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 nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.
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.
In accordance with the “Segment Reporting” Topic of the Accounting Standards Codification, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) determined that the Company has only one reporting unit.
Agreement and Plan of Merger with CardCash Exchange, Inc.
On
August 18, 2023, RDE entered into an Agreement and Plan of Merger with CardCash Exchange, Inc., (“CardCash”) a leading secondary
gift card exchange. RDE, subject to a number of closing conditions, including that it meet the listing standards for the Nasdaq Capital
Market, will acquire the business of CardCash for (i) $
Going Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine
months ended September 30, 2023, the Company recorded a net loss of $
| F-6 |
At
September 30, 2023, the Company had cash on hand in the amount of $
COVID-19
The Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic may continue to impact its employees, suppliers, vendors, and business partners. While the pandemic did not materially affect the Company’s financial results and business operations for the three and nine months ended September 30, 2023, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.
2. Significant Accounting Policies
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, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, redemption rate of promotional gift cards, assumptions used in valuing equity instruments issued for services, and the valuation allowance for 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.
The Company operates online websites that sell discounted restaurant coupons, travel and vacation packages, and other merchandise. 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.
Restaurant Coupons revenues
Sale of Restaurant Coupons
The
Company 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.
| F-7 |
Sale of Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be redeemed 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.
Travel, Vacation and Merchandise Revenues
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 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. 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 September 30, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended September 30, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| F-8 |
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
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.
| F-9 |
September 30, 2023 | September 30, 2022 | |||||||
| Convertible notes payable | ||||||||
| Common stock issuable | ||||||||
| 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, dividend rate, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Advertising Costs
The
Company has marketing relationship agreements with various online companies such as portal networks, contextual sites, search engines
and affiliate partners. Advertising costs are generally charged to the Company monthly per vendor agreements, which typically are based
on visitors and/or registrations delivered to the site or at a set fee. Agreements do not provide for guaranteed renewal and may be terminated
by the Company without cause. Such advertising costs are charged to expense as incurred and included in selling, general and administrative
expenses in the statements of operations. During the nine months ended September 30, 2023 and 2022, advertising costs were $
Customer and Vendor Concentration
As
of September 30, 2023 and December 31, 2022, there were two customers and one customer who accounted for over
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.
| F-10 |
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.
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 effective January 1, 2023. The adoption of ASU 2016-13 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 Company adopted ASU 2021-18 effective January 1, 2023. 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. Right-of-Use Assets and Operating Lease Liabilities
The Company leases certain corporate office spaces under an operating lease agreement.
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 $
As
of December 31, 2022, operating lease liabilities were $
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Lease costs: | ||||||||
| Operating lease (included in general and administrative in the Company’s consolidated statement of operations) | $ | $ | ||||||
| Other information: | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term – operating leases (in years) | ||||||||
| Average discount rate – operating leases | % | % | ||||||
The supplemental balance sheet information related to leases for the period is as follows:
| September 30, | December 31 | |||||||
| 2023 | 2022 | |||||||
| Long-term right-of-use assets | $ | $ | ||||||
| Short-term operating lease liabilities | $ | $ | ||||||
| Long-term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| F-11 |
Supplemental cash flow information related to the lease liabilities are as follows:
| Operating | ||||
| Year Ending June 30: | Lease | |||
| 2023 (remaining 3 months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | ||||
| Less: Imputed interest/present value | ( | ) | ||
| Present value of lease liabilities | $ | |||
4. Convertible Note Payable- Past Due
Convertible notes consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Principal balance | $ | $ | ||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | $ | $ | ||||||
In
2018, the Company merged with Incumaker, Inc. The merger was treated as a reverse merger and recapitalization of the Company for financial
accounting purposes. In conjunction with the merger with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable.
At September 30, 2023 and December 31, 2022, the remaining convertible note assumed in the reverse merger had a principal balance outstanding
of $
5. Notes Payable, Acquisitions
Notes payable, acquisitions consists of the following at September 30, 2023 and December 31, 2022:
| September 30, | 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, two notes payable for the purchase of GameIQ were issued, one for $
As
of December 31, 2022, the notes payable had an aggregate principal balance outstanding of $
| F-12 |
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 $
6. Government Assistance Notes Payable -SBA Loans
Government Assistance Notes Payable-SBA Loans consists of the following at September 30, 2023, and December 31, 2022:
| September 30, | 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):
In
2020 and 2021, the Company received an aggregate of $
The
loans bear interest at
7. Stockholder’s Equity (Deficit)
Common Stock Transactions
Issuance of Common Stock on Sale of Common Stock
During
the nine months ended September 30, 2023, the Company received net proceeds of $
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
In fiscal 2022, the Company granted of shares to members of the Company’s Board of Directors with a fair value of $ or $ per share. The shares vest over a two-year period from grant date.
During
the nine months ended September 30, 2023, the Company issued the remaining shares of common stock and recognized
$
During
the nine months ended September 30, 2022, the Company issued of these shares of common stock
with a fair value of $
| F-13 |
Issuance of Restricted Stock to Employees
In fiscal 2022, the Company granted shares of the Company’s restricted stock to employees with a fair value $ or $ per share. The shares vest over a two-year period from grant date.
