# Giftify, Inc.: Form 10-Q for the period ended Jun 30, 2022

- Company: [Giftify, Inc.](/companies/gift.md) (CIK 1760233)
- Form: 10-Q
- Filed: 2022-07-29
- Accepted by EDGAR: Jul 29, 2022, 16:08 ET
- Period: 2022-06-30
- Accession: 0001493152-22-020710
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1760233/000149315222020710/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1760233/000149315222020710/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $1.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-01-01 to 2022-06-30 | $2.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2022-04-01 to 2022-06-30 | $1.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2022-01-01 to 2022-06-30 | $2.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | −$193.1k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-01-01 to 2022-06-30 | −$988.9k | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | −$193.6k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2022-01-01 to 2022-06-30 | $78.5k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-01-01 to 2022-06-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-01-01 to 2022-06-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 14,090,269 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-01-01 to 2022-06-30 | 14,321,975 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-01-01 to 2022-06-30 | −$35.9k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2022-06-30 | $2.2m | us-gaap:Cash |
| Current assets | at 2022-06-30 | $2.5m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $3.0m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $4.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $4.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-06-30 | −$1.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,320 characters.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 1-K for the year ended December 31, 2021, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

### Business Overview

Restaurant.com is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. Founded in 1999, we connect digital consumers, businesses, and communities offering dining and merchant deal options nationwide at over 182,500 restaurants and retailers to over 7.8 million customers. Our 12,500 core restaurants and 170,000 Dining Discount Pass restaurants and retailers extend nationwide. Our top three B2C markets are New York, Chicago and Los Angeles.

We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Approximately 9-13 days each month we email our customers offers for restaurant discounts based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. A typical restaurant discount deal might offer a $25 discount that can be used toward a $50 purchase at a restaurant. Additional deals include discounted pricing at theaters, movies or other merchants. Customers purchase restaurant deals from us and redeem them with our merchant partners. We charge, and only collect, a service fee from our customers which allows them to download the discount certificates and redeem them at the restaurant. We receive no revenue or commission from the restaurants offering the discount deals.

We derive our revenue from transactions in which we sell complimentary entertainment and travel offerings and consumer products on behalf of third-party merchants. Approximately 9-13 days each month we email our customers offers for discounted experiences and products based on location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. Those discounted experiences and products generally involve a customer’s purchase of a voucher through one of our websites that can be redeemed with a third-party merchant for services or goods (or for discounts on services and goods). Revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid by us to our partners.

Through our websites, www.restaurant.com, www.specials.restaurant.com, and mobile iOS and Android apps, we provide affordable dining and entertainment experiences. In addition to purchasing restaurant discount certificates, entertainment and travel deals and consumer products as well as company gift card redemption, our website and mobile platform provide additional information to assist the customer and encourage return visits to our websites, including restaurant menus, entrée pricing, mapping and directions, and extensive filtering options, including most popular, cuisine type and “Deals Near Me” for nearby restaurants. Paperless restaurant certificate redemption and validation can also occur on our mobile platforms. During the year ended December 31, 2020, there were an average of 700,000 unique visitors per month to our digital platforms including our mobile and Specials offerings. Since the launch of our mobile apps in 2012, mobile has grown from zero to 49% of our B2C revenue and over 60% of the B2C orders with over 6.4 million downloads of our apps for the year ended December 30, 2021.

Our B2B sales program has grown significantly since its introduction in 2004 and comprises 50% of revenue. Our high-value, low-cost features enable businesses to use Restaurant.com Gift Cards to entice new and existing customers to increase sales, promote customer satisfaction and incent desired behavior. The availability of use in every market, features like “never expire” and online exchange, and use by every customer demographic fit every business’s customer base; features no other incentive product can match.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally. The outbreak has negatively impacted our revenues as a result of the temporary closures of restaurants throughout the United States where our discount certificates and Discount Dining Passes are accepted and where dining is being restricted to outdoor locations or to capacity constraints for indoor dining. We expect that for the next several months, as the virus continues to limit visits to restaurants and as many prospective patrons choose to order delivery of meals from restaurants or take advantage of picking-up meals from restaurants, to continue to negatively impact our revenues from purchase of our discount certificates, since they can only be redeemed when dining in the restaurants. In addition, our dining certificates are not accepted for payment by third-party platforms that facilitate ordering and delivery of food on-demand. As the COVID-19 pandemic appears to be abating, we expect an improvement in our revenues during the second half of the year ending December 31, 2022.

