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 |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(ZIP Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB |
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 ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were shares of common stock outstanding as of May 13, 2024.
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 June 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 SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| Successor | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents (includes restricted cash of $ | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use asset, net | ||||||||
| Deposits | ||||||||
| Intangible assets, net - provisional | ||||||||
| Goodwill - provisional | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Secured revolving line of credit | ||||||||
| Convertible promissory notes, current portion | ||||||||
| Notes payable, current portion | ||||||||
| Acquisition obligation | ||||||||
| Operating lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Deferred taxes | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized; | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable, and shares, respectively | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
RDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Net Sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating Expenses | ||||||||
| Selling, general and administrative expenses | ||||||||
| Amortization of capitalized software costs | ||||||||
| Amortization of intangible assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| 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 consolidated financial statements.
| F-2 |
RDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Three Months Ended March 31, 2024
(Unaudited)
| Successor: | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Fair value of vested options | - | - | ||||||||||||||||||||||||||
| Fair value of vested restricted stock units | - | |||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||
| Common shares issued on cashless exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Common shares issued | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of common stock for cash | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the Three Months Ended March 31, 2023
(Unaudited)
| Predecessor: | Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 (Unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
RDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Fair value of vested stock options | ||||||||
| Fair value of vested restricted common stock | ||||||||
| Fair value of common stock issued for services | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Accrued interest | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Right of use assets | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capitalized website development costs | ( | ) | ( | ) | ||||
| Net cash provided by investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit | ||||||||
| Repayment of line of credit | ( | ) | ( | ) | ||||
| Repayment of acquisition obligation | ( | ) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by (used in) 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 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
RDE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2024 and 2023
(Unaudited)
1. Basis of Presentation
RDE, Inc. (“RDE”) through its wholly-owned subsidiary Restaurant.com, Inc., has been in the business of connecting digital consumers, businesses and communities with dining and merchant deal options throughout the United States.
On August 18, 2023, RDE entered into an agreement and plan of merger to acquire CardCash Exchange Inc (“CardCash”). On December 29, 2023, the merger was completed and has been accounted for as a business combination using the acquisition method of accounting (See Note 3). CardCash was formed in 2013 and buys merchant gift cards and resells them at a markup.
RDE’s operations are not considered significant compared to the operations of CardCash before the acquisition. Accordingly, for the purpose of the accompanying condensed consolidated financial statements, periods before December 29, 2023 reflect the financial position, results of operations and cash flows of CardCash prior to the acquisition, and is referred to as the “Predecessor”. Periods beginning after December 29, 2023 reflect the financial position, results of operations and cash flows of RDE consolidated with CardCash, and is referred to as the “Successor”. A black-line between the Successor and Predecessor periods has been placed in the condensed consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these periods.
Collectively, RDE (Successor) and CardCash (Predecessor) are referred to as the “Company”.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements for the year ended December 31, 2023, and, in the opinion of management, reflect all adjustments, which consist of normal recurring adjustments, considered necessary for a fair presentation of the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Card Cash Exchange, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Going Concern
The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date the accompanying financial statements were issued. RDE and CardCash have a history of reporting net losses and negative operating cash flows. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, our independent registered public accounting firm, in its audit report to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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.
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. The Company has financed its working capital requirements through borrowings from various sources and the sale of its equity securities.
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.
| F-5 |
2. Significant Accounting Policies
Use of Estimates
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are adjusted. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions used in valuing assets acquired in business acquisitions, impairment testing of goodwill and other long-term assets, assumptions used in valuing stock-based compensation, the realizability of deferred tax assets and the related valuation allowance, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
Certain customers may receive incentives, which are accounted for as variable consideration. Provisions for sales returns are recognized in the period when the sale is recorded based upon the Company’s prior experience and current trends. These revenue reductions are established by the Company based upon management’s best estimates at the time of sale following the historical trend, adjusted to reflect known changes in the factors that impact such reserves and allowances, and the terms of agreements with customers.
Amounts billed and due from the Company’s customers are classified as accounts receivable on the balance sheet. Amounts received in advance from customers are recorded as deferred revenue on the balance sheet until the performance obligations have been satisfied. The Company has elected to apply the practical expedient to not assess contracts for significant financing component because the period between the receipt of advance payment and the Company’s transfer of services to the customer is less than one year.
| F-6 |
Other
Sale of promotional gift cards, sale of travel, vacation and merchandise, and advertising revenues
The Company also recognizes revenue from the sale of Restaurant.com promotional gift cards (revenue recognized based on the Company’s historical redemption rates of its promotional gift cards), the sale of travel, vacation, and merchandise on behalf of third-party merchants (revenue reported on a net basis equal to the purchase price received from the customer less a portion of the purchase price paid by the Company to its merchant partners), and advertising revenue for 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 (revenue recognized when its determinable, which is generally upon receipt of a statement and/or proceeds from the third-party partners).
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2024 and 2023:
| Sales Channels | Gift Cards | Restaurant Coupons | Sale
of Travel, Vacation and Merchandise | Advertising | Total | |||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | $ | |||||||||||||||
| Business to business (B2B) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | $ | |||||||||||||||
| Business to business (B2B) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Cost of Sales
Cost of sales consists primarily of the cost to purchase merchant gift cards, and transaction fees and costs.
Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
| F-7 |
Intangible Assets
The
Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition. The finite-lived intangible
assets consist of customer relationships, trade name, and developed technology. Intangible assets with finite useful lives are amortized
using the straight-line method over their estimated useful life of
The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.
Goodwill
Goodwill
represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets
of the business acquired. As of March 31, 2024 goodwill that arose from acquisition of CardCash (see Note 3) was $
Long-Lived Assets
The
Company evaluates long-lived assets, other than goodwill and indefinite lived intangible assets, for impairment whenever events or changes
in circumstances indicate that their net book value may not be recoverable. The measurement of possible impairment is based upon the
ability to recover the carrying value of the asset through the expected future undiscounted cash flows from the use of the asset and
its eventual disposition. An impairment loss, equal to the difference between the asset’s fair value and its carrying value, is
recognized when the estimated future undiscounted cash flows are less than its carrying amount.
Leases
The Company leases certain corporate office space under lease agreements. The Company determines whether a contract contains a lease at contract inception. A contract is or contains a lease if the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. Control is determined based on the right to obtain all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. Operating lease right-of-use assets (“ROU”) for operating leases represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term and is included in the general and administrative line in the Company’s consolidated statements of operations.
Advertising
The
Company expenses advertising costs as incurred and amounted to $
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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
| F-8 |
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Stock-based compensation expense recognized and recorded as part of selling, general and administrative expenses.
Basic earnings (loss) per share is computed using the weighted average number of common shares issued and outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes and stock issuable upon the exercise of stock options and warrants, have been excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all convertible notes and stock issuable upon the exercise of stock options and warrants outstanding were anti-dilutive.
March 31, 2024 | March 31, 2023 | |||||||
| Convertible notes payable | ||||||||
| Common stock issuable | ||||||||
| Series B convertible preferred stock | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
The issuable and potentially issuable shares as summarized above. These potentially issuable common shares would have been anti-dilutive because the Company had a net loss for the periods ended March 31, 2024 and 2023, such common stock equivalents would have been excluded from the calculation of net loss per share.
Fair Value of Financial Instruments
Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
| F-9 |
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
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.
Segment Information
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s operation segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable and cash. The credit risk exposure surrounding trade accounts receivable is limited as these amounts represent the timing difference between payments being settled by credit card processors and the cash being provided to the Company.
No
significant customers comprised more than
The Company maintains a balance at financial institutions, which at times exceed the federally insured limit. The Company has not experienced a loss on this account.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company’s adopted ASU 2016-13 effective January 1, 2023, and there was no material effect on the Company’s financial position, results of operations and cash flows.
| F-10 |
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company’s adopted ASU 2023-7 effective January 1, 2024, and there was no material effect on the Company’s financial position, results of operations and cash flows.
In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The ASU requires buyers to disclose information about their supplier finance programs. Interim and annual requirements include the disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 on January 1, 2023, and there was no material impact on our financial statements.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
3. Acquisition of Card Cash
On
December 29, 2023, RDE completed the acquisition of CardCash. The acquisition was made pursuant to an agreement and plan of merger dated
August 18, 2023 between RDE and CardCash. RDE acquired all of the issued and outstanding equity of CardCash for $
RDE utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations, and allocated the purchase price to CardCash’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition. The fair value assigned to the developed technology was determined using the relief from royalty method. The fair value assigned to trade name were determined using the relief from royalty method. The fair value of the customer relationships was determined using the multi-period excess earnings method, which estimates the direct cash flow expected to be generated from the existing customers acquired. The cash flows were based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model, as well as the weighted average cost of capital. The valuation assumptions took into consideration the Company’s estimates of customer attrition and revenue growth projections. The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill. Goodwill also represents the future benefits as a result of the acquisition that the Company believes will enhance the Company’s product offerings and lineup available to both new and existing customers and generate future synergies within the discount coupon and giftcard business.