On April 1,2023, the Company granted shares of the Company’s restricted stock with an aggregate fair value of $, or $ per share to employees. shares of the restricted stock were issued to the Company’s Chief Executive Officer, and shares of the restricted stock were issued to other employees. The restricted stock grant vest % on the grant date, and % on each subsequent anniversary date.
During
the nine months ended September 30, 2023, the Company issued shares of common stock and recognized $
During the nine months ended September 30, 2022, the Company issued of these shares of restricted stock with a fair value of $based upon its vesting term.
Issuance of Common Stock for Services
During
the nine months ended September 30, 2023, the Company issued
shares of common stock to with a fair value of $
During the nine months ended September 30, 2022, the Company issued shares of common stock to with a fair
value of $
Common Stock Issuable
At
September 30, 2023 and December 31, 2022, shares of common stock with an aggregate value 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, September 30, 2023 | $ | |||||||
| Balance exercisable, September 30, 2023 | $ | |||||||
On April 1, 2023, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, approved options exercisable into shares to be issued to its employees. The stock options had an exercise price of $ per share, with vesting of % on date of issuance, and then % on each subsequent anniversary date. The stock options are exercisable at a weighted average price of $ per share with an average life to expiration of approximately three years. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $ per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %.
| F-14 |
The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
During
the nine months ended September 30, 2023, the Company recognized $
The weighted average remaining contractual life of common stock options outstanding and exercisable at September 30, 2023 was years. Based on a fair market value of $ per share on September 30, 2023, the intrinsic value attributed to exercisable but unexercised common stock options was $ at September 30, 2023.
8. 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.
| F-15 |
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 |
Agreement and Plan of Merger with CardCash Exchange, Inc.
On August 18, 2023, RDE entered into an Agreement and Plan of Merger with CardCash Exchange, Inc., (“CardCash”) a leading secondary gift card exchange. RDE, subject to a number of closing conditions, including that it meet the listing standards for the Nasdaq Capital Market, will acquire the business of CardCash for (i) $2,000,000 of which $1,000,000 will be paid at the future closing of the transaction out of existing cash, and $1,000,000 will be paid in the form a promissory note due and payable on the second anniversary of the future closing date, and (ii) the issuance of 6,108,077 restricted shares of RDE’s common stock to the shareholders of CardCash with a fair value on August 18, 2023, of approximately $27.7 million, which would currently represents approximately 37% of RDE’s issued and outstanding shares of common stock after the future closing of the merger. Following the closing of the CardCash merger, CardCash will become a wholly owned subsidiary of RDE. The acquisition is targeted to close by the end of 2023. This transaction will be accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged will be recorded at estimated fair values on the date of closing of the acquisition.
COVID-19
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 nine months ended September 30, 2023, we incurred a net loss of $2,457,522, utilized cash in operations of $1,001,156, and had a stockholders’ equity of $196,303 as of September 30, 2023. At September 30, 2023, we had cash of $2,613,868 available to fund its operations, including expansion plans, and to service its debt.
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.
| 2 |
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.
Results of Operations - Three months ended September 30, 2023, compared to three months ended September 30, 2022
Revenue
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Three Months Ended September 30, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | 125,017 | $ | 35,723 | $ | 35,017 | $ | 195,757 | ||||||||
| Business to business (B2B) | 377,159 | - | - | 377,159 | ||||||||||||
| Other | - | - | - | - | ||||||||||||
| Total | $ | 502,176 | $ | 35,723 | $ | 35,017 | $ | 572,916 | ||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | 158,564 | $ | 69,733 | $ | 44,704 | $ | 273,001 | ||||||||
| Business to business (B2B) | 547,357 | - | - | 547,357 | ||||||||||||
| Other | 4,389 | - | - | 4,389 | ||||||||||||
| Total | $ | 710,310 | $ | 69,733 | $ | 44,704 | $ | 824,747 | ||||||||
Revenue for the three months ended September 30, 2023, was $572,916, a decrease of approximately $251,831 or 31%, as compared to $824,747 in the same period of the prior year. The decrease was due to
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.
| 3 |
Costs of revenues decreased to $59,417 during the three months ended September 30, 2023, as compared to $38,798 during the three months ended September 30, 2022. During the three months ended September 30, 2023 and 2022, our cost of revenues, as a percentage of revenue, was 10% and 5%, respectively. The increase in cost of revenues, as a percentage of revenue, was from .
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Selling, general and administrative expenses were $669,386 during the three months ended September 30, 2023, as compared to $1,315,716 during the three months ended September 30, 2022, a decrease of $646,330. The decrease was related mainly to a $637,681 employee retention tax refund, which did not occur in the prior year period.
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 $37,144 during the three months ended September 30, 2023 and 2022, respectively.
Loss from Operations
For the three months ended September 30, 2023, we incurred a loss from operations of $190,054, as compared to a loss from operations of $566,911 for the three months ended September 30, 2022. The increase in loss from operations was due to the decrease in revenue and decreased operating expenses discussed above.
