# Giftify, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Giftify, Inc.](/companies/gift.md) (CIK 1760233)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 17:02 ET
- Period: 2023-09-30
- Accession: 0001493152-23-040604
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1760233/000149315223040604/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1760233/000149315223040604/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $572.9k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $703.6k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $4.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$190.1k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$2.4m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$192.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$2.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.16 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.16 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 14,742,677 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 15,651,039 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$1.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $2.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $2.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $3.2m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $3.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $196.3k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,393 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 10-K for the year ended December 31, 2022, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

### Business Overview

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

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

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

Through our websites, www.restaurant.com, www.specials.restaurant.com, and mobile iOS and Android apps, we provide affordable dining and entertainment experiences. In addition to purchasing restaurant discount certificates, entertainment and travel deals and consumer products as well as company gift card redemption, our website and mobile platform provide additional information to assist the customer and encourage return visits to our websites, including restaurant menus, entrée pricing, mapping and directions, and extensive filtering options, including most popular, cuisine type and “Deals Near Me” for nearby restaurants. Paperless restaurant certificate redemption and validation can also occur on our mobile platforms. During the year ended December 31, 2022 , there were an average of 700,000 unique visitors per month to our digital platforms including our mobile and Specials offerings. Since the launch of our mobile apps in 2012, mobile has grown from zero to 49% of our B2C revenue and over 60% of the B2C orders with over 6.4 million downloads of our apps for the year ended December 31, 2022.

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

### Agreement and Plan of Merger with CardCash Exchange, Inc.

On August 18, 2023, RDE entered into an Agreement and Plan of Merger with CardCash Exchange, Inc., (“CardCash”) a leading secondary gift card exchange. RDE, subject to a number of closing conditions, including that it meet the listing standards for the Nasdaq Capital Market, will acquire the business of CardCash for (i) $2,000,000 of which $1,000,000 will be paid at the future closing of the transaction out of existing cash, and $1,000,000 will be paid in the form a promissory note due and payable on the second anniversary of the future closing date, and (ii) the issuance of 6,108,077 restricted shares of RDE’s common stock to the shareholders of CardCash with a fair value on August 18, 2023, of approximately $27.7 million, which would currently represents approximately 37% of RDE’s issued and outstanding shares of common stock after the future closing of the merger. Following the closing of the CardCash merger, CardCash will become a wholly owned subsidiary of RDE. The acquisition is targeted to close by the end of 2023. This transaction will be accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged will be recorded at estimated fair values on the date of closing of the acquisition.

### COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally. The outbreak has negatively impacted our revenues as a result of the temporary closures of restaurants throughout the United States where our discount certificates and Discount Dining Passes are accepted and where dining is being restricted to outdoor locations or to capacity constraints for indoor dining. We expect that for the next several months, as the virus continues to limit visits to restaurants and as many prospective patrons choose to order delivery of meals from restaurants or take advantage of picking-up meals from restaurants, to continue to negatively impact our revenues from purchase of our discount certificates, since they can only be redeemed when dining in the restaurants. In addition, our dining certificates are not accepted for payment by third-party platforms that facilitate ordering and delivery of food on-demand. As the COVID-19 pandemic appears to be abating, we expect an improvement in our revenues in fiscal 2023.

### Inflation

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

### Going Concern

During the nine months ended September 30, 2023, we incurred a net loss of $2,457,522, utilized cash in operations of $1,001,156, and had a stockholders’ equity of $196,303 as of September 30, 2023. At September 30, 2023, we had cash of $2,613,868 available to fund its operations, including expansion plans, and to service its debt.

Our condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced operating losses and negative operating cash flows during 2022 and 2021. We have financed our working capital requirements through borrowings from various sources and the sale of our equity securities.

Our operations have been significantly and negatively impacted by the COVID-19 pandemic. Due to the uncertain and rapidly evolving nature of current conditions around the world, we are unable to predict accurately the impact that the COVID-19 pandemic will have on its business going forward. We expect the COVID-19 pandemic and its effects to continue to have a significant adverse impact on its business for the duration of the pandemic and during the subsequent economic recovery, which could be for an extended period of time.

As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability.

As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus may have on the Company’s business plans and the amount and type of financing available to the Company in the future.