As of March 31, 2024, management has not yet finalized its valuation analysis. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments through the purchase price measurement period would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets.
| F-11 |
The following table summarizes the allocation of the fair value of the purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of CardCash on the date of acquisition:
| Fair Value | ||||
| Fair value of consideration: | ||||
| Cash | $ | |||
| Notes payable ($ | ||||
| Common stock ( shares of common stock at $ per share) | ||||
| Total purchase price | $ | |||
| Allocation of the consideration to the fair value of assets acquired and liabilities assumed: | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaids, deposits, and other | ||||
| Property and equipment, net | ||||
| Accounts payable and accrued liabilities | ( | ) | ||
| Line of credit | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Net tangible assets | ( | ) | ||
| Intangible assets: | ||||
| Developed technology | ||||
| Trade name | ||||
| Customer relationships | ||||
| Net identifiable intangible assets | ||||
| Goodwill | ||||
| Fair value of net asset acquired | $ | |||
The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of CardCash based on the historical financial statements of the Company and CardCash. The unaudited pro forma statements of operations for the three months ended March 31, 2023 give effect to the transaction as if it had occurred on January 1, 2023.
Three Months Ended March 31, 2023 | ||||
| (Proforma, unaudited) | ||||
| Sales | $ | |||
| Net loss | $ | ( | ) | |
| Net loss per share | $ | ) | ||
| F-12 |
4. Property and Equipment, Net
Property and equipment, net consisted of the following:
March 31, 2024 | December 31, 2023 | |||||||
| (Successor) | ||||||||
| Website development costs | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Property and equipment, gross | ||||||||
| Accumulated depreciation | ( | ) | ||||||
| Property and equipment, net | $ | $ | ||||||
The Company accounts for capitalized
software and website development costs to develop software programs to be used solely to meet the Company’s internal needs in
accordance with ASC 350-40. Costs incurred during the application development stage for software programs to be used solely to meet
its internal needs are capitalized. The depreciation
expense on property and equipment for the three months ended March 31, 2024 and 2023 was $
5. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
March 31, 2024 | December 31, 2023 | |||||||
| ( | ||||||||
| Goodwill | $ | $ | ||||||
| Intangible Assets | ||||||||
| Customer relationships | ||||||||
| Trade name | ||||||||
| Developed technology | ||||||||
| Intangible assets, gross | ||||||||
| Accumulated amortization | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||
On
December 29, 2023, in relation to the acquisition of CardCash (See Note 3), the Company recorded intangible assets of $
Identifiable intangibles are amortized over their estimated remaining useful lives, which are as follows:
| Description | Weighted
Average | |
| Customer relationships | ||
| Trademarks, trade names and service marks | ||
| Developed technology | ||
| Non-competition agreement |
Estimated amortization expense for the Company is as follows:
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| $ |
6. Leases
The Company determines whether a contract is, or contains, a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its office and warehouse locations, and certain warehouse equipment. Leases with an initial term of 12 months or less are not included on the balance sheets.
| F-13 |
The Company leases office facilities under noncancelable operating lease agreements. The Company had leases for office facilities in Woodbridge, New Jersey and Schaumburg, Illinois. The operating lease agreement for the Woodbridge, New Jersey location ended in April 2024, and is currently being leased on a month-to-month basis while the lease renewal is being negotiated.
The
Company’s ROU asset balance was $
The
Company’s lease liability balance was $
During
the three months ended March 31, 2024 and 2023, lease costs totaled approximately $
As
of March 31, 2024, the weighted average remaining lease terms for operating lease is
Maturities of the Company’s operating lease liabilities are as follows as of March 31, 2024:
As of | ||||
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | ||||
| Less: Imputed interest | ( | ) | ||
| Total operating lease liability | $ | |||
7. Secured Revolving Line of Credit
The outstanding line of credit balance at March 31, 2024 and December 31, 2023 was:
March 31, 2024 | December 31, 2023 | |||||||
| ( | ||||||||
| Line of credit | $ | $ | ||||||
In
November 2020, CardCash entered into an amended and restated promissory note for a revolving line of credit with availability of up
to $
| F-14 |
8. Convertible Debt
Convertible debt consists of the following at March 31, 2024 and December 31, 2023:
March 31, 2024 | December 31, 2023 | |||||||
| ( | ||||||||
| Incumaker-past due | $ | |||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
Incumaker, Inc.
On
November 5, 2018, RDE completed the acquisition of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December
31, 2023, there was one remaining assumed convertible note payable outstanding that matured July 2017, and is past due. At March 31,
2024, the principal balance of $
9. Notes Payable
Notes payable consists of the following at March 31, 2024 and December 31, 2023:
| March 31, 2024 | December 31, 2023 | |||||||
| ( | ||||||||
| CardCash acquisition notes payable | $ | $ | ||||||
| GameIQ acquisition note payable | ||||||||
| Economic Injury Disaster Loans (EIDL) note payable | ||||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
CardCash Acquisition Notes Payable
On
December 29, 2023, the Company issued two year promissory notes totaling $
GameIQ Acquisition Note Payable
On
February 1, 2022, RDE issued two notes payable for the purchase of GameIQ, one for $
As
of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $
| F-15 |
Economic Injury Disaster Loans (EIDL)
On
June 17, 2020, RDE received $
The
loans bear interest at
10. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2024 and 2023, there were shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of March 31, 2024 and December 31, 2023, the Company had shares and shares, respectively, of common stock issued and outstanding.
Common Stock Transactions
Issuance of Common Stock on Sale of Common Stock
During
the three months ended March 31, 2024, the Company received net proceeds of approximately $
Issuance of Restricted Stock
On
March 1, 2024, the Company granted its Chief Executive Officer shares of the Company’s restricted stock, and shares
of the Company’s restricted stock to other officers and employees with an aggregate fair value of $
Elliot Bohm and Marc Ackerman
Effective on December 29, 2023, with the closing of the acquisition of CardCash (see Note 3), the Company entered into an Employment Agreements with Elliot Bohm and Mark Ackerman. Mr. Bohm was the President of CardCash and Mr. Ackerman was the Chief Operating Officer of CardCash prior to the acquisition by RDE and will remain in those positions following the acquisition. Bohm will also join the Board of Directors of RDE.
Under
the terms of the four-year agreements, Mr. Bohm and Mr. Ackerman shall each receive an annual base salary of $
| F-16 |
On
March 1, 2023, the Company granted its Chief Executive Officer
shares of the Company’s restricted stock, and
shares of the Company’s restricted stock to employees with an aggregate fair value of $
Issuance of Common Stock for Services
During
the three months ended March 31, 2024, the Company issued shares of common stock with a fair value of $
Common Stock Issuable
At
December 31, 2023, shares of common stock with an aggregate value of $
Summary of Stock Options
| Number of Options | Weighted Average Exercise Price | |||||||
| ( | ||||||||
| Balance outstanding, December 31, 2023 | ||||||||
| Options granted | ||||||||
| Options exercised | ( | ) | ||||||
| Options expired or forfeited | ( | ) | ||||||
| Balance outstanding, March 31, 2024 | $ | |||||||
| Balance exercisable, March 31, 2024 | $ | |||||||
During the three months ended March 31, 2024 and 2023, the Company recognized $of compensation expense relating to vested stock options. As of March 31, 2024, the Company had no unvested compensation related to stock options.
The weighted average remaining contractual life of common stock options outstanding and exercisable at March 31, 2024 was years. Based on a fair market value of $ per share on March 31, 2024, the intrinsic value attributed to exercisable but unexercised common stock options was $ at March 31, 2024.
11. Commitments and 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 proceedings 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.
12. Subsequent Events
On April 1, 2024, the Company received net proceeds of $
On April 1, 2024, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, granted options exercisable into shares to be issued to its executives and employees. The stock options had an exercise price of $per share, with .
The stock options are exercisable at a weighted average price of $per share with an average life to expiration of approximately . The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
| F-17 |
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, 2023, 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.