Other Income (Expenses)
Interest expense was $1,916 for the three months ended September 30, 2023, as compared to interest expense of $29,431 for the three months ended September 30, 2022.
Net Loss
We realized a net loss of $191,970 for the three months ended September 30, 2023, as compared to net loss of $596,342 for the three months ended September 30, 2022. The change to net loss was due to the decrease in revenue offset by decreased operating expenses and interest expense, as discussed above.
| 4 |
Results of Operations - Nine months ended September 30, 2023, compared to nine months ended September 30, 2022
Revenue
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:
| Sales Channels | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total | ||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| Business to consumer (B2C) | $ | 599,275 | $ | 171,416 | $ | 124,607 | $ | 855,298 | ||||||||
| Business to business (B2B) | 1,250,701 | - | - | 1,250,701 | ||||||||||||
| Other | 116 | - | - | 116 | ||||||||||||
| Total | $ | 1,810,092 | $ | 171,416 | $ | 124,607 | $ | 2,106,115 | ||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| Business to consumer (B2C) | $ | 513,578 | $ | 219,334 | $ | 136,166 | $ | 869,078 | ||||||||
| Business to business (B2B) | 2,501,066 | - | - | 2,501,066 | ||||||||||||
| Other | 25,537 | - | - | 25,537 | ||||||||||||
| Total | $ | 3,040,181 | $ | 219,334 | $ | 136,166 | $ | 3,395,681 | ||||||||
Revenue for the nine months ended September 30, 2023, was $2,106,115, a decrease of approximately $1,289,566 or 38%, as compared to $3,395,681 in the same period of the prior year.
During the nine months ended September 30, 2022, we entered into an agreement with a national mobile telephone provider (“Provider”) to provide our coupon codes to the Provider’s mobile phone application user that are verified nurses and teachers. Each Provider participant who redeemed the promotion received a dining credit of $25.00 and two movie tickets. The dining credit can be redeemed for a certificate at any of our participating local restaurants. The movie tickets provided by us are through Fandango for use at participating theatres. The agreement started and ended in May 2022, and we earned $1,106,447 in revenues from this agreement during the nine months ended September 30, 2022. No similar Provider agreement activity occurred during the current year period.
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 $255,683 during the nine months ended September 30, 2023, as compared to $637,096 during the nine months ended September 30, 2022. During the nine months ended September 30, 2023 and 2022, our cost of revenues, as a percentage of revenue, was 12% and 19%, respectively. The decrease in cost of revenues, as a percentage of revenue, was from Fandango movie ticket costs related to the agreement with our Provider discussed above. No similar Provider agreement activity occurred during the current year period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Selling, general and administrative expenses were $4,273,187 during the nine months ended September 30, 2023, as compared to $4,227,766 during the nine months ended September 30, 2022, an increase of $45,421. The increase was related mainly to a $817,958 increase in stock-based compensation for directors, employees and contractors in the current period offset by a $637,681 employee retention tax refund, which did not occur in the prior year period.
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 $86,668 during the nine months ended September 30, 2023 and 2022, respectively.
| 5 |
Loss from Operations
For the nine months ended September 30, 2023, we incurred a loss from operations of $2,422,755, as compared to a loss from operations of $1,555,849 for the nine months ended September 30, 2022. The increase in loss from operations was due to the decrease in revenue offset by the decreased operating expenses discussed above.
Other Income (Expenses)
The Company had other expenses of $34,817 for the nine months ended September 30, 2023, as compared to other income of $1,037,998 for the nine months ended September 30, 2022. Other income for the nine months ended September 30, 2022, consisted of a gain on legal settlement of $69,000, a gain on vender settlement of $28,600, and a gain from the forgiveness of a government assistance loan of $1,025,535, all of which did not occur in the current year period. Interest expense was $34,817 for the nine months ended September 30, 2023, as compared to interest expense of $85,137 for the nine months ended September 30, 2022.
Net Loss
We realized a net loss of $2,457,572 for the nine months ended September 30, 2023, as compared to a net loss of $517,851 for the nine months ended September 30, 2022. The change to net loss from net income was primarily from recording a gain on legal settlement of $69,000, a gain on vendor settlement of $28,600, 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 decrease in revenue and increased operating expenses during the nine months ended September 30, 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 nine months ended September 30, 2023, the Company recorded a net loss of $2,457,572, used cash in operations of $1,001,156, and had a stockholders’ equity of $196,302 at September 30, 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.
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 September 30, 2023, we had cash on hand in the amount of $2,613,868. Our continuation as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
The Company’s consolidated statements of cash flows as discussed herein are presented below.
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (1,001,156 | ) | $ | (717,244 | ) | ||
| Net cash provided by investing activities | - | 12,805 | ||||||
| Net cash provided by financing activities | 2,492,066 | 236,864 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 1,490,911 | $ | (467,575 | ) | |||
| 6 |
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 nine months ended September 30, 2023 was approximately $1,001,156 and consisted of a net loss of $2,457,252, adjustments for non-cash stock based compensation, which totaled $1,428,142, and $28,274 in changes in working capital and other activities.