If the Company is unable to obtain the cash resources necessary to satisfy the Company’s ongoing cash requirements, the Company could be required to scale back its business activities or to discontinue its operations entirely.

### Results of Operations - Three months ended September 30, 2023, compared to three months ended September 30, 2022

### Revenue

In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended September 30, 2023 and 2022:

| Sales Channels Three Months Ended September 30, 2023 | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total |
| --- | ---: | ---: | ---: | ---: |
| Business to consumer (B2C) | $125,017 | $35,723 | $35,017 | $195,757 |
| Business to business (B2B) | 377,159 | - | - | 377,159 |
| Other | - | - | - | - |
| Total | $502,176 | $35,723 | $35,017 | $572,916 |
| Three Months Ended September 30, 2022 |  |  |  |  |
| Business to consumer (B2C) | $158,564 | $69,733 | $44,704 | $273,001 |
| Business to business (B2B) | 547,357 | - | - | 547,357 |
| Other | 4,389 | - | - | 4,389 |
| Total | $710,310 | $69,733 | $44,704 | $824,747 |

Revenue for the three months ended September 30, 2023, was $572,916, a decrease of approximately $251,831 or 31%, as compared to $824,747 in the same period of the prior year. The decrease was due to

### Operating Expenses

#### Cost of Revenues

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

Costs of revenues decreased to $59,417 during the three months ended September 30, 2023, as compared to $38,798 during the three months ended September 30, 2022. During the three months ended September 30, 2023 and 2022, our cost of revenues, as a percentage of revenue, was 10% and 5%, respectively. The increase in cost of revenues, as a percentage of revenue, was from .

#### Selling, General and Administrative Expenses

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

Selling, general and administrative expenses were $669,386 during the three months ended September 30, 2023, as compared to $1,315,716 during the three months ended September 30, 2022, a decrease of $646,330. The decrease was related mainly to a $637,681 employee retention tax refund, which did not occur in the prior year period.

#### Amortization of Intangible Assets

Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $0 and $37,144 during the three months ended September 30, 2023 and 2022, respectively.

### Loss from Operations

For the three months ended September 30, 2023, we incurred a loss from operations of $190,054, as compared to a loss from operations of $566,911 for the three months ended September 30, 2022. The increase in loss from operations was due to the decrease in revenue and decreased operating expenses discussed above.

### Other Income (Expenses)

Interest expense was $1,916 for the three months ended September 30, 2023, as compared to interest expense of $29,431 for the three months ended September 30, 2022.

### Net Loss

We realized a net loss of $191,970 for the three months ended September 30, 2023, as compared to net loss of $596,342 for the three months ended September 30, 2022. The change to net loss was due to the decrease in revenue offset by decreased operating expenses and interest expense, as discussed above.

### Results of Operations - Nine months ended September 30, 2023, compared to nine months ended September 30, 2022

### Revenue

In the following table, revenue is disaggregated by our divisions and type of revenue for the nine months ended September 30, 2023 and 2022:

| Sales Channels Nine Months Ended September 30, 2023 | Restaurant Coupons | Sale of Travel, Vacation and Merchandise | Advertising | Total |
| --- | ---: | ---: | ---: | ---: |
| Business to consumer (B2C) | $599,275 | $171,416 | $124,607 | $855,298 |
| Business to business (B2B) | 1,250,701 | - | - | 1,250,701 |
| Other | 116 | - | - | 116 |
| Total | $1,810,092 | $171,416 | $124,607 | $2,106,115 |
| Nine Months Ended September 30, 2022 |  |  |  |  |
| Business to consumer (B2C) | $513,578 | $219,334 | $136,166 | $869,078 |
| Business to business (B2B) | 2,501,066 | - | - | 2,501,066 |
| Other | 25,537 | - | - | 25,537 |
| Total | $3,040,181 | $219,334 | $136,166 | $3,395,681 |

Revenue for the nine months ended September 30, 2023, was $2,106,115, a decrease of approximately $1,289,566 or 38%, as compared to $3,395,681 in the same period of the prior year.