### Recent Developments

On January 31, 2022, the Company, through its newly formed Delaware subsidiary, GameIQ Acquisition Corp., Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GameIQ, a California corporation, that is a developer of consumer gamification technologies for retail businesses. Under the terms of the Merger Agreement, the Company agreed to issue 600,000 restricted shares of its common stock and issued promissory notes to Balazs Wellisch, President and co-founder, and Quentin Blackford, Director, of GameIQ, in the principal amounts of $78,813 and $62,101, respectively, bearing interest at 1% per annum, to repay loans by Mr. Wellisch and Mr. Blackford to GameIQ. Each note requires repayment in six equal biannual installments, with the first installment due on the six-month anniversary of the Closing Date as that term is defined in the Merger Agreement. Following the merger, GameIQ shall merge with and into the Company. In addition, Balazs Wellisch will become Chief Technology Officer of Restaurant.com, a subsidiary of the Company. The Merger Agreement closed on February 28, 2022. The closing price of the Company’s common stock was $0.50 per share on both January 31, 2022 and February 28, 2022.

### Inflation

Global inflation also increased during 2021 and in 2022. The Russia Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and the restaurant customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected.

### Results of Operations - Three months ended June 30, 2022, compared to three months ended June 30, 2021

#### Overview

As reflected in the accompanying condensed consolidated financial statements, during the three months ended June 30, 2022, we realized a net loss of $193,590, compared to a net loss of $2,306,595 for the three months ended June 30, 2021.

The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.

### Revenue

For the three months ended June 30, 2022 and 2021, the Company’s operating revenues consisted of revenues generated by the Restaurant.com business, and GameIQ, which we acquired on February 28, 2022.

In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended June 30, 2022 and 2021:

| Sales Channels Three Months Ended June 30, 2022 | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total |
| --- | ---: | ---: | ---: | ---: |
| Business to consumer (B2C) | $157,774 | $72,874 | $42,632 | $273,280 |
| Business to business (B2B) | 1,524,934 | - | - | 1,524,934 |
| Other | 12,940 | - | - | 12,940 |
| Total | $1,695,648 | $72,874 | $42,632 | $1,811,154 |
| Three Months Ended June 30, 2021 |  |  |  |  |
| Business to consumer (B2C) | $233,230 | $100,232 | $45,405 | $378,867 |
| Business to business (B2B) | 409,579 | - | - | 409,579 |
| Other | 330 | - | - | 330 |
| Total | $643,139 | $100,232 | $45,405 | $788,776 |

Revenue for the three months ended June 30, 2022, was $1,811,154, an increase of approximately $1,022,378 or 130%, as compared to $788,776 in the same period of the prior year. During the three months ended June 30, 2022, we entered into an agreement with a national mobile telephone provider (“Provider”) to provide our coupon codes to the Provider’s mobile phone application user that are verified nurses and teachers. Each Provider participant who redeemed the promotion received a dining credit of $25.00 and two movie tickets. The dining credit can be redeemed for a certificate at any of our participating local restaurants. The movie tickets provided by us are through Fandango for use at participating theatres. The agreement started and ended in May 2022, and we earned $1,106,447 in revenues from this agreement during the three months ended June 30, 2022.

### Operating Expenses

#### Cost of Revenues

Cost of revenues consists primarily of the costs incurred to generate revenues, consisting primarily of transaction fees. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.

Costs of revenues increased to $497,733 during the three months ended June 30, 2022, as compared to $97,243 during the three months ended June 30, 2021, as a result of our increase in revenue. During the three months ended June 30, 2022 and 2021, our cost of revenues, as a percentage of revenue, was 27% and 12%, respectively. The increase in cost of revenues, as a percentage of revenue, was from Fandango movie ticket costs related to the agreement with our Provider discussed above. No similar Provider agreement activity occurred during the prior year period.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.

Selling, general and administrative expenses were $1,475,455 during the three months ended June 30, 2022, as compared to $2,808,490 during the three months ended June 30, 2021, a decrease of $1,333,035. The decrease was related mainly to a $1,232,325 decrease in stock-based compensation for directors, employees and contractors in the current period as compared to the prior year. Excluding stock-based compensation, our selling, general and administrative expenses increased $100,710 during the current period, related to general changes in our business and operations.