Cash used in operating activities for the nine months ended September 30, 2022 was approximately $717,244 and consisted of a net loss of $517,851, adjustments for non-cash items, including amortization of intangible assets, gain on legal settlement, gain on forgiveness of government assistance notes payable, fair value of vested stock options, and the fair value of common stock and issued for directors, employees, and service providers, which in the aggregate total $340,751, and $141,358 in changes in working capital and other activities.
Investing Activities
The Company had no investing activities for the nine months ended September 30, 2023. Cash provided by investing activities for the nine months ended September 30, 2022 was $12,805 and was cash received on the acquisition of GameIQ.
Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2023 was $2,492,066, which was from proceeds of $2,504,750 from the sale of common stock, offset by $12,684 of principal payments on our acquisition notes payable.
For the nine months ended September 30, 2022, cash provided by financing activities was $236,864, which was from proceeds received of $250,000 the sale of common stock, and $13,136 of principal payments on our acquisition notes payable.
Convertible debt assumed upon reverse merger consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Principal balance | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest | 18,637 | 17,137 | ||||||
| Total principal and accrued interest | $ | 38,637 | $ | 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 September 30, 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 $18,637 and $17,137, respectively. As of September 30, 2023, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 25,758 shares of the Company’s common stock.
| 7 |
Convertible Debt Assumed Upon Reverse Merger - Past Due
Convertible notes consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Total principal balance | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest | 19,387 | 17,137 | ||||||
| Total principal and accrued interest | $ | 39,387 | $ | 37,137 | ||||
In 2018, the Company merged with Incumaker, Inc. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. At September 30, 2023 and December 31, 2022, the remaining convertible note assumed in the reverse merger had a principal balance outstanding of $20,000, was due July 2017, interest of 15% per annum, and accrued interest payable of $19,387 and $17,137, respectively. As of September 30, 2023, the convertible note, including accrued interest payable, was convertible at $1.50 per share into 26,258 shares of the Company’s common stock.
Acquisition Notes Payable
On February 1, 2022, two notes payable for the purchase of GameIQ were issued, one for $78,813. and another for $62,101. RDE, Inc. promises to pay to the order of the holders the principal amounts together with annual interest of 1%, which shall be paid upon the earlier of (i) nine (9) 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. 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 RDE, Inc.
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 nine months ended September 30, 2023, the Company made principal payments of $12,674. As of September 30, 2023, the notes payable had an aggregate principal balance outstanding of $115,104 and accrued interest payable of $845.
Government Assistance Notes Payable-SBA Loans
Government Assistance Notes Payable-SBA Loans consists of the following at September 30, 2023, and December 31, 2022:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Economic Injury/Disaster Loans | $ | 661,035 | $ | 661,035 | ||||
| Accrued interest | 34,411 | 45,541 | ||||||
| Total principal and accrued interest | 695,446 | 706,576 | ||||||
| Less current portion | (39,876 | ) | (15,217 | ) | ||||
| Non-current portion | $ | 655,570 | $ | 691,359 | ||||
Economic Injury Disaster Loans (EIDL):
In 2020 and 2021, the Company received an aggregate of $650,000 of proceeds applicable to two loans administered by the Small Business Administration (“SBA”) as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (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.
| 8 |
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month over a period of 30 years. As of September 30, 2023 and December 31, 2022, the note payable had a principal balance outstanding of $661,035 and $661,035 and accrued interest payable of $34,411 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 September 30, 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.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 9 |
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.
Item 5. Other Information
None.
| 10 |
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. |
| 11 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RDE, INC. | |||
| Date: | November 13, 2023 | By: | /s/ Ketan Thakker |
| Ketan Thakker | |||
| President, Chief Executive Officer and Principal Financial Officer | |||
| 12 |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ketan Thakker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of RDE, INC. | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: | November 13, 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: | November 13, 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 September 30, 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: | November 13, 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 September 30, 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: | November 13, 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 ($) |
Sep. 30, 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 | 16,761,960 | 14,152,378 |
| Common stock, shares outstanding | 16,761,960 | 14,152,378 |
| Common stock issuable, shares | 383,343 | 383,343 |
| Convertible Debt [Member] | ||
| Short-Term Debt [Line Items] | ||
| Accrued interest current | $ 19,387 | $ 17,137 |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Accrued interest current | 0 | 251,507 |
| Accrued interest non current | 845 | 687 |
| Government Assistance Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Accrued interest non current | $ 34,411 | $ 45,541 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 572,916 | $ 824,747 | $ 2,106,115 | $ 3,395,681 |
| Operating expenses | ||||
| Cost of revenues | 59,417 | 38,798 | 255,683 | 637,096 |
| Selling, general and administrative expenses | 703,553 | 1,315,716 | 4,273,187 | 4,227,766 |
| Amortization of intangible assets | 37,144 | 86,668 | ||
| Total operating expenses | 762,970 | 1,391,658 | 4,528,870 | 4,951,530 |
| Loss from operations | (190,054) | (566,911) | (2,422,755) | (1,555,849) |
| Other income (expenses) | ||||
| Interest | (1,916) | (29,431) | (34,817) | (85,137) |
| Gain on legal settlement | 69,000 | |||
| Gain on vendor settlement | 28,600 | |||
| Gain from forgiveness of government assistance notes payable | 1,025,535 | |||
| Total other income (expenses) | (1,916) | (29,431) | (34,817) | 1,037,998 |
| Net loss | $ (191,970) | $ (596,342) | $ (2,457,572) | $ (517,851) |
| Net loss per share basic | $ (0.1) | $ (0.04) | $ (0.16) | $ (0.04) |
| Net loss per share diluted | $ (0.1) | $ (0.04) | $ (0.16) | $ (0.04) |
| Weighted average common shares outstanding basic | 14,742,677 | 14,148,393 | 15,651,039 | 13,646,878 |
| Weighted average common shares outstanding diluted | 14,742,677 | 14,148,393 | 15,651,039 | 13,646,878 |
Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 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 September 30, 2023 and the results of operations and cash flows for the three and nine months ended September 30, 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 (“GAAP”) 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 nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.