Background
On March 1, 2020, we acquired the assets of Restaurant.com, Inc. Restaurant.com, Inc. is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand.
On February 28, 2022, the Company completed the acquisition of GameIQ, a California corporation, that is a developer of consumer gamification technologies for retail businesses. The Company issued 600,000 restricted shares of its common stock with a fair value of $300,000, and promissory notes aggregating $140,914 and bearing interest at 1% per annum, to Balazs Wellisch, President and co-founder, and Quentin Blackford, Director, of GameIQ. Each note required repayment in nine equal biannual installments, with the first installment due on the nine-month anniversary of the closing. Balazs Wellisch became Chief Technology Officer of Restaurant.com, a subsidiary of the Company.
On December 29, 2023, RDE, Inc. completed the acquisition of CardCash Exchange, Inc. (“CardCash”). The acquisition was made pursuant to a plan of merger agreement dated August 18, 2023, between RDE, and Elliott Bohn, in his capacity as stockholder representative for CardCash’s stockholders. The Company acquired all of the issued and outstanding equity interests of CardCash from CardCash’s stockholders for $26,682,000, made up of 6,108,007 shares of RDE’s common stock with a fair value of $24,432,000 or $4.00 per share, $750,000 in cash (including $250,000 advanced in October 2023), and the issuance of notes payable for $1,500,000. Elliot Bohm, President of CardCash prior to the merger with RDE, remains as President of CardCash following the closing of the merger and has joined the Board of Directors of RDE as well as serving as a member of the Board of Directors of CardCash. Marc Ackerman, Chief Operating Officer of CardCash prior to the merger with RDE, continues to serve as Chief Operating Officer of CardCash following the closing of the merger.
Business Overview
We have two principal divisions, B2C and B2B, for both CardCash and for Restaurant.com.
CardCash
CardCash operates as a leading gift card exchange platform, facilitating the purchase and sale of unwanted gift cards at discounted rates for both consumers and businesses. The Company’s mission is to provide a seamless marketplace for individuals looking to maximize the value of their gift cards while also offering businesses innovative solutions to leverage this market.
CardCash’s core service offering includes the buying and selling of gift cards from over 1,100 retailers, such as Target, Home Depot, Starbucks and TJ Maxx, among others. By connecting buyers and sellers, CardCash enables consumers to unlock value from unused gift cards and save significant amounts on their purchases.
CardCash purchases unwanted gift cards at a value lower than their face worth and subsequently retails them at a discounted rate to discerning shoppers nationwide. This avenue not only allows individuals to obtain cash for their unneeded gift cards but also enables them to make cost-effective purchases through discounted gift cards.
With advanced fraud prevention technology, known as FraudFix, CardCash ensures the security and integrity of all transactions conducted on its platform. This commitment to trust and reliability has contributed to its success in saving consumers over $100 million since its inception.
| 1 |
Restaurant.com
Restaurant.com is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. 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 10,000 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.
Restaurant.com Business to Customer Division
Our B2C division accounted for 45% of gross revenue in our fiscal year ended December 31, 2023. To our database of 6.2 million customers, we sell:
● Discounted certificates for 10,000 restaurants. The certificates range from $5 to $100 and never expire.
● Discount Dining Passes, which provide discounts at 170,000 restaurants and other retailers. These passes provide multiple uses for six months.
● “Specials by Restaurant.com” which bundle Restaurant.com certificates with a variety of other entertainment options, including theatre, movies, wine and travel. Customers have favored these bundled offering (“Specials”), generating significantly greater revenue per customer when compared to purchasing our other products. The average order value for these Specials sales is nearly five times a certificate purchase. Specials generated over 5% of our past year’s B2C revenue from 60% of the B2C orders for the fiscal year ended December 31, 2023. We believe that our relationships with small businesses presents a significant revenue opportunity through such cross-promotions.
Restaurant.com Business to Business Division
Our B2B division accounted for 55% of our gross revenue in our fiscal year ended December 31, 2023. We sell certificates and Discount Dining Passes to corporations and marketers, which use them to:
● generate new customers;
● increase sales at the point of sale;
● reward points/customer loyalty;
● convert to paperless billing and auto-bill payment.
● motivate specific customer behavior such as free home repair estimates and test drives for auto dealers;
● renew subscriptions and memberships; and
● address customer service issues.
Restaurant.com Other Business
We also generate revenue through third-party offers and display ad revenue. This comprises a de minimis portion of our gross revenue.
| 2 |
Restaurant.com Attractive Customer Demographics
We intend to grow and leverage our customer database of 6.2 million which we believe is of value to merchants for a variety of services and products.
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
The Company has a history of reporting net losses. At March 31, 2024, the Company had cash of $5,400,821 available to fund its operations, including expansion plans, and to service its debt, and a working capital deficit of $228,112.
Our 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 2023 and 2022. We have financed our working capital requirements through borrowings from various sources and the sale of our equity securities.
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, 2023, 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.
Basis of Presentation
On August 18, 2023, RDE, Inc. (“RDE”) entered into an agreement and plan of merger to acquire CardCash Exchange Inc (“CardCash”). On December 29, 2023, the merger was completed. RDE’s operations are not considered significant compared to the operations of CardCash before the acquisition. Accordingly, for the purpose of the accompanying consolidated financial statements, periods before December 29, 2023 reflect the financial position, results of operations and cash flows of Card Cash prior to the acquisition, and is referred to as the “Predecessor”. Periods beginning after December 29, 2023 reflect the financial position, results of operations and cash flows of RDE consolidated with CardCash, and is referred to as the “Successor”. A black-line between the Successor and Predecessor periods has been placed in the consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these periods. Collectively, RDE (Successor) and CardCash (Predecessor) are referred to as the “Company”.
| 3 |
Results of Operations - Three months ended March 31, 2024, compared to three months ended March 31, 2023
Sales
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Net Sales | $ | 21,521,894 | $ | 24,161,728 | ||||
Sales for the three months ended March 31, 2024, were $21,521,894, a decrease of approximately $2,639,834, or 10.9%, as compared to $24,161,728 in the three months ended March 31, 2022. During the current year period, we focused on improving our gross margin. We assessed the quality of our purchased gift card brands, allowing us to increase the sales price to our customers, resulting in a gross margin of 15.1%, as compared to a gross margin of 12.1% in the prior year period. While our sales decreased 10.6% over the prior year period, our gross profit increased over the prior year period.
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Cost of Sales | $ | 18,264,618 | $ | 21,248,728 | ||||
Cost of sales consists primarily of the cost to purchase merchant gift cards. Amortization of developed technology is excluded from cost of sales and included in amortization expense in the Statements of Operations.
Costs of sales for the three months ended March 31, 2024 increased to $18,264,618, as compared to $21,248,078 during the three months ended March 31, 2023. Our cost of sales, as a percentage of sales, were 84.5% and 87.9%, respectively. The decline in our cost of sales, and the increase in our gross margin, as compared to the prior year period, is discussed above.
Operating Expenses
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Selling, General and Administrative Expenses | $ | 5,214,041 | $ | 2,802,828 | ||||
| Amortization of capitalized software costs | 378,737 | 312,703 | ||||||
| Amortization of intangible assets | 607,917 | 312,703 | ||||||
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.
| 4 |
Selling, general and administrative expenses were $5,214,041 for the three months ended March 31, 2024, as compared to $2,802,828 for the three months ended March 31, 2023, an increase of $2,411,213. The increase was from the recording of $37,126 of stock-based compensation expense during the three months ended March 31, 2024, and approximately $202,000 of legal and professional fees related to our recent acquisition. Both of these current year expenses did not occur in the prior year period. The remaining change in selling, general and administrative expenses was from general changes in our business and operations.
Amortization of capitalized software costs. Amortization expenses are primarily attributable to the Company’s capitalized software development costs. Amortization expenses were $378,737 for the three months ended March 31, 2024, as compared to $312,703 during the three months ended March 31, 2023.
Amortization of intangible assets. Amortization expenses are primarily attributable to the Company’s amortization of intangible assets with finite lives. Amortization expenses were $607,917 for the three months ended March 31, 2024, as compared to $75,000 during the three months ended March 31, 2023.
Loss from Operations
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Loss from Operations | $ | 2,943,419 | $ | 276,881 | ||||
For the three months ended March 31, 2024, we incurred a loss from operations of $2,943,419, as compared to a loss from operations of $276,881 for the three months ended March 31, 2023. The increase in loss from operations was due to our increased gross profit offset by increased stock-based compensation expense, operating costs, and amortization expense, as discussed above.