#### Amortization of Intangible Assets

Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $31,044 and $144,000 during the three months ended June 30, 2022 and 2021, respectively.

### Loss from Operations

For the three months ended June 30, 2022, we incurred a loss from operations of $193,078, as compared to a loss from operations of $2,260,957 for the three months ended June 30, 2021. The decrease in loss from operations was due to the increase in revenue and our decreased operating expenses discussed above.

### Other Income (Expenses)

The Company had other expenses of $512 for the three months ended June 30, 2022, as compared to other expense of $45,638 for the three months ended June 30, 2021. Other income for the three months ended June 30, 2022, consisted of a gain on vendor settlement of $28,600, offset by interest expense of $29,112. Other expense for the three months ended June 30, 2021, consisted of interest expense of $38,138 and financing costs of $7,500.

### Net Income (Loss)

We realized a net loss of $193,590 for the three months ended June 30, 2022, as compared to realizing a net loss of $2,306,595 for the three months ended June 30, 2021. The decrease in net loss is primarily due to our increased revenue, decreased operating expenses, and decreased other expense, as discussed above.

### Results of Operations - Six months ended June 30, 2022, compared to six months ended June 30, 2021

#### Overview

As reflected in the accompanying condensed consolidated financial statements, during the six months ended June 30, 2022, we realized a net income of $78,491 and used cash in operations of $35,910, compared to a net loss of $3,439,015 and used cash in operations of $759,112 for the six months ended June 30, 2021. As of June 30, 2022, we had a stockholders’ deficit of approximately $1,817,372.

The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.

### Revenue

For the six months ended June 30, 2022 and 2021, the Company’s operating revenues consisted of revenues generated by the Restaurant.com business, and GameIQ, which we acquired on February 28, 2022.

In the following table, revenue is disaggregated by our divisions and type of revenue for the six months ended June 30, 2022 and 2021:

| Sales Channels Six Months Ended June 30, 2022 | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total |
| --- | ---: | ---: | ---: | ---: |
| Business to consumer (B2C) | $355,012 | $149,602 | $91,463 | $596,077 |
| Business to business (B2B) | 1,953,709 | - | - | 1,953,709 |
| Other | 21,148 | - | - | 21,148 |
| Total | $2,329,869 | $149,602 | $91,463 | $2,570,934 |
| Six Months Ended June 30, 2021 |  |  |  |  |
| Business to consumer (B2C) | $426,818 | $169,156 | $83,123 | $679,097 |
| Business to business (B2B) | 912,825 | - | - | 912,825 |
| Other | 7,339 | - | - | 7,339 |
| Total | $1,346,982 | $169,156 | $83,123 | $1,599,261 |

Revenue for the six months ended June 30, 2022, was $2,570,934, an increase of approximately $971,673 or 61%, as compared to $1,599,261 in the same period of the prior year. During the six months ended June 30, 2022, we entered into an agreement with a national mobile telephone provider (“Provider”) to provide our coupon codes to the Provider’s mobile phone application user that are verified nurses and teachers. Each Provider participant who redeemed the promotion received a dining credit of $25.00 and two movie tickets. The dining credit can be redeemed for a certificate at any of our participating local restaurants. The movie tickets provided by us are through Fandango for use at participating theatres. The agreement started and ended in May 2022, and we earned $1,106,447 in revenues from this agreement during the six months ended June 30, 2022.

### Operating Expenses

#### Cost of Revenues

Cost of revenues consists primarily of the costs incurred to generate revenues, consisting primarily of transaction fees. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.

Costs of revenues increased to $598,298 during the six months ended June 30, 2022 as compared to $210,353 during the six months ended June 30, 2021, as a result of our increase in revenue. During the six months ended June 30, 2022 and 2021, our cost of revenues, as a percentage of revenue, was 23% and 13%, respectively. The increase in cost of revenues, as a percentage of revenue, was from Fandango movie ticket costs related to the agreement with our Provider discussed above. No similar Provider agreement activity occurred during the prior year period.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.

Selling, general and administrative expenses were $2,912,050 during the six months ended June 30, 2022, as compared to $5,065,366 during the six months ended June 30, 2021, a decrease of $2,153,316. The decrease was related mainly to a $2,072,650 decrease in stock-based compensation for directors, employees and contractors in the current period as compared to the prior year. Excluding stock-based compensation, our selling, general and administrative expenses increased $80,666 during the current period, related to general changes in our business and operations.