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.
In accordance with the “Segment Reporting” Topic of the Accounting Standards Codification, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) determined that the Company has only one reporting unit.
Agreement and Plan of Merger with CardCash Exchange, Inc.
On August 18, 2023, RDE entered into an Agreement and Plan of Merger with CardCash Exchange, Inc., (“CardCash”) a leading secondary gift card exchange. RDE, subject to a number of closing conditions, including that it meet the listing standards for the Nasdaq Capital Market, will acquire the business of CardCash for (i) $2,000,000 of which $1,000,000 will be paid at the future closing of the transaction out of existing cash, and $1,000,000 will be paid in the form a promissory note due and payable on the second anniversary of the future closing date, and (ii) the issuance of restricted shares of RDE’s common stock to the shareholders of CardCash with a fair value on August 18, 2023, of approximately $27.7 million, which would currently represents approximately 37% of RDE’s issued and outstanding shares of common stock after the future closing of the merger. Following the closing of the CardCash merger, CardCash will become a wholly owned subsidiary of RDE. The acquisition is targeted to close by the end of 2023. This transaction will be accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged will be recorded at estimated fair values on the date of closing of the acquisition.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2023, the Company recorded a net loss of $2,457,572 and used cash in operations of $1,001,156. 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 September 30, 2023, the Company had cash on hand in the amount of $2,613,868. 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 sufficient revenues to fund operations. 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.
COVID-19
The Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic may continue to impact its employees, suppliers, vendors, and business partners. While the pandemic did not materially affect the Company’s financial results and business operations for the three and nine months ended September 30, 2023, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.
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Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies | 2. Significant Accounting Policies
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, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, redemption rate of promotional gift cards, assumptions used in valuing equity instruments issued for services, and the valuation allowance for 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.
The Company operates online websites that sell discounted restaurant coupons, travel and vacation packages, and other merchandise. 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.
Restaurant Coupons revenues
Sale of Restaurant Coupons
The Company 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).
Sale of Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be redeemed 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.
Travel, Vacation and Merchandise Revenues
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 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. 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 September 30, 2023 and 2022:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
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, dividend rate, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Advertising Costs
The Company has marketing relationship agreements with various online companies such as portal networks, contextual sites, search engines and affiliate partners. Advertising costs are generally charged to the Company monthly per vendor agreements, which typically are based on visitors and/or registrations delivered to the site or at a set fee. Agreements do not provide for guaranteed renewal and may be terminated by the Company without cause. Such advertising costs are charged to expense as incurred and included in selling, general and administrative expenses in the statements of operations. During the nine months ended September 30, 2023 and 2022, advertising costs were $165,710 and $247,759, respectively.
Customer and Vendor Concentration
As of September 30, 2023 and December 31, 2022, there were two customers and one customer who accounted for over 10% of the Company’s consolidated accounts receivable, respectively. As of September 30, 2023 and December 31, 2022, there were three vendors and three vendors, respectively, who accounted for over 10% of the Company’s consolidated accounts payable. During the nine months ended September 30, 2023 and 2022, there were no customers who accounted for over 10% of the Company’s consolidated net revenue. During the nine months ended September 30, 2023 and 2022, there were no vendors, respectively, who accounted for over 10% of the Company’s purchases.
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.
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 effective January 1, 2023. The adoption of ASU 2016-13 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 Company adopted ASU 2021-18 effective January 1, 2023. 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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Right-of-Use Assets and Operating Lease Liabilities |
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| Right-of-Use Assets and Operating Lease Liabilities | 3. Right-of-Use Assets and Operating Lease Liabilities
The Company leases certain corporate office spaces under an operating lease agreement.
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. In April 2023, Restaurant.com signed a lease for its office located in Schaumberg, Illinois. The lease has a term of 36 months and an average base rent of approximately $7,500 per month. At lease commencement, the Company recorded a right-of-use asset and lease liability of $293,798 based upon the present value of all lease payments. During the nine months ended September 30, 2023, the Company reflected a decrease in its ROU asset of $82,555, resulting in a ROU asset balance of $263,851 as of September 30, 2023.
As of December 31, 2022, operating lease liabilities were $59,328. In April 2023, the Company recorded an operating lease liability of $293,798 as discussed above. During the nine months ended September 30, 2023, the Company made lease payments of $67,026 towards its operating lease liability. As of September 30, 2023, ROU lease liabilities under operating leases totaled $286,100.