During the nine months ended September 30, 2022, we entered into an agreement with a national mobile telephone provider (“Provider”) to provide our coupon codes to the Provider’s mobile phone application user that are verified nurses and teachers. Each Provider participant who redeemed the promotion received a dining credit of $25.00 and two movie tickets. The dining credit can be redeemed for a certificate at any of our participating local restaurants. The movie tickets provided by us are through Fandango for use at participating theatres. The agreement started and ended in May 2022, and we earned $1,106,447 in revenues from this agreement during the nine months ended September 30, 2022. No similar Provider agreement activity occurred during the current year period.

### Operating Expenses

#### Cost of Revenues

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

Costs of revenues decreased to $255,683 during the nine months ended September 30, 2023, as compared to $637,096 during the nine months ended September 30, 2022. During the nine months ended September 30, 2023 and 2022, our cost of revenues, as a percentage of revenue, was 12% and 19%, respectively. The decrease in cost of revenues, as a percentage of revenue, was from Fandango movie ticket costs related to the agreement with our Provider discussed above. No similar Provider agreement activity occurred during the current year period.

#### Selling, General and Administrative Expenses

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

Selling, general and administrative expenses were $4,273,187 during the nine months ended September 30, 2023, as compared to $4,227,766 during the nine months ended September 30, 2022, an increase of $45,421. The increase was related mainly to a $817,958 increase in stock-based compensation for directors, employees and contractors in the current period offset by a $637,681 employee retention tax refund, which did not occur in the prior year period.

#### Amortization of Intangible Assets

Amortization of intangible assets relates to our acquisition of GameIQ effective February 28, 2022, and Restaurant.com, effective January 30, 2020. Amortization of intangible assets was $0 and $86,668 during the nine months ended September 30, 2023 and 2022, respectively.

### Loss from Operations

For the nine months ended September 30, 2023, we incurred a loss from operations of $2,422,755, as compared to a loss from operations of $1,555,849 for the nine months ended September 30, 2022. The increase in loss from operations was due to the decrease in revenue offset by the decreased operating expenses discussed above.

### Other Income (Expenses)

The Company had other expenses of $34,817 for the nine months ended September 30, 2023, as compared to other income of $1,037,998 for the nine months ended September 30, 2022. Other income for the nine months ended September 30, 2022, consisted of a gain on legal settlement of $69,000, a gain on vender settlement of $28,600, and a gain from the forgiveness of a government assistance loan of $1,025,535, all of which did not occur in the current year period. Interest expense was $34,817 for the nine months ended September 30, 2023, as compared to interest expense of $85,137 for the nine months ended September 30, 2022.

### Net Loss

We realized a net loss of $2,457,572 for the nine months ended September 30, 2023, as compared to a net loss of $517,851 for the nine months ended September 30, 2022. The change to net loss from net income was primarily from recording a gain on legal settlement of $69,000, a gain on vendor settlement of $28,600, and a gain from the forgiveness of a government assistance loan of $1,025,535, which did not occur in the current year period, offset by the decrease in revenue and increased operating expenses during the nine months ended September 30, 2023, as compared to the prior year period.

### Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2023, the Company recorded a net loss of $2,457,572, used cash in operations of $1,001,156, and had a stockholders’ equity of $196,302 at September 30, 2023. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date of the financial statements being issued.

The ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, has also expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

At September 30, 2023, we had cash on hand in the amount of $2,613,868. Our continuation as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

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

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(1,001,156) | $(717,244) |
| Net cash provided by investing activities | - | 12,805 |
| Net cash provided by financing activities | 2,492,066 | 236,864 |
| Net increase (decrease) in cash and cash equivalents | $1,490,911 | $(467,575) |

6

#### Operating Activities

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

Cash used in operating activities for the nine months ended September 30, 2023 was approximately $1,001,156 and consisted of a net loss of $2,457,252, adjustments for non-cash stock based compensation, which totaled $1,428,142, and $28,274 in changes in working capital and other activities.

Cash used in operating activities for the nine months ended September 30, 2022 was approximately $717,244 and consisted of a net loss of $517,851, adjustments for non-cash items, including amortization of intangible assets, gain on legal settlement, gain on forgiveness of government assistance notes payable, fair value of vested stock options, and the fair value of common stock and issued for directors, employees, and service providers, which in the aggregate total $340,751, and $141,358 in changes in working capital and other activities.

#### Investing Activities

The Company had no investing activities for the nine months ended September 30, 2023. Cash provided by investing activities for the nine months ended September 30, 2022 was $12,805 and was cash received on the acquisition of GameIQ.

#### Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2023 was $2,492,066, which was from proceeds of $2,504,750 from the sale of common stock, offset by $12,684 of principal payments on our acquisition notes payable.

For the nine months ended September 30, 2022, cash provided by financing activities was $236,864, which was from proceeds received of $250,000 the sale of common stock, and $13,136 of principal payments on our acquisition notes payable.

Convertible debt assumed upon reverse merger consists of the following at September 30, 2023 and December 31, 2022:

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Principal balance | $20,000 | $20,000 |
| Accrued interest | 18,637 | 17,137 |
| Total principal and accrued interest | $38,637 | $37,137 |

On November 5, 2018, the Company completed a merger agreement dated October 23, 2018 with Incumaker, Inc., whereby all of the shareholders of the Company exchanged their shares of common stock in exchange for shares of Incumaker, Inc. common stock. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger agreement with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. The notes payable had interest rates ranging from 8% to 22% per annum. At September 30, 2023 and December 31, 2022, the remaining convertible debt assumed in the transaction had a principal balance outstanding of $20,000, and accrued interest payable of $18,637 and $17,137, respectively. As of September 30, 2023, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 25,758 shares of the Company’s common stock.

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

Convertible notes consists of the following at September 30, 2023 and December 31, 2022:

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Total principal balance | $20,000 | $20,000 |
| Accrued interest | 19,387 | 17,137 |
| Total principal and accrued interest | $39,387 | $37,137 |

In 2018, the Company merged with Incumaker, Inc. The merger was treated as a reverse merger and recapitalization of the Company for financial accounting purposes. In conjunction with the merger with Incumaker, Inc., the Company assumed certain outstanding convertible notes payable. At September 30, 2023 and December 31, 2022, the remaining convertible note assumed in the reverse merger had a principal balance outstanding of $20,000, was due July 2017, interest of 15% per annum, and accrued interest payable of $19,387 and $17,137, respectively. As of September 30, 2023, the convertible note, including accrued interest payable, was convertible at $1.50 per share into 26,258 shares of the Company’s common stock.

### Acquisition Notes Payable

On February 1, 2022, two notes payable for the purchase of GameIQ were issued, one for $78,813. and another for $62,101. RDE, Inc. promises to pay to the order of the holders the principal amounts together with annual interest of 1%, which shall be paid upon the earlier of (i) nine (9) equal biannual installments with the first installment due on the nine-month anniversary of February 1, 2022, and the final payment due February 1, 2025. In the event of default, the notes to the Holders are secured, in the manner that such payment to be made in cash or shares of the RDE, Inc.’s common stock at the election of the holders. These Notes may be prepaid in whole or in part by RDE, Inc.

As of December 31, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $688. During the nine months ended September 30, 2023, the Company made principal payments of $12,674. As of September 30, 2023, the notes payable had an aggregate principal balance outstanding of $115,104 and accrued interest payable of $845.

### Government Assistance Notes Payable-SBA Loans

Government Assistance Notes Payable-SBA Loans consists of the following at September 30, 2023, and December 31, 2022:

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Economic Injury/Disaster Loans | $661,035 | $661,035 |
| Accrued interest | 34,411 | 45,541 |
| Total principal and accrued interest | 695,446 | 706,576 |
| Less current portion | (39,876) | (15,217) |
| Non-current portion | $655,570 | $691,359 |

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

In 2020 and 2021, the Company received an aggregate of $650,000 of proceeds applicable to two loans administered by the Small Business Administration (“SBA”) as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL, and accrued interest of $900, as part of the consideration paid for the acquisition of GameIQ.

The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month over a period of 30 years. As of September 30, 2023 and December 31, 2022, the note payable had a principal balance outstanding of $661,035 and $661,035 and accrued interest payable of $34,411 and $45,541 respectively.

### Off-Balance Sheet Arrangements

None.

### Critical Accounting Policies and Estimates

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, , depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. There were no changes to our critical accounting policies described in the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that impacted our condensed consolidated financial statements and related notes included herein.

### Recently Issued Accounting Pronouncements

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

## Controls and procedures

As filed, 2,982 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 September 30, 2023, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

#### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

#### 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 Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-040604. Last ingested by Listed: Nov 3, 2026, 08:57 ET. No prices; not investment advice.