Other Income (Expenses)
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Other Income (Expenses) | $ | (247,301 | ) | $ | (181,894 | ) | ||
We had other expenses of $247,301 for the three months ended March 31, 2024, as compared to other expenses of $181,894 for the three months ended March 31, 2023. Other expenses consist solely of interest expenses.
Net Loss
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Net Loss | $ | 3,190,720 | $ | 400,378 | ||||
| 5 |
We realized a net loss of $3,190,720 for the three months ended March 31, 2024, as compared to a net loss of $430,378 for the three months ended March 31, 2023. The increase in net loss was due to our increased gross profit offset by increased stock-based compensation expense, operating costs, amortization expense, and interest expense, as discussed above.
Modified EBITDA
In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, and fair value of common stock issued for services.
Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Set forth below is a reconciliation of net loss to Modified EBITDA for the three months ended March 31, 2024 and 2023 (unaudited):
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Net loss | $ | (3,190,270 | ) | $ | (430,378 | ) | ||
| Modified EBITDA adjustments: | ||||||||
| Income taxes | - | (28,397 | ) | |||||
| Interest expense | 247,301 | 181,894 | ||||||
| Amortization of intangible assets | 607,917 | 75,000 | ||||||
| Amortization of capitalized software costs | 378,737 | 312,703 | ||||||
| Stock option and other noncash compensation | 1,081,376 | - | ||||||
| Fair value of common stock issued for services | 217,500 | - | ||||||
| Total EBITDA adjustments | $ | 2,532,831 | $ | 541,200 | ||||
| Modified EBITDA | $ | (657,439 | ) | $ | 110,822 | |||
We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:
| ● | Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
| ● | Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs; | |
| ● | Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and | |
| ● | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements. |
| 6 |
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of operations is based upon the Company’s consolidated financial statements for the years ended December 31, 2023 and 2022 presented elsewhere in this report, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
Acquisitions and Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
| 7 |
Recent Accounting Pronouncements
See discussion of recent accounting pronouncements in Note 2 to the accompanying financial statements.
Liquidity and Capital Resources
The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.
Our 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 experienced operating losses and negative operating cash flows during 2023 and 2022. We have financed our working capital requirements through borrowings from various sources and the sale of equity securities.
We have a history of reporting net losses. At March 31, 2024, we had cash of $5,400,821 available to fund our operations, including expansion plans, and to service our debt, and a working capital deficit of $228,112. We anticipate our cash balance will last until at least March 2025. As a result, we have concluded that there is substantial doubt about the Company’s ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our 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 our ability to secure additional funds, there can be no assurances that we 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 amount and type of financing available to us in the future.
If we are unable to obtain the cash resources necessary to satisfy our ongoing cash requirements, we could be required to scale back its business activities or to discontinue its operations entirely.
Our consolidated statements of cash flows as discussed herein are presented below.
| Successor | Predecessor | |||||||
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Net cash provided by (used in) operating activities | $ | (6,636 | ) | $ | 803,483 | |||
| Net cash used in investing activities | (224,815 | ) | (38,449 | ) | ||||
| Net cash provided by (used in) financing activities | 1,532,535 | (494,351 | ) | |||||
| Net increase in cash and cash equivalents | 1,301,084 | 270,683 | ||||||
Operating Activities
Cash provided by or used in operating activities primarily consists of net loss adjusted for certain non-cash items, including amortization of intangible assets, impairment of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, and the effect of changes in working capital and other activities.
Cash used in operating activities for the three months ended March 31, 2024 was approximately $6,636 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, fair value of vested stock options, and the fair value of common stock issued to executives, employees, and advisors, and routine changes in working capital and other activities.
| 8 |
Cash provided by operating activities for the three months ended March 31, 2023 was approximately $803,483 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, goodwill impairment, fair value of vested stock options, and the fair value of common stock issued to executives, and routine changes in working capital and other activities.
Investing Activities
Cash used for investing activities for the three months ended March 31, 2024 was $224,815, which was for capital expenditures.
Cash used for investing activities for the three months ended March 31, 2023, was $38,449, which was for capital expenditures.
Financing Activities
Cash provided by financing activities for the three months ended March 31, 2024 was $1,532,535, which was from proceeds of $2,709,000 on the private sale of common stock, less partial repayment of our line of credit balance of $676,465, and payment of $500,000 on our acquisition obligation.
Cash used in financing activities for the three months ended March 31, 2023 was $494,351, which was from net repayment of our line of credit facility of $494,351.
Secured Revolving Line of Credit
The outstanding line of credit balance at March 31, 2024 and December 31, 2023 was:
| March 31, 2024 | December 31, 2023 | |||||||
| Line of credit | $ | 6,060,920 | $ | 6,737,385 | ||||
In November 2020, CardCash entered into an amended and restated promissory note for a revolving line of credit with availability of up to $10,000,000. The revolving line of credit is payable on demand, secured by the Company’s inventory, with interest based on the Wall Street Journal Prime Rate plus 3.00%, limited to a floor of 6.5%. At March 31, 2024 and December 31, 2023, the average interest rate was 12% and 12%, respectively. As of March 31, 2024, the Company was in compliance with customary debt covenants.
Convertible Debt
On November 5, 2018, RDE completed the acquisition of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December 31, 2023, there was one remaining assumed convertible note payable outstanding that matured July 2017, and is past due. At March 31, 2024, the principal balance of $20,000, and accrued interest of $20,887, are convertible at $1.50 per share into 27,258 shares of the Company’s common stock.
Notes Payable
CardCash Acquisition Notes Payable
On December 29, 2023, the Company issued two year promissory notes totaling $1,500,000 as partial consideration for the acquisition of CardCash (see Note 3). $750,000 is payable on the December 29, 2025, bearing simple annual interest of 5%, and $750,000 is to be paid upon the earlier of (a) the completion of a firm commitment underwriting RDE’s initial public offering to allow the Company to become listed on the Nasdaq Capital Market or (b) December 29, 2024. As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $1,500,000. As of March 31, 2024, the notes payable had an aggregate principal balance outstanding of $1,500,000 and accrued interest payable of $18,750.
| 9 |
GameIQ Acquisition Note Payable
On February 1, 2022, RDE issued two notes payable for the purchase of GameIQ, one for $78,813 and another for $62,101. In accordance with Notes, the Company promised to pay the principal together with interest at 1% upon the earlier of (i) nine equal biannual installments with the first installment due on October 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”).
As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $102,199 and accrued interest payable of $821. As of March 31, 2024, the notes payable had an aggregate principal balance outstanding of $102,199 and accrued interest payable of $1,027.
Economic Injury Disaster Loans (EIDL)
On June 17, 2020, RDE received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ.
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of December 31, 2023, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $27,259. As of March 31, 2024, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $23,487.
Off-Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this Item.
| 10 |
Item 4. Controls and Procedures.
Evaluation of Disclosure control and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Securities and Exchange Act of 1934 Rules 13a-15(f). Based on this evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2024. As of March 31, 2024, management’s assessment identified the following material weaknesses in the Company’s internal control over financial reporting:
We continue to have a material weakness in our internal control over financial reporting as disclosed in the December 31, 2023, Annual Report on Form 10-K, in that we had inadequate segregation of duties consistent with control objectives. Specifically, certain personnel have the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations; and (ii) we did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain effective program change management controls to ensure that information technology program and data changes affecting certain financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately.
Notwithstanding the identified material weaknesses, management has concluded that the Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
Remediation Plan
Management has been actively engaged in developing and implementing remediation plans to address material weaknesses described above. These remediation efforts are ongoing and include or are expected to include designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing controls over segregation of duties, and designing and implementing IT general controls, including controls over the review and update of user access rights and privileges and program change management controls.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceeding that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
| 11 |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
Exhibit No. |
Description | |
| 31.1 | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a) | |
| 31.2 | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a) | |
| 32.1** | Section 1350 Certification of Chief Executive Officer | |
| 32.2** | Section 1350 Certification of Chief Financial Officer | |
| 101.INS† | Inline XBRL Instance Document | |
| 101.SCH† | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL† | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF† | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB† | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE† | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** 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.+ Management contract or compensatory plan or arrangement.