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
The supplemental balance sheet information related to leases for the period is as follows:
Supplemental cash flow information related to the lease liabilities are as follows:
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Convertible Note Payable- Past Due |
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| Convertible Note Payable- Past Due | 4. Convertible Note Payable- Past Due
Convertible notes consists of the following at September 30, 2023 and December 31, 2022:
In 2018, the Company merged with Incumaker, Inc. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. At September 30, 2023 and December 31, 2022, the remaining convertible note assumed in the reverse merger had a principal balance outstanding of $20,000, was due July 2017, interest of 15% per annum, and accrued interest payable of $19,387 and $17,137, respectively. As of September 30, 2023, the convertible note, including accrued interest payable, was convertible at $ per share into shares of the Company’s common stock.
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Notes Payable, Acquisitions |
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| Notes Payable, Acquisitions | 5. Notes Payable, Acquisitions
Notes payable, acquisitions consists of the following at September 30, 2023 and December 31, 2022:
GameIQ Acquisition Note Payable
On February 1, 2022, two notes payable for the purchase of GameIQ were issued, one for $78,813. and another for $62,101. RDE, Inc. promises to pay to the order of the holders the principal amounts together with annual interest of 1%, which shall be paid upon the earlier of (i) nine (9) 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. 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 RDE, Inc.
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 nine months ended September 30, 2023, the Company made principal payments of $12,674. As of September 30, 2023, the notes payable had an aggregate principal balance outstanding of $115,104 and accrued interest payable of $845.
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 -SBA Loans |
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| Government Assistance Notes Payable -SBA Loans | 6. Government Assistance Notes Payable -SBA Loans
Government Assistance Notes Payable-SBA Loans consists of the following at September 30, 2023, and December 31, 2022:
Economic Injury Disaster Loans (EIDL):
In 2020 and 2021, the Company received an aggregate of $650,000 of proceeds applicable to two loans administered by the Small Business Administration (“SBA”) as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (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 over a period of 30 years. As of September 30, 2023 and December 31, 2022, the note payable had a principal balance outstanding of $661,035 and $661,035 and accrued interest payable of $34,411 and $45,541 respectively.
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Stockholder’s Equity (Deficit) |
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| Stockholder’s Equity (Deficit) | 7. Stockholder’s Equity (Deficit)
Common Stock Transactions
Issuance of Common Stock on Sale of Common Stock
During the nine months ended September 30, 2023, the Company received net proceeds of $2,504,750 for the sale of shares of common stock at $ per share, as part of a private placement.
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 5) was converted into shares of the Company’s common stock, and the note was retired.
Issuance of Restricted Stock to Directors
In fiscal 2022, the Company granted of shares to members of the Company’s Board of Directors with a fair value of $ or $ per share. The shares vest over a two-year period from grant date.
During the nine months ended September 30, 2023, the Company issued the remaining shares of common stock and recognized $140,000 of expense related to the vesting of restricted shares, leaving no remaining future vesting expense.
During the nine months ended September 30, 2022, the Company issued of these shares of common stock with a fair value of $190,000 based upon its vesting term
Issuance of Restricted Stock to Employees
In fiscal 2022, the Company granted shares of the Company’s restricted stock to employees with a fair value $ or $ per share. The shares vest over a two-year period from grant date.
On April 1,2023, the Company granted shares of the Company’s restricted stock with an aggregate fair value of $, or $ per share to employees. shares of the restricted stock were issued to the Company’s Chief Executive Officer, and shares of the restricted stock were issued to other employees. The restricted stock grant vest % on the grant date, and % on each subsequent anniversary date.
During the nine months ended September 30, 2023, the Company issued shares of common stock and recognized $521,945 of expense related to the vesting of restricted shares, leaving $502,500 remaining to be expensed upon vesting in future periods through March 31, 2025.
During the nine months ended September 30, 2022, the Company issued of these shares of restricted stock with a fair value of $based upon its vesting term.
Issuance of Common Stock for Services
During the nine months ended September 30, 2023, the Company issued shares of common stock to with a fair value of $523,500, or $ per share, to a consultant for services rendered, which was fully expensed when granted.
During the nine months ended September 30, 2022, the Company issued shares of common stock to with a fair value of $230,508, to consultants for services rendered, which was fully expensed when granted.
Common Stock Issuable
At September 30, 2023 and December 31, 2022, shares of common stock with an aggregate value of $383,000 have not been issued and are reflected as common stock issuable in the accompanying condensed consolidated financial statements.
Stock Options
On April 1, 2023, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, approved options exercisable into shares to be issued to its employees. The stock options had an exercise price of $ per share, with vesting of % on date of issuance, and then % on each subsequent anniversary date. The stock options are exercisable at a weighted average price of $ per share with an average life to expiration of approximately three years. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $ per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %.
The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
During the nine months ended September 30, 2023, the Company recognized $242,696 of compensation expense relating to vested stock options. As of September 30, 2023, the aggregate amount of unvested compensation related to stock options was approximately $327,367, which will be recognized as an expense as the options vest in future periods through March 31, 2025.