#### Amortization of Intangible Assets

Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $49,524 and $336,000 during the six months ended June 30, 2022 and 2021, respectively.

### Loss from Operations

For the six months ended June 30, 2022, we incurred a loss from operations of $988,938, as compared to a loss from operations of $4,012,458 for the six months ended June 30, 2021. The decrease in loss from operations was due to the increase in revenue and decreased operating expenses discussed above.

### Other Income (Expenses)

The Company had other income of $1,067,429 for the six months ended June 30, 2022, as compared to other income of $573,443 for the six months ended June 30, 2021. Other income for the six months ended June 30, 2022, consisted of a gain on legal settlement of $69,000, a gain on vendor settlement of $28,600, a gain from the forgiveness of a government assistance loan of $1,025,535, offset by interest expense of $55,706. Other income for the six months ended June 30, 2021, consisted of a gain from the forgiveness of a government assistance loan of $648,265, offset by financing costs of $7,500, and interest expense of $67,322.

### Net Income (Loss)

We realized a net income of $78,491 for the six months ended June 30, 2022, as compared to realizing a net loss of $3,439,015 for the six months ended June 30, 2021. The increase in net income is primarily due to a gain on forgiveness of government assistance notes payable, increased revenue and decreased operating expenses, as discussed above.

### Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the six months ended June 30, 2022, the Company recorded a operating loss of $988,938, used cash in operations of $35,910, and had a stockholders’ deficit of $1,817,372 at June 30, 2022. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date of the financial statements being issued.

The ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

At June 30, 2022, we had cash on hand in the amount of $2,157,220. Our continuation as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

The Company’s consolidated statements of cash flows as discussed herein are presented below.

|  | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(35,910) | $(759,112) |
| Net cash provided by investing activities | 12,805 | - |
| Net cash provided by financing activities | 250,000 | 2,239,591 |
| Net increase in cash | $226,985 | $1,408,479 |

6

#### Operating Activities

Cash provided by or used in operating activities primarily consists of net income (loss) adjusted for certain non-cash items, including amortization of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, and the effect of changes in working capital and other activities.

Cash used in operating activities for the six months ended June 30, 2022 was approximately $35,910 and consisted of a net income of approximately $78,491, adjustments for non-cash items, including amortization of intangible assets, gain on legal settlement, gain on forgiveness of government assistance notes payable, fair value of vested stock options, and the fair value of common stock and issued for directors, employees, and service providers, which in the aggregate total $478,098, and $363,697 in changes in working capital and other activities.

Cash used in operating activities for the six months ended June 30, 2021 was $759,112 and consisted of a net loss of $3,439,015, adjustments for non-cash items, including amortization of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, which in the aggregate total approximately $2,361,315, and approximately $318,588 in changes in working capital and other activities.

#### Investing Activities

Cash provided by investing activities for the six months ended June 30, 2022 was $12,805 and was cash received on the acquisition of GameIQ. The Company had no investing activities for the six months ended June 30, 2021.

#### Financing Activities

For the six months ended June 30, 2022, cash provided by financing activities was $250,000, which was from the sale of common stock. For the six months ended June 30, 2021, cash provided by financing activities was $2,239,591, and included net proceeds of $1,843,117 received from the sale of common stock, and $1,025,535 in proceeds from government assistance loans, offset by the repayment of $203,147 of bridge notes payable, repayment of $400,000 of convertible notes payable, and payment of $25,914 related to an acquisition obligation.

### Convertible Debt Assumed Upon Reverse Merger - Past Due

Convertible debt assumed upon reverse merger consists of the following at June 30, 2022 and December 31, 2021:

|  | June 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Total principal balance | $20,000 | $20,000 |
| Accrued interest | 15,637 | 11,537 |
| Total principal and accrued interest | $35,637 | $31,537 |

On November 5, 2018, the Company completed a merger agreement dated October 23, 2018 with Incumaker, Inc., whereby all of the shareholders of the Company exchanged their shares of common stock in exchange for shares of Incumaker, Inc. common stock. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger agreement with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. The notes payable had interest rates ranging from 8% to 22% per annum. At June 30, 2022 and December 31, 2021, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $15,637 and $11,537, respectively. As of June 30, 2022, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 23,758 shares of the Company’s common stock.