† Filed herewith.
| 12 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RDE, INC. | |||
| Date: May 15, 2024 | By: | /s/ Ketan Thakker | |
| Ketan Thakker | |||
| President, Chief Executive Officer and Principal Financial Officer | |||
| 13 |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ketan Thakker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of RDE, INC. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 15, 2024 | /s/ Ketan Thakker | |
| Ketan Thakker | ||
Chief Executive Officer (Principal Executive Officer) | ||
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ketan Thakker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of RDE, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 15, 2024 | /s/ Ketan Thakker | |
| Ketan Thakker | ||
| Principal Financial and Accounting Officer | ||
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of RDE, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: | May 15, 2024 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
President and Chief Executive Officer (Principal Executive Officer) |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RDE, Inc. and will be retained by RDE, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Principal Financial Officer of RDE, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: | May 15, 2024 | /s/ Ketan Thakker | |
| Ketan Thakker | |||
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RDE, Inc. and will be retained by RDE, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Restricted cash | $ 1,258,826 | $ 1,258,826 |
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 750,000,000 | 750,000,000 |
| Common stock, shares issued | 25,538,097 | 24,119,967 |
| Common stock, shares outstanding | 25,538,097 | 24,119,967 |
| Common stock issuable, shares | 370,843 | 383,343 |
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) |
Successor [Member]
Preferred Stock [Member]
|
Successor [Member]
Common Stock [Member]
|
Successor [Member]
Common Stock Issuable [Member]
|
Successor [Member]
Additional Paid-in Capital [Member]
|
Successor [Member]
Retained Earnings [Member]
|
Preferred Stock [Member] |
Common Stock [Member] |
Common Stock Issuable [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2022 | $ 2,900 | $ 4,934,052 | $ (30,335,139) | $ (25,398,187) | |||||||
| Balance, shares at Dec. 31, 2022 | 29,035,625 | ||||||||||
| Net loss | (430,378) | (430,378) | |||||||||
| Balance at Mar. 31, 2023 | $ 2,900 | $ 4,934,052 | $ (30,765,517) | (25,828,565) | |||||||
| Balance, shares at Mar. 31, 2023 | 29,035,625 | ||||||||||
| Balance at Dec. 31, 2023 | $ 24,114 | $ 383,343 | $ 93,376,244 | $ (69,462,507) | 24,321,194 | ||||||
| Balance, shares at Dec. 31, 2023 | 24,119,967 | 383,343 | |||||||||
| Fair value of vested options | 37,126 | 37,126 | |||||||||
| Fair value of vested restricted stock units | 1,044,250 | 1,044,250 | |||||||||
| Issuance of common stock for services | $ 50 | 217,450 | 217,500 | ||||||||
| Issuance of common stock for services, shares | 50,000 | ||||||||||
| Common shares issued on cashless exercise of stock options | $ 1 | (1) | |||||||||
| Common shares issued on cashless exercise of stock options, shares | 1,130 | 2,834 | |||||||||
| Common shares issued | $ 13 | $ (12,500) | 12,487 | ||||||||
| Common shares issued, shares | 12,500 | (12,500) | 12,500 | ||||||||
| Issuance of common stock for cash | $ 1,354 | 2,707,646 | $ 2,709,000 | ||||||||
| Issuance of common stock for cash, shares | 1,354,500 | ||||||||||
| Net loss | (3,190,720) | (3,190,720) | |||||||||
| Balance at Mar. 31, 2024 | $ 25,532 | $ 370,843 | $ 97,395,202 | $ (72,653,227) | $ 25,138,350 | ||||||
| Balance, shares at Mar. 31, 2024 | 25,538,097 | 370,843 |
Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | 1. Basis of Presentation
RDE, Inc. (“RDE”) through its wholly-owned subsidiary Restaurant.com, Inc., has been in the business of connecting digital consumers, businesses and communities with dining and merchant deal options throughout the United States.
On August 18, 2023, RDE entered into an agreement and plan of merger to acquire CardCash Exchange Inc (“CardCash”). On December 29, 2023, the merger was completed and has been accounted for as a business combination using the acquisition method of accounting (See Note 3). CardCash was formed in 2013 and buys merchant gift cards and resells them at a markup.
RDE’s operations are not considered significant compared to the operations of CardCash before the acquisition. Accordingly, for the purpose of the accompanying condensed consolidated financial statements, periods before December 29, 2023 reflect the financial position, results of operations and cash flows of CardCash prior to the acquisition, and is referred to as the “Predecessor”. Periods beginning after December 29, 2023 reflect the financial position, results of operations and cash flows of RDE consolidated with CardCash, and is referred to as the “Successor”. A black-line between the Successor and Predecessor periods has been placed in the condensed consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these periods.
Collectively, RDE (Successor) and CardCash (Predecessor) are referred to as the “Company”.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements for the year ended December 31, 2023, and, in the opinion of management, reflect all adjustments, which consist of normal recurring adjustments, considered necessary for a fair presentation of the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Card Cash Exchange, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Going Concern
The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date the accompanying financial statements were issued. RDE and CardCash have a history of reporting net losses and negative operating cash flows. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, our independent registered public accounting firm, in its audit report to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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.
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. The Company has financed its working capital requirements through borrowings from various sources and the sale of its equity securities.
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.
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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 the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are adjusted. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions used in valuing assets acquired in business acquisitions, impairment testing of goodwill and other long-term assets, assumptions used in valuing stock-based compensation, the realizability of deferred tax assets and the related valuation allowance, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
Certain customers may receive incentives, which are accounted for as variable consideration. Provisions for sales returns are recognized in the period when the sale is recorded based upon the Company’s prior experience and current trends. These revenue reductions are established by the Company based upon management’s best estimates at the time of sale following the historical trend, adjusted to reflect known changes in the factors that impact such reserves and allowances, and the terms of agreements with customers.
Amounts billed and due from the Company’s customers are classified as accounts receivable on the balance sheet. Amounts received in advance from customers are recorded as deferred revenue on the balance sheet until the performance obligations have been satisfied. The Company has elected to apply the practical expedient to not assess contracts for significant financing component because the period between the receipt of advance payment and the Company’s transfer of services to the customer is less than one year.
Other
Sale of promotional gift cards, sale of travel, vacation and merchandise, and advertising revenues
The Company also recognizes revenue from the sale of Restaurant.com promotional gift cards (revenue recognized based on the Company’s historical redemption rates of its promotional gift cards), the sale of travel, vacation, and merchandise on behalf of third-party merchants (revenue reported on a net basis equal to the purchase price received from the customer less a portion of the purchase price paid by the Company to its merchant partners), and advertising revenue for 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 (revenue recognized when its determinable, which is generally upon receipt of a statement and/or proceeds from the third-party partners).
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2024 and 2023:
Cost of Sales
Cost of sales consists primarily of the cost to purchase merchant gift cards, and transaction fees and costs.
Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Intangible Assets
The Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition. The finite-lived intangible assets consist of customer relationships, trade name, and developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of three years.
The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.
Goodwill
Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. As of March 31, 2024 goodwill that arose from acquisition of CardCash (see Note 3) was $20,007,669. Under ASC 350 Intangibles-Goodwill and Other, goodwill and other intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing is performed annually at December 31. Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of the Company’s reporting unit to the carrying value of the underlying net assets in the reporting unit. If the fair value of the reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) determined that there is only one reporting unit. No impairment indicators were identified as of March 31, 2024.
Long-Lived Assets
The Company evaluates long-lived assets, other than goodwill and indefinite lived intangible assets, for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. The measurement of possible impairment is based upon the ability to recover the carrying value of the asset through the expected future undiscounted cash flows from the use of the asset and its eventual disposition. An impairment loss, equal to the difference between the asset’s fair value and its carrying value, is recognized when the estimated future undiscounted cash flows are less than its carrying amount. No impairment indicators were identified as of March 31, 2024.
Leases
The Company leases certain corporate office space under lease agreements. The Company determines whether a contract contains a lease at contract inception. A contract is or contains a lease if the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. Control is determined based on the right to obtain all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. Operating lease right-of-use assets (“ROU”) for operating leases represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term and is included in the general and administrative line in the Company’s consolidated statements of operations.
Advertising
The Company expenses advertising costs as incurred and amounted to $261,042 and $243,777 for the three months ended March 31, 2024 and 2023, respectively, which are recorded in general and administrative in the Statements of Operations.
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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Stock-based compensation expense recognized and recorded as part of selling, general and administrative expenses.
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 issuable and potentially issuable shares as summarized above. These potentially issuable common shares would have been anti-dilutive because the Company had a net loss for the periods ended March 31, 2024 and 2023, such common stock equivalents would have been excluded from the calculation of net loss per share.
Fair Value of Financial Instruments
Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
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.
Segment Information
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s operation segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable and cash. The credit risk exposure surrounding trade accounts receivable is limited as these amounts represent the timing difference between payments being settled by credit card processors and the cash being provided to the Company.