The weighted average remaining contractual life of common stock options outstanding and exercisable at September 30, 2023 was years. Based on a fair market value of $ per share on September 30, 2023, the intrinsic value attributed to exercisable but unexercised common stock options was $ at September 30, 2023.
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Contingencies |
9 Months Ended |
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Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingencies | 8. 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. |
Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, redemption rate of promotional gift cards, assumptions used in valuing equity instruments issued for services, and the valuation allowance for 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.
The Company operates online websites that sell discounted restaurant coupons, travel and vacation packages, and other merchandise. 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.
Restaurant Coupons revenues
Sale of Restaurant Coupons
The Company 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).
Sale of Promotional Gift Card Revenue
The Company sells Restaurant.com promotional gift cards which can only be redeemed 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.
Travel, Vacation and Merchandise Revenues
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 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. 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 September 30, 2023 and 2022:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:
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| Business Combinations | Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
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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, dividend rate, 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 nine months ended September 30, 2023 and 2022, advertising costs were $165,710 and $247,759, respectively.
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| Customer and Vendor Concentration | Customer and Vendor Concentration
As of September 30, 2023 and December 31, 2022, there were two customers and one customer who accounted for over 10% of the Company’s consolidated accounts receivable, respectively. As of September 30, 2023 and December 31, 2022, there were three vendors and three vendors, respectively, who accounted for over 10% of the Company’s consolidated accounts payable. During the nine months ended September 30, 2023 and 2022, there were no customers who accounted for over 10% of the Company’s consolidated net revenue. During the nine months ended September 30, 2023 and 2022, there were no vendors, respectively, who accounted for over 10% of the Company’s purchases.
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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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| 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 effective January 1, 2023. The adoption of ASU 2016-13 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 Company adopted ASU 2021-18 effective January 1, 2023. 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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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregation of Revenue | In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2023 and 2022:
In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:
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| Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share |
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Right-of-Use Assets and Operating Lease Liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Right-of-use Assets And Operating Lease Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Lease Expenses and Supplemental Cash Flow Information | The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
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| Schedule of Supplemental Balance Sheet Information | The supplemental balance sheet information related to leases for the period is as follows:
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| Schedule of Supplemental Cash Flow Information | Supplemental cash flow information related to the lease liabilities are as follows:
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Convertible Note Payable- Past Due (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Debt | Convertible notes consists of the following at September 30, 2023 and December 31, 2022:
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Notes Payable, Acquisitions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable Acquisitions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Acquisition Notes Payable | Notes payable, acquisitions consists of the following at September 30, 2023 and December 31, 2022:
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Government Assistance Notes Payable -SBA Loans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government Assistance Notes Payable -sba Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable | Government Assistance Notes Payable-SBA Loans consists of the following at September 30, 2023, and December 31, 2022:
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Stockholder’s Equity (Deficit) (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options |
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Basis of Presentation (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Aug. 18, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net Income (Loss) Attributable to Parent | $ 191,970 | $ 596,342 | $ 2,457,572 | $ 517,851 | |
| Net Cash Provided by (Used in) Operating Activities | 1,001,156 | $ 717,244 | |||
| Cash | $ 2,613,868 | $ 2,613,868 | |||
| Card Cash Exchange Inc [Member] | |||||
| Ownership percent | 37.00% | ||||
| Card Cash Exchange Inc [Member] | |||||
| Payments to acquire business | $ 2,000,000 | ||||
| Number of restricted shares | 6,108,077 | ||||
| Number of restricted shares, value | $ 27,700,000 | ||||
| Card Cash Exchange Inc [Member] | Future Closing [Member] | |||||
| Payments to acquire business | 1,000,000 | ||||
| Card Cash Exchange Inc [Member] | Second Anniversary of Future Closing [Member] | |||||
| Payments to acquire business | $ 1,000,000 | ||||
Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share (Details) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 1,144,384 | 1,055,717 |
