GIFTIFY, INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere in this prospectus. In addition to historical information, the following discussion contains forward looking statements based upon current expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but not limited to, risks described in the section entitled “Risk Factors” and elsewhere in this prospectus. Background and Basis of Presentation 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. Founded in 1999, Restaurant.com connects digital consumers, businesses, and communities offering over 200,000 dining and merchant deal options nationwide at 187,000 restaurants and retailers to over 7.8 million customers. We have decided to leverage our experience in ecommerce and concentrate on developing what we believe are significant growth opportunities in the B2B and B2C business of Restaurant.com, Inc. 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 nine equal biannual installments, with the first installment due on the nine-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. 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. 27 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. 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. 28 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 year ended December 31, 2022, we incurred a net loss of $1,278,524, utilized cash in operations of $1,053,571, and had a stockholders’ deficiency of $3,049,017 as of December 31, 2022. At December 31, 2022, we had cash of $1,122,958 available to fund its operations, including expansion plans, and to service its debt. 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 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. Year ended December 31, 2022 compared to Year ended December 31, 2021 Results of Operations – Twelve months ended December 31, 2022, compared to twelve months ended December 31, 2021 Revenue For the year ended December 31, 2022 and 2022, the Company’s operating revenues consisted of revenues generated by the Restaurant.com business. 29 For the years ended December 31, 2022 and 2021, disaggregated revenue by the Company’s divisions and type of revenue is presented below. Sales Channels Restaurant Coupons Sale of Travel, Vacation and Merchandise Advertising Total Year Ended December 31, 2022 Business to consumer (B2C) $ 704,586 $ 363,281 $ 198,519 $ 1,266,386 Business to business (B2B) 3,148,377 - - 3,148,377 Other 29,832 - - 29,832 Total $ 3,882,795 $ 363,281 $ 198,519 $ 4,444,595 Year Ended December 31, 2021 Business to consumer (B2C) $ 867,465 $ 375,261 $ 182,503 $ 1,425,229 Business to business (B2B) 1,861,795 - - 1,861,795 Other 36,485 - - 36,485 Total $ 2,765,745 $ 375,261 $ 182,503 $ 3,323,509 Revenue for the year ended December 31, 2022, was $4,444,595, an increase of approximately $1,121,086 or 34%, as compared to $3,323,509 in the same period of the prior year. The increase in 2022 relates to an agreement 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 in May 2022 and ended in August 2022, and we earned $1,106,447 in revenues from this agreement during the year ended December 31, 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 $825,242 during the year ended December 31, 2022 as compared to $394,023 during the year ended December 31, 2021, as a result of our increase in revenue. During the year ended December 31, 2022 and 2021, our cost of revenues, as a percentage of revenue, was 19% and 8%, 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 $5,462,690 during the year ended December 31, 2022, as compared to $7,243,151 during the year ended December 31, 2021, a decrease of $1,780,461. The decrease was related mainly to a $1,939,031 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 $158,570 during the current period, related to general changes in our business and operations. 30 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 $184,795 and $624,000 during the year ended December 31, 2022 and 2021, respectively. Write-off of Impaired Intangible Assets . During the year ended December 31, 2022, the Company determined that certain intangible assets acquired in connection with the acquisition of the GameIQ business were impaired, resulting in a charge to operations of $258,714 at December 31, 2022. During the year ended December 31, 2021, the Company determined that certain intangible assets acquired in connection with the acquisition of the Restaurant.com business were impaired, resulting in a charge to operations of $570,030 at December 31, 2021. Loss from Operations For the year ended December 31, 2022, we incurred a loss from operations of $2,286,846, as compared to a loss from operations of $5,507,695 for the year ended December 31, 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 $1,025,322 for the year ended December 31, 2022, as compared to other income of $516,472 for the year ended December 31, 2021. Other income for the year ended December 31, 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 $114,813. Other income for the year ended December 31, 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 $124,293. Net Loss We realized a net loss of $1,278,524 for the year ended December 31, 2022, as compared to realizing a net loss of $4,991,223 for the year ended December 31, 2021. The decrease in net loss is primarily due to a gain on forgiveness of government assistance notes payable, increased revenue and decreased operating expenses, as discussed above. 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, 2022 and 2021 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. 31 Stock-Based Compensation The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates. Operating Segments Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. In reaching such a conclusion management evaluated the Company’s reporting units by first identifying its operating segments. The Company then evaluated each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. 32 Revenue Recognition Revenue is recognized when, or as, control of a promised product transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue excludes taxes that have been assessed by governmental authorities and that are directly imposed on revenue-producing transactions between the Company and its customers, including sales and use taxes. Revenue recognition is evaluated through the following five-step process: (1) identification of the agreement with a customer; (2) identification of the performance obligations in the agreement; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the agreement; and (5) recognition of revenue when or as a performance obligation is satisfied. The Company operates online websites that sell discounted restaurant coupons, travel and vacation packages, and other merchandise across a wide range of product categories, including, but not limited to, computer products, consumer electronics, apparel, housewares, watches, jewelry, travel, sporting goods, automobiles, home improvement products, and collectibles. In addition, the Company also generates revenues based upon the number of times a third-party website(s) or products(s) are accessed or viewed by consumers from the Company’s website or platform. Recent Accounting Pronouncements See discussion of recent accounting pronouncements in Note 2 to the accompanying financial statements. 