No significant customers comprised more than 10% of accounts receivable or revenue as of and for the period ended March 31, 2024 and 2023.
The Company maintains a balance at financial institutions, which at times exceed the federally insured limit. The Company has not experienced a loss on this account.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company’s adopted ASU 2016-13 effective January 1, 2023, and there was no material effect on the Company’s financial position, results of operations and cash flows.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company’s adopted ASU 2023-7 effective January 1, 2024, and there was no material effect on the Company’s financial position, results of operations and cash flows.
In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The ASU requires buyers to disclose information about their supplier finance programs. Interim and annual requirements include the disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 on January 1, 2023, and there was no material impact on our financial statements.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
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Acquisition of Card Cash |
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| Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Card Cash | 3. Acquisition of Card Cash
On December 29, 2023, RDE completed the acquisition of CardCash. The acquisition was made pursuant to an agreement and plan of merger dated August 18, 2023 between RDE and CardCash. RDE acquired all of the issued and outstanding equity of CardCash for $26,682,000, made up of the issuance of shares of the RDE’s common stock valued at $24,682,000, the issuance of a note payable for $1,500,000, and payment of $750,000 in cash.
RDE utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations, and allocated the purchase price to CardCash’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition. The fair value assigned to the developed technology was determined using the relief from royalty method. The fair value assigned to trade name were determined using the relief from royalty method. The fair value of the customer relationships was determined using the multi-period excess earnings method, which estimates the direct cash flow expected to be generated from the existing customers acquired. The cash flows were based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model, as well as the weighted average cost of capital. The valuation assumptions took into consideration the Company’s estimates of customer attrition and revenue growth projections. The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill. Goodwill also represents the future benefits as a result of the acquisition that the Company believes will enhance the Company’s product offerings and lineup available to both new and existing customers and generate future synergies within the discount coupon and giftcard business.
As of March 31, 2024, management has not yet finalized its valuation analysis. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments through the purchase price measurement period would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets.
The following table summarizes the allocation of the fair value of the purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of CardCash on the date of acquisition:
The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of CardCash based on the historical financial statements of the Company and CardCash. The unaudited pro forma statements of operations for the three months ended March 31, 2023 give effect to the transaction as if it had occurred on January 1, 2023.
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Property and Equipment, Net |
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| Property and Equipment, Net | 4. Property and Equipment, Net
Property and equipment, net consisted of the following:
The Company accounts for capitalized software and website development costs to develop software programs to be used solely to meet the Company’s internal needs in accordance with ASC 350-40. Costs incurred during the application development stage for software programs to be used solely to meet its internal needs are capitalized. The depreciation expense on property and equipment for the three months ended March 31, 2024 and 2023 was $378,737 and $312,703, respectively.
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Goodwill and Intangible Assets |
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| Goodwill and Intangible Assets | 5. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
On December 29, 2023, in relation to the acquisition of CardCash (See Note 3), the Company recorded intangible assets of $6,700,000 (provisional). During the period March 31, 2024, the Company recorded amortization expense of $607,917, leaving an ending intangible asset balance of $6,092,083 at March 31, 2024.
Identifiable intangibles are amortized over their estimated remaining useful lives, which are as follows:
Estimated amortization expense for the Company is as follows:
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Leases |
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| Leases | 6. Leases
The Company determines whether a contract is, or contains, a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its office and warehouse locations, and certain warehouse equipment. Leases with an initial term of 12 months or less are not included on the balance sheets.
The Company leases office facilities under noncancelable operating lease agreements. The Company had leases for office facilities in Woodbridge, New Jersey and Schaumburg, Illinois. The operating lease agreement for the Woodbridge, New Jersey location ended in April 2024, and is currently being leased on a month-to-month basis while the lease renewal is being negotiated.
The Company’s ROU asset balance was $315,183 as of December 31, 2023. During the three months ended March 31, 2024, the Company recorded a reduction of ROU assets of $65,632 related to its leases, resulting in an ROU asset balance of $249,551 as of March 31, 2024.
The Company’s lease liability balance was $337,304 as of December 31, 2023. During the three months ended March 31, 2024, the Company made payments of $65,763 against its operating lease liability, resulting in a lease liability of $271,541, of which the current portion of lease liability was $87,207, leaving a long-term lease liabilities balance of $184,334.
During the three months ended March 31, 2024 and 2023, lease costs totaled approximately $75,580 and $53,415, respectively.
As of March 31, 2024, the weighted average remaining lease terms for operating lease is 3.08 years, and the weighted average discount rate for operating lease is 10.00%.
Maturities of the Company’s operating lease liabilities are as follows as of March 31, 2024:
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Secured Revolving Line of Credit |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||
| Secured Revolving Line of Credit | 7. Secured Revolving Line of Credit
The outstanding line of credit balance at March 31, 2024 and December 31, 2023 was:
In November 2020, CardCash entered into an amended and restated promissory note for a revolving line of credit with availability of up to $10,000,000. The revolving line of credit is payable on demand, secured by the Company’s inventory, with interest based on the Wall Street Journal Prime Rate plus 3.00%, limited to a floor of 6.5%. At March 31, 2024 and December 31, 2023, the average interest rate was 12% and 12%, respectively. As of March 31, 2024, the Company was in compliance with customary debt covenants. At March 31, 2024 and December 31, 2023, this line of credit requires a deposit of $1,258,826, included in restricted cash. |
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Convertible Debt |
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| Convertible Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debt | 8. Convertible Debt
Convertible debt consists of the following at March 31, 2024 and December 31, 2023:
Incumaker, Inc.
On November 5, 2018, RDE completed the acquisition of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December 31, 2023, there was one remaining assumed convertible note payable outstanding that matured July 2017, and is past due. At March 31, 2024, the principal balance of $20,000, and accrued interest of $20,887, are convertible at $1.50 per share into shares of the Company’s common stock.
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Notes Payable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable | 9. Notes Payable
Notes payable consists of the following at March 31, 2024 and December 31, 2023:
CardCash Acquisition Notes Payable
On December 29, 2023, the Company issued two year promissory notes totaling $1,500,000 as partial consideration for the acquisition of CardCash (see Note 3). $750,000 is payable on the December 29, 2025, bearing simple annual interest of 5%, and $750,000 is to be paid upon the earlier of (a) the completion of a firm commitment underwriting RDE’s initial public offering to allow the Company to become listed on the Nasdaq Capital Market or (b) December 29, 2024. As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $1,500,000. As of March 31, 2024, the notes payable had an aggregate principal balance outstanding of $1,500,000 and accrued interest payable of $18,750.
GameIQ Acquisition Note Payable
On February 1, 2022, RDE issued two notes payable for the purchase of GameIQ, one for $78,813 and another for $62,101. In accordance with Notes, the Company promised to pay the principal together with interest at 1% upon the earlier of (i) nine equal biannual installments with the first installment due on October 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”).
As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $102,199 and accrued interest payable of $821. As of March 31, 2024, the notes payable had an aggregate principal balance outstanding of $102,199 and accrued interest payable of $1,027.
Economic Injury Disaster Loans (EIDL)
On June 17, 2020, RDE received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ.
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of December 31, 2023, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $27,259. As of March 31, 2024, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $23,487.
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Stockholder’s Deficit |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholder’s Deficit | 10. Stockholder’s Deficit
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2024 and 2023, there were shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of March 31, 2024 and December 31, 2023, the Company had shares and shares, respectively, of common stock issued and outstanding.
Common Stock Transactions
Issuance of Common Stock on Sale of Common Stock
During the three months ended March 31, 2024, the Company received net proceeds of approximately $2,709,000 for the sale of shares of common stock at $ per share, as part of a private placement.
Issuance of Restricted Stock
On March 1, 2024, the Company granted its Chief Executive Officer shares of the Company’s restricted stock, and shares of the Company’s restricted stock to other officers and employees with an aggregate fair value of $1,793,500 or $ per share. . During the three months ended March 31, 2024, the Company issued of these shares of restricted stock with a fair value of $597,831 based upon its vesting term. During the three months ended March 31, 2024, the Company recognized $ of expenses related to the vesting of restricted shares, leaving $ remaining to be expensed upon vesting in future periods through .
Elliot Bohm and Marc Ackerman
Effective on December 29, 2023, with the closing of the acquisition of CardCash (see Note 3), the Company entered into an Employment Agreements with Elliot Bohm and Mark Ackerman. Mr. Bohm was the President of CardCash and Mr. Ackerman was the Chief Operating Officer of CardCash prior to the acquisition by RDE and will remain in those positions following the acquisition. Bohm will also join the Board of Directors of RDE.
