GIFTIFY, INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise indicated or the context otherwise requires, references in this section to “the Company,” “RDE” “we,” “us,” “our” and other similar terms refer to RDE, Inc. and its subsidiaries and references to “CardCash” refer to the Company, formerly known as CardCash Acquisition Corp., prior to the Merger (as defined below). The following discussion and analysis of the financial condition and results of operations of RDE should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis should also be read together with the section entitled “Organization and description of business” as of December 31, 2023 (Successor) and for the period from January 1, 2023 through December 29, 2023 (Predecessor), and for the year ended December 31, 2022 (Predecessor). In addition to historical information, the following discussion and analysis contains forward-looking statements. Our actual results may differ significantly from those projected in such forward-looking statements. Factors that might cause future results to differ materially from those projected in such forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” All figures are presented in thousands, except percentages, rates and unless otherwise noted. References to “Notes” are notes included in our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Background On March 1, 2020, we acquired the assets of Restaurant.com, Inc. Restaurant.com, Inc. is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. On February 28, 2022, the Company completed the acquisition of GameIQ, a California corporation, that is a developer of consumer gamification technologies for retail businesses. The Company issued 600,000 restricted shares of its common stock with a fair value of $300,000, and promissory notes aggregating $140,914 and bearing interest at 1% per annum, to Balazs Wellisch, President and co-founder, and Quentin Blackford, Director, of GameIQ. Each note required repayment in nine equal biannual installments, with the first installment due on the nine-month anniversary of the closing. Balazs Wellisch became Chief Technology Officer of Restaurant.com, a subsidiary of the Company. On December 29, 2023, RDE, Inc. completed the acquisition of CardCash Exchange, Inc. (“CardCash”). The acquisition was made pursuant to a plan of merger agreement dated August 18, 2023, between RDE, and Elliott Bohn, in his capacity as stockholder representative for CardCash’s stockholders. The Company acquired all of the issued and outstanding equity interests of CardCash from CardCash’s stockholders for $26,682,000, made up of 6,108,007 shares of RDE’s common stock with a fair value of $24,432,000 or $4.00 per share, $750,000 in cash (including $250,000 advanced in October 2023), and the issuance of notes payable for $1,500,000. Elliot Bohm, President of CardCash prior to the merger with RDE, remains as President of CardCash following the closing of the merger and has joined the Board of Directors of RDE as well as serving as a member of the Board of Directors of CardCash. Marc Ackerman, Chief Operating Officer of CardCash prior to the merger with RDE, continues to serve as Chief Operating Officer of CardCash following the closing of the merger. Business Overview We have two principal divisions, B2C and B2B, for both CardCash and for Restaurant.com. CardCash CardCash operates as a leading gift card exchange platform, facilitating the purchase and sale of unwanted gift cards at discounted rates for both consumers and businesses. The Company’s mission is to provide a seamless marketplace for individuals looking to maximize the value of their gift cards while also offering businesses innovative solutions to leverage this market. CardCash’s core service offering includes the buying and selling of gift cards from over 1,100 retailers, such as Target, Home Depot, Starbucks and TJ Maxx, among others. By connecting buyers and sellers, CardCash enables consumers to unlock value from unused gift cards and save significant amounts on their purchases. CardCash purchases unwanted gift cards at a value lower than their face worth and subsequently retails them at a discounted rate to discerning shoppers nationwide. This avenue not only allows individuals to obtain cash for their unneeded gift cards but also enables them to make cost-effective purchases through discounted gift cards. With advanced fraud prevention technology, known as FraudFix, CardCash ensures the security and integrity of all transactions conducted on its platform. This commitment to trust and reliability has contributed to its success in saving consumers over $100 million since its inception. Restaurant.com Restaurant.com is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Founded in 1999, we connect digital consumers, businesses, and communities offering dining and merchant deal options nationwide at over 182,500 restaurants and retailers to over 7.8 million customers. Our 10,000 core restaurants and 170,000 Dining Discount Pass restaurants and retailers extend nationwide. Our top three B2C markets are New York, Chicago and Los Angeles. 30 Restaurant.com Business to Customer Division Our B2C division accounted for 45% of gross revenue in our fiscal year ended December 31, 2023. To our database of 6.2 million customers, we sell: ● Discounted certificates for 10,000 restaurants. The certificates range from $5 to $100 and never expire. ● Discount Dining Passes, which provide discounts at 170,000 restaurants and other retailers. These passes provide multiple uses for six months. ● “Specials by Restaurant.com” which bundle Restaurant.com certificates with a variety of other entertainment options, including theatre, movies, wine and travel. Customers have favored these bundled offering (“Specials”), generating significantly greater revenue per customer when compared to purchasing our other products. The average order value for these Specials sales is nearly five times a certificate purchase. Specials generated over 5% of our past year’s B2C revenue from 60% of the B2C orders for the fiscal year ended December 31, 2023. We believe that our relationships with small businesses presents a significant revenue opportunity through such cross-promotions. Restaurant.com Business to Business Division Our B2B division accounted for 55% of our gross revenue in our fiscal year ended December 31, 2023. We sell certificates and Discount Dining Passes to corporations and marketers, which use them to: ● generate new customers; ● increase sales