### Acquisition Notes Payable

Acquisition notes payable consists of the following at June 30, 2022 and December 31, 2021:

|  | June 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| GameIQ acquisition note payable | $140,914 | $- |
| Restaurant.com acquisition note payable | 1,500,000 | 1,500,000 |
| Total principal balance | 1,640,914 | 1,500,000 |
| Accrued interest | 207,151 | 162,300 |
| Total principal and accrued interest | 1,848,065 | 1,662,300 |
| Less current portion | (1,753,848) | - |
| Non-current portion | $94,217 | $1,662,300 |

#### GameIQ Acquisition Note Payable

On February 1, 2022, notes payable for the purchase of GameIQ was issued to two holders, one for $78,813. and another for $62,101. In accordance with Notes, RDE, Inc. promises to pay to the order of the Holders the principal amounts together with annual interest on the unpaid principal amount of 1% computed on the basis of the actual number of days elapsed and a year of 365 days from the date of the Notes (the “Total Amount”), which shall be paid upon the earlier of (i) six (6) equal biannual installments with the first installment due on the six-month anniversary of February 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”). Notwithstanding any other provision of this Note, the Holders does not intend to charge, and the RDE, Inc. shall not be required to pay, any fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the RDE, Inc. or credited to reduce the principal hereunder. All payments received by the Holder will be applied first to costs of collection, if any, then the balance to the unpaid principal and interest. In the event of default, the notes to the holders are secured, in the manner that such payment to be made in cash or shares of the RDE, Inc.’s common stock at the election of the Holders. These Notes may be prepaid in whole or in part by the RDE, Inc. For purposes of clarity, if RDE’s payments to the Holders pursuant to (i) of the agreement, do not in the aggregate equal the Total Amount, the amount remaining owed to the Holders shall be paid to the Holders on or before the Maturity Date. As of June 30, 2022, the notes payable had an aggregate principal balance outstanding of $140,914 and accrued interest payable of $274.

#### Restaurant.com Note Payable

Pursuant to the terms of the acquisition agreement with Restaurant.com, Inc. entered into on March 1, 2020, the Company executed an unsecured promissory note in the principal amount of $1,500,000 that matures on March 1, 2023. The promissory note bears interest at a rate of 6% per annum and is convertible at the option of the Company into common shares at a price to be determined on the date of conversion. As of June 30, 2022 and December 31, 2021, the note payable had a principal balance outstanding of $1,500,000 and accrued interest payable of $206,877 and $162,300 respectively.

### Government Assistance Notes Payable

On June 30, 2022, and December 31, 2021, the notes payable balances and accrued interest payable are as follows:

|  | June 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Paycheck Protection Loan | $- | $1,025,535 |
| Economic Injury/Disaster Loans | 664,500 | 650,000 |
| Total principal balance | 664,500 | 1,675,535 |
| Accrued interest | 32,977 | 25,321 |
| Total principal and accrued interest | 697,477 | 1,700,856 |
| Less current portion | (40,000) | (11,115) |
| Non-current portion | $657,477 | $1,689,741 |

8

#### Paycheck Protection Note Payable

On March 22, 2021, the Company received loan proceeds of $1,025,535 pursuant to the Paycheck Protection Program (2nd draw). The note payable was scheduled to mature in March 2026, bears interest at the rate of 1% per annum, and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The loan and accrued interest payable are forgivable provided the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

Effective February 28, 2022, the Company received formal notice that the note payable, including accrued interest of $9,743, was forgiven. As a result, the gain from the forgiveness of the government assistance notes payable aggregating $1,025,535 was recognized in the statement of operations during the six months ended June 30, 2022.

#### Economic Injury Disaster Loans (EIDL):

On June 17, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ (see Note 3)

The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of June 30, 2022, and December 31, 2021, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $32,977 and $25,321 respectively.

### Off-Balance Sheet Arrangements

None.

### Critical Accounting Policies and Estimates

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. There were no changes to our critical accounting policies described in the consolidated financial statements included in our Annual Report on Form 1-K for the fiscal year ended December 31, 2021, that impacted our condensed consolidated financial statements and related notes included herein.

### Recently Issued Accounting Pronouncements

See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.

## Controls and procedures

As filed, 2,972 characters.

#### Evaluation of Disclosure control and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2022, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

#### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

#### Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

## Risk factors

As filed, 163 characters.

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.

Filed Jul 29, 2022.
Source: SEC EDGAR, the filing index for accession 0001493152-22-020710. Last ingested by Listed: Nov 3, 2026, 08:57 ET. No prices; not investment advice.