Under the terms of the four-year agreements, Mr. Bohm and Mr. Ackerman shall each receive an annual base salary of $375,000 and a one-time award of restricted shares of RDE’s common stock with aggregate fair value of $10 million, . During the three months ended March 31, 2024, the Company recorded $ on the vesting of shares of restricted common stock.
On March 1, 2023, the Company granted its Chief Executive Officer shares of the Company’s restricted stock, and shares of the Company’s restricted stock to employees with an aggregate fair value of $1,005,000 or $ per share. . During the six months ended June 30, 2023, the Company issued of these shares of restricted stock with a fair value of $335,000 based upon its vesting term. During the six months ended June 30, 2023, the Company recognized $ of expenses related to the vesting of restricted shares, leaving $ remaining to be expensed upon vesting in future periods through .
Issuance of Common Stock for Services
During the three months ended March 31, 2024, the Company issued shares of common stock with a fair value of $217,500, or $ per share, to a consultant for services rendered.
Common Stock Issuable
At December 31, 2023, 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 consolidated financial statements. During the three months ended March 31, 2024, the Company issued shares of common stock, leaving shares of common stock issuable in the accompanying consolidated financial statements at March 31, 2024.
Summary of Stock Options
During the three months ended March 31, 2024 and 2023, the Company recognized $of compensation expense relating to vested stock options. As of March 31, 2024, the Company had no unvested compensation related to stock options.
The weighted average remaining contractual life of common stock options outstanding and exercisable at March 31, 2024 was years. Based on a fair market value of $ per share on March 31, 2024, the intrinsic value attributed to exercisable but unexercised common stock options was $ at March 31, 2024.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 11. Commitments and 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 proceedings that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2024 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 12. Subsequent Events
On April 1, 2024, the Company received net proceeds of $100,000 for the sale of shares of common stock at $ per share, as part of a private placement.
On April 1, 2024, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, granted options exercisable into shares to be issued to its executives and employees. The stock options had an exercise price of $per share, with .
The stock options are exercisable at a weighted average price of $per share with an average life to expiration of approximately . The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award. |
Significant Accounting Policies (Policies) |
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| Use of Estimates | Use of Estimates
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are adjusted. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions used in valuing assets acquired in business acquisitions, impairment testing of goodwill and other long-term assets, assumptions used in valuing stock-based compensation, the realizability of deferred tax assets and the related valuation allowance, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
Certain customers may receive incentives, which are accounted for as variable consideration. Provisions for sales returns are recognized in the period when the sale is recorded based upon the Company’s prior experience and current trends. These revenue reductions are established by the Company based upon management’s best estimates at the time of sale following the historical trend, adjusted to reflect known changes in the factors that impact such reserves and allowances, and the terms of agreements with customers.
Amounts billed and due from the Company’s customers are classified as accounts receivable on the balance sheet. Amounts received in advance from customers are recorded as deferred revenue on the balance sheet until the performance obligations have been satisfied. The Company has elected to apply the practical expedient to not assess contracts for significant financing component because the period between the receipt of advance payment and the Company’s transfer of services to the customer is less than one year.
Other
Sale of promotional gift cards, sale of travel, vacation and merchandise, and advertising revenues
The Company also recognizes revenue from the sale of Restaurant.com promotional gift cards (revenue recognized based on the Company’s historical redemption rates of its promotional gift cards), the sale of travel, vacation, and merchandise on behalf of third-party merchants (revenue reported on a net basis equal to the purchase price received from the customer less a portion of the purchase price paid by the Company to its merchant partners), and advertising revenue for 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 (revenue recognized when its determinable, which is generally upon receipt of a statement and/or proceeds from the third-party partners).
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2024 and 2023:
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| Cost of Sales | Cost of Sales
Cost of sales consists primarily of the cost to purchase merchant gift cards, and transaction fees and costs.
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| Business Combinations | Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
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| Intangible Assets | Intangible Assets
The Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition. The finite-lived intangible assets consist of customer relationships, trade name, and developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of three years.
The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.
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| Goodwill | Goodwill
Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. As of March 31, 2024 goodwill that arose from acquisition of CardCash (see Note 3) was $20,007,669. Under ASC 350 Intangibles-Goodwill and Other, goodwill and other intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing is performed annually at December 31. Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of the Company’s reporting unit to the carrying value of the underlying net assets in the reporting unit. If the fair value of the reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) determined that there is only one reporting unit. No impairment indicators were identified as of March 31, 2024.
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| Long-Lived Assets | Long-Lived Assets
The Company evaluates long-lived assets, other than goodwill and indefinite lived intangible assets, for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. The measurement of possible impairment is based upon the ability to recover the carrying value of the asset through the expected future undiscounted cash flows from the use of the asset and its eventual disposition. An impairment loss, equal to the difference between the asset’s fair value and its carrying value, is recognized when the estimated future undiscounted cash flows are less than its carrying amount. No impairment indicators were identified as of March 31, 2024.
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| Leases | Leases
The Company leases certain corporate office space under lease agreements. The Company determines whether a contract contains a lease at contract inception. A contract is or contains a lease if the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. Control is determined based on the right to obtain all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. Operating lease right-of-use assets (“ROU”) for operating leases represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term and is included in the general and administrative line in the Company’s consolidated statements of operations.
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| Advertising | Advertising
The Company expenses advertising costs as incurred and amounted to $261,042 and $243,777 for the three months ended March 31, 2024 and 2023, respectively, which are recorded in general and administrative in the Statements of Operations.
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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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Stock-based compensation expense recognized and recorded as part of selling, general and administrative expenses.
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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.
The issuable and potentially issuable shares as summarized above. These potentially issuable common shares would have been anti-dilutive because the Company had a net loss for the periods ended March 31, 2024 and 2023, such common stock equivalents would have been excluded from the calculation of net loss per share.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
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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| Segment Information | Segment Information
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s operation segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable and cash. The credit risk exposure surrounding trade accounts receivable is limited as these amounts represent the timing difference between payments being settled by credit card processors and the cash being provided to the Company.
No significant customers comprised more than 10% of accounts receivable or revenue as of and for the period ended March 31, 2024 and 2023.
The Company maintains a balance at financial institutions, which at times exceed the federally insured limit. The Company has not experienced a loss on this account.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company’s adopted ASU 2016-13 effective January 1, 2023, and there was no material effect on the Company’s financial position, results of operations and cash flows.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company’s adopted ASU 2023-7 effective January 1, 2024, and there was no material effect on the Company’s financial position, results of operations and cash flows.