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 year ended December 31, 2022, the Company recorded an operating loss of $2,286,846, used cash in operations of $1,053,571, and had a stockholders’ deficit of $3,049,017 at December 31, 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, 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 December 31, 2022, we had cash on hand in the amount of $1,122,958. 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. Year Ended December 31, 2022 2021 Net cash used in operating activities $ (1,053,571 ) $ (1,260,191 ) Net cash provided by investing activities 12,805 - Net cash provided by financing activities 233,399 2,589,940 Net increase (decrease) in cash $ (807,367 ) $ 1,930,325 33 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 year ended December 31, 2022 was approximately $1,053,571 and consisted of a net loss of $1,278,524, 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 $(14,874), and $183,827 in changes in working capital and other activities. Cash used in operating activities for the year ended December 31, 2021 was $1,260,191 and consisted of a net loss of $4,991,223, 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 $3,155,142, and approximately $575,890 in changes in working capital and other activities. Investing Activities Cash provided by investing activities for the year ended December 31, 2022 was $12,805 and was cash received on the acquisition of GameIQ. The Company had no investing activities for the year ended December 31, 2021. Financing Activities For the year ended December 31, 2022, cash provided by financing activities was $233,399, which was from proceeds received of $250,000 the sale of common stock, less $13,136 of principal payments on our acquisition notes payable, and $3,465 in principal payments on our note payable – government assistance loans. For the year ended December 31, 2021, cash provided by financing activities was $2,589,940, and included net proceeds of $1,958,466 received from the sale of common stock, and $1,375,535 in proceeds from government assistance loans, offset by the repayment of $303,147 of bridge notes payable, repayment of $400,000 of convertible notes payable, and repayment of $40,914 of acquisition obligations. Convertible Debt Assumed Upon Reverse Merger - Past Due Convertible debt assumed upon reverse merger consists of the following at December 31, 2022 and December 31, 2021: December 31 December 31, 2022 2021 Total principal balance $ 20,000 $ 20,000 Accrued interest 17,137 11,537 Total principal and accrued interest $ 37,137 $ 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 December 31, 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 $17,137 and $11,537, respectively. As of December 31, 2022, convertible debt assumed in the transaction, including accrued interest payable, was convertible at $1.50 per share into 24,758 shares of the Company’s common stock. 34 Acquisition Notes Payable Acquisition notes payable consists of the following at December 31, 2022 and December 31, 2021: December 31, December 31, 2022 2021 GameIQ acquisition note payable $ 127,778 $ - Restaurant.com acquisition note payable 1,500,000 1,500,000 Total principal balance 1,627,778 1,500,000 Accrued interest 252,194 162,300 Total principal and accrued interest 1,879,972 1,662,300 Less current portion (1,798,478 ) - Non-current portion $ 81,494 $ 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) nine (6) equal biannual installments with the first installment due on the nine-month anniversary of February 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”). Notwithstanding any other provision of this Note, the Holders does not intend to charge, and the RDE, Inc. shall not be required to pay, any fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the RDE, Inc. or credited to reduce the principal hereunder. All payments received by the Holder will be applied first to costs of collection, if any, then the balance to the unpaid principal and interest. In the event of default, the notes to the holders are secured, in the manner that such payment to be made in cash or shares of the RDE, Inc.’s common stock at the election of the Holders. These Notes may be prepaid in whole or in part by the RDE, Inc. For purposes of clarity, if RDE’s payments to the Holders pursuant to (i) of the agreement, do not in the aggregate equal the Total Amount, the amount remaining owed to the Holders shall be paid to the Holders on or before the Maturity Date. During the year ended December 31, 2022, the Company made principal payments of $13,136. As of December 31, 2022, the notes payable had an aggregate principal balance outstanding of $127,788 and accrued interest payable of $687. 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 December 31, 2022 and December 31, 2021, the note payable had a principal balance outstanding of $1,500,000 and accrued interest payable of $251,507 and $162,300 respectively. On March 1, 2023, the principal and interest balance of approximately $1,770,000, was converted into 554,859 shares of the Company’s common stock, and the note was retired. 35 Government Assistance Notes Payable Government Assistance Notes Payable consists of the following at December 31, 2022, and December 31, 2021: December 31, December 31, 2022 2021 Paycheck Protection Loan $ - $ 1,025,535 Economic Injury/Disaster Loans 661,035 650,000 Total principal balance 661,035 1,675,535 Accrued interest 45,541 25,321 Total principal and accrued interest 706,576 1,700,856 Less current portion (15,217 ) (11,115 ) Non-current portion $ 691,359 $ 1,689,741 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 year ended December 31, 2022. Economic Injury Disaster Loans (EIDL): On June 17, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 21, 2020, the Company received an additional $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. 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. During the year ended December 31, 2022, the Company made principal payments of $3,465. As of December 31, 2022, and December 31, 2021, the note payable had a principal balance outstanding of $661,035 and accrued interest payable of $45,541 and $25,321 respectively. Off-Balance Sheet Arrangements At December 31, 2022 and December 31, 2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the Company is not required to provide the information required by this Item 7A. 36