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 26,258 | 24,258 |
| Common Stock Issuable [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 383,343 | 383,343 |
| Common Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 734,783 | 648,116 |
Schedule of Lease Expenses and Supplemental Cash Flow Information (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Right-of-use Assets And Operating Lease Liabilities | ||
| Operating lease (included in general and administrative in the Company’s consolidated statement of operations) | $ 83,000 | $ 73,000 |
| Cash paid for amounts included in the measurement of lease liabilities | $ 77,000 | $ 68,000 |
| Weighted-average remaining lease term (in years) (Year) | 3 years 7 months 6 days | 9 months 18 days |
| Weighted-average discount rate (Rate) | 7.00% | 4.00% |
Schedule of Supplemental Balance Sheet Information (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Right-of-use Assets And Operating Lease Liabilities | ||
| Long-term right-of-use assets | $ 263,851 | $ 52,608 |
| Short-term operating lease liabilities | 65,232 | 59,328 |
| Long-term operating lease liabilities | 220,869 | |
| Total operating lease liabilities | $ 286,101 | $ 59,328 |
Schedule of Supplemental Cash Flow Information (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Right-of-use Assets And Operating Lease Liabilities | ||
| 2023 (remaining 3 months) | $ 22,000 | |
| 2024 | 92,000 | |
| 2025 | 96,000 | |
| 2026 | 99,000 | |
| 2027 | 34,000 | |
| Total lease payments | 343,000 | |
| Less: Imputed interest/present value | (56,899) | |
| Present value of lease liabilities | $ 286,101 | $ 59,328 |
Right-of-Use Assets and Operating Lease Liabilities (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Apr. 30, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Right-of-use Assets And Operating Lease Liabilities | ||||
| Operating lease right of use asset | $ 263,851 | $ 52,608 | ||
| Lease term | 36 months | |||
| Average base rent | $ 7,500 | |||
| Right-of-use asset and lease liability | $ 293,798 | 293,798 | ||
| Changes in operating lease right of use asset | 82,555 | 85,533 | ||
| Operating lease liabilities | 65,232 | $ 59,328 | ||
| Operating lease liabilities payment | 67,026 | $ 81,296 | ||
| Right of use operating lease liabilities | $ 286,100 | |||
Schedule of Convertible Debt (Details) - Convertible Notes Payable [Member] - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Principal balance | $ 20,000 | $ 20,000 |
| Accrued interest | 19,387 | 17,137 |
| Total principal and accrued interest | $ 39,387 | $ 37,137 |
Convertible Note Payable- Past Due (Details Narrative) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Apr. 01, 2023 |
Dec. 31, 2022 |
|
| Short-Term Debt [Line Items] | |||
| Convertible per share | $ 3.35 | ||
| Convertible Notes Payable [Member] | |||
| Short-Term Debt [Line Items] | |||
| Principal balance outstanding | $ 20,000 | $ 20,000 | |
| Interest rate | 15.00% | 15.00% | |
| Accrued interest payable | $ 19,387 | $ 17,137 | |
| Convertible per share | $ 1.50 | ||
| Convertible shares | 26,258 |
Schedule of Acquisition Notes Payable (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Less current portion | $ (34,066) | $ (1,798,478) |
| Non-current portion | 81,883 | 81,494 |
| GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 115,104 | 127,788 |
| Accrued interest | 845 | 688 |
| Acquisition Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 115,104 | 1,627,778 |
| Accrued interest | 845 | 252,194 |
| Total principal and accrued interest | 115,949 | 1,879,972 |
| Less current portion | (34,066) | (1,798,478) |
| Non-current portion | 81,883 | 81,494 |
| Acquisition Note Payable [Member] | GameIQ Acquisition Corp., Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 115,104 | 127,778 |
| Acquisition Note Payable [Member] | Restaurant.com, Inc. [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | $ 1,500,000 |
Notes Payable, Acquisitions (Details Narrative) - USD ($) |
9 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 01, 2023 |
Feb. 01, 2022 |
Mar. 01, 2020 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Restaurant Com Acquisition Note Payable [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Interest rate | 6.00% | ||||
| Maturity date | Mar. 01, 2023 | ||||
| Debt instrument face amount | $ 1,770,000 | $ 1,500,000 | $ 1,500,000 | ||
| Accrued interest payable | 251,507 | ||||
| Notes payable principal balance | $ 1,770,000 | ||||
| Debt instrument convertible shares | 554,859 | ||||
| GameIQ Acquisition Corp., Inc [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Interest rate | 1.00% | ||||
| Maturity date | Feb. 01, 2025 | ||||
| Debt instrument face amount | $ 115,104 | 127,788 | |||
| Accrued interest payable | 845 | $ 688 | |||
| Principal payment | $ 12,674 | ||||
| GameIQ Acquisition Corp., Inc [Member] | One Notes Payable [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Notes payable | $ 78,813 | ||||
| GameIQ Acquisition Corp., Inc [Member] | Another Notes Payable [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Notes payable | $ 62,101 |
Schedule of Notes Payable (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Less current portion | $ (39,876) | $ (15,217) |
| Non-current portion | 655,570 | 691,359 |
| Government Assistance Note Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 661,035 | 661,035 |
| Accrued interest | 34,411 | 45,541 |
| Total principal and accrued interest | $ 695,446 | $ 706,576 |
Government Assistance Notes Payable -SBA Loans (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2022 |
Jan. 31, 2022 |
|
| Financing Receivable, Credit Quality Indicator [Line Items] | |||||
| Notes payable outstanding | $ 39,876 | $ 15,217 | |||
| Economic Injury Disaster Loans [Member] | |||||
| Financing Receivable, Credit Quality Indicator [Line Items] | |||||
| Proceeds from loans | $ 650,000 | ||||
| Principal balance | $ 14,500 | ||||
| Accrued interest | $ 34,411 | 45,541 | $ 900 | ||
| Debt instrument interest rate | 3.75% | ||||
| Repayment of principal and interest in notes payable | $ 3,500 | ||||
| Debt instrument term | 30 years | ||||
| Notes payable outstanding | $ 661,035 | $ 661,035 | |||
| Economic Injury Disaster Loans [Member] | SBA [Member] | |||||
| Financing Receivable, Credit Quality Indicator [Line Items] | |||||
| Proceeds from loans | $ 650,000 | ||||