In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The ASU requires buyers to disclose information about their supplier finance programs. Interim and annual requirements include the disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 on January 1, 2023, and there was no material impact on our financial statements.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
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Significant Accounting Policies (Tables) |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregation of Revenue | In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2024 and 2023:
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| Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share |
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Acquisition of Card Cash (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The following table summarizes the allocation of the fair value of the purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of CardCash on the date of acquisition:
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| Schedule of Pro Forma Statements of Operations |
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Property and Equipment, Net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Property and Equipment, Net | Property and equipment, net consisted of the following:
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Goodwill and Intangible Assets (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill and Intangible Assets | Goodwill and intangible assets consist of the following:
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| Schedule of Identifiable Intangibles Assets Estimated Remaining Useful Lives | Identifiable intangibles are amortized over their estimated remaining useful lives, which are as follows:
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| Schedule of Estimated Amortization Expense | Estimated amortization expense for the Company is as follows:
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturities of Operating Lease Liabilities | Maturities of the Company’s operating lease liabilities are as follows as of March 31, 2024:
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Secured Revolving Line of Credit (Tables) |
3 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||
| Schedule of Line of Credit | The outstanding line of credit balance at March 31, 2024 and December 31, 2023 was:
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Convertible Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Debt | Convertible debt consists of the following at March 31, 2024 and December 31, 2023:
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Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable | Notes payable consists of the following at March 31, 2024 and December 31, 2023:
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Stockholder’s Deficit (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options |
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Schedule of Anti- dilutive Securities Excluded from Computation of Earning Loss Per Share (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Financial Designation, Predecessor and Successor | Successor | Predecessor |
| Anti-dilutive securities | 1,115,883 | 1,526,882 |
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 27,258 | |
| Common Stock Issuable [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 370,843 | |
| Series B Convertible Preferred Stock [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 1,526,882 | |
| Share-Based Payment Arrangement, Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities | 717,782 | |
Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
Dec. 29, 2023 |
|
| Product Information [Line Items] | ||||
| Finite lived intangible asset useful life | 3 years | |||
| Goodwill - provisional | $ 20,007,669 | $ 20,007,669 | ||
| Impairment of long-lived assets | 0 | |||
| Advertising expense | $ 261,042 | $ 243,777 | ||
| Customer Concentration Risk [Member] | No Customers [Member] | Revenue Benchmark [Member] | ||||
| Product Information [Line Items] | ||||
| Concentration risk, percentage | 10.00% | 10.00% | ||
| Customer Concentration Risk [Member] | No Customers [Member] | Accounts Receivable [Member] | ||||
| Product Information [Line Items] | ||||
| Concentration risk, percentage | 10.00% | 10.00% | ||
| Card Cash Exchange Inc [Member] | ||||
| Product Information [Line Items] | ||||
| Goodwill - provisional | $ 20,007,669 | $ 20,007,669 | ||
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Parenthetical) (Details) - Card Cash Exchange Inc [Member] |
Dec. 29, 2023
USD ($)
$ / shares
shares
|
|---|---|
| Business Acquisition [Line Items] | |
| Notes payable | $ 1,500,000 |
| Number of stock issued | shares | 6,108,007 |
| Share price per share | $ / shares | $ 4.00 |
| Due December 30, 2025 [Member] | |
| Business Acquisition [Line Items] | |
| Notes payable | $ 750,000 |
| Due December 30, 2024 [Member] | |
| Business Acquisition [Line Items] | |
| Notes payable | $ 750,000 |
Schedule of Pro Forma Statements of Operations (Details) - Card Cash Exchange Inc [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
$ / shares
| |
| Business Acquisition [Line Items] | |
| Sales | $ | $ 24,973,439 |
| Net loss | $ | $ (1,413,627) |
| Net loss per share, basic | $ / shares | $ (0.10) |
| Net loss per share, diluted | $ / shares | $ (0.10) |
Acquisition of Card Cash (Details Narrative) - Card Cash Exchange Inc [Member] |
Dec. 29, 2023
USD ($)
shares
|
|---|---|
| Business Acquisition [Line Items] | |
| Purchase price | $ 26,682,000 |
| Shares issued | shares | 6,108,007 |
| Fair value of common stock | $ 24,682,000 |
| Notes payable | 1,500,000 |
| Payments of consideration in cash | $ 750,000 |
Schedule Property and Equipment, Net (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 2,788,128 | $ 2,563,312 |
| Accumulated depreciation | (378,737) | |
| Property and equipment, net | 2,409,391 | 2,563,312 |
| Website Development Costs [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 2,758,282 | 2,533,466 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 29,846 | $ 29,846 |
Property and Equipment, Net (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 378,737 | $ 312,703 |
Schedule of Goodwill and Intangible Assets (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Finite-Lived Intangible Assets [Line Items] | |||
| Financial Designation, Predecessor and Successor | Successor | Predecessor | |
| Goodwill | $ 20,007,669 | $ 20,007,669 | |
| Intangible assets, gross | 6,700,000 | 6,700,000 | |
| Accumulated amortization | (607,917) | ||
| Intangible assets, net | 6,092,083 | 6,700,000 | |
| Customer Relationships [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Intangible assets, gross | 1,700,000 | 1,700,000 | |
| Trade Names [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Intangible assets, gross | 2,400,000 | 2,400,000 | |
| Developed Technology Rights [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Intangible assets, gross | $ 2,600,000 | $ 2,600,000 | |
Schedule of Identifiable Intangibles Assets Estimated Remaining Useful Lives (Details) |
Mar. 31, 2024 |
|---|---|
| Finite-Lived Intangible Assets [Line Items] | |
| Weighted Average Useful Life | 3 years |
| Customer Relationships [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Weighted Average Useful Life | 3 years |
| Trademarks and Trade Names [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Weighted Average Useful Life | 3 years |
| Developed Technology Rights [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Weighted Average Useful Life | 3 years |
| Noncompete Agreements [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Weighted Average Useful Life | 5 years |
Schedule of Estimated Amortization Expense (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| 2024 (remaining) | $ 1,624,083 | |
| 2025 | 2,234,000 | |
| 2026 | 2,234,000 | |
| Intangible assets, net | $ 6,092,083 | $ 6,700,000 |
Goodwill and Intangible Assets (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
Dec. 29, 2023 |
|
| Restructuring Cost and Reserve [Line Items] | ||||
| Intangible asset balance | $ 6,092,083 | $ 6,700,000 | ||
| Amortization expense | $ 607,917 | $ 75,000 | ||
| Card Cash Exchange Inc [Member] | ||||
| Restructuring Cost and Reserve [Line Items] | ||||
| Intangible asset balance | $ 6,700,000 | |||
Schedule of Maturities of Operating Lease Liabilities (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Leases | |||
| Financial Designation, Predecessor and Successor | Successor | Predecessor | |
| 2024 (remaining) | $ 86,134 | ||
| 2025 | 95,526 | ||
| 2026 | 99,366 | ||
| 2027 | 33,776 | ||
| Total | 314,802 | ||
| Less: Imputed interest | (43,261) | ||
| Total operating lease liability | $ 271,541 | $ 337,304 | |
Leases (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Leases | |||
| Operating lease right of use asset | $ 249,551 | $ 315,183 | |
| Reduction of right of use assets | 65,632 | $ 46,872 | |
| Operating lease liability | 271,541 | 337,304 | |
| Payments to operating lease liability | 65,763 | 154,631 | |
| Current portion of lease liability | 87,207 | 134,475 | |
| Long-term lease liabilities | 184,334 | $ 202,829 | |
| Lease cost | $ 75,580 | $ 53,415 | |
| Weighted average remaining lease term (in years) | 3 years 29 days | ||
| Weighted average discount rate | 10.00% | ||
Schedule of Line of Credit (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Debt Disclosure [Abstract] | |||
| Financial Designation, Predecessor and Successor | Successor | Predecessor | |
| Line of credit | $ 6,060,920 | $ 6,737,385 | |
Secured Revolving Line of Credit (Details Narrative) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
Nov. 30, 2020 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Debt Disclosure [Abstract] | |||
| Line of credit | $ 10,000,000 | ||
| Line of credit facility, prime rate | 3.00% | ||
| Line of credit facility, floor interest rate | 6.50% | ||
| Line of credit facility, average interest rate | 12.00% | 12.00% | |
| Restricted cash | $ 1,258,826 | $ 1,258,826 |
Schedule of Convertible Debt (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Short-Term Debt [Line Items] | |||
| Financial Designation, Predecessor and Successor | Successor | Predecessor | |
| Less current portion | $ (40,887) | $ (40,137) | |
| Convertible Debt [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total principal balance | 20,000 | 20,000 | |
| Accrued interest | 20,887 | 20,137 | |
| Total principal and accrued interest | 40,887 | 40,137 | |
| Less current portion | (40,887) | (40,137) | |
| Non-current portion | |||
| Convertible Debt [Member] | Incumaker Inc [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total principal balance | 20,000 | $ 20,000 | |
| Accrued interest | $ 20,887 | ||
Convertible Debt (Details Narrative) - Convertible Debt [Member] - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Short-Term Debt [Line Items] | ||
| Principal balance | $ 20,000 | $ 20,000 |
| Accrued interest | 20,887 | 20,137 |
| Incumaker Inc [Member] | ||
| Short-Term Debt [Line Items] | ||
| Principal balance | 20,000 | $ 20,000 |
| Accrued interest | $ 20,887 | |
| Debt, conversion price | $ 1.50 | |
| Debt conversion, shares issuable | 27,258 |
Summary of Stock Options (Details) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Equity [Abstract] | ||
| Financial Designation, Predecessor and Successor | Successor | Predecessor |
| Number of Options. Balance outstanding, beginning | 743,116 | |
| Weighted Average Exercise Price, Balance outstanding | $ 4.43 | |
| Number of Options, granted | ||
| Weighted Average Exercise Price, Options granted | ||
| Number of Options, exercised | (2,834) | |
| Weighted Average Exercise Price, Options exercised | $ 3.35 | |
| Number of Options expired or forfeited | (22,500) | |
| Weighted Average Exercise Price, Options expired or forfeited | $ 1.05 | |
| Number of Options. Balance outstanding, ending | 717,782 | |
| Weighted Average Exercise Price, Balance outstanding | $ 4.54 | |
| Number of Options. Balance exercisable | 652,902 | |
| Weighted Average Exercise Price, Balance exercisable | $ 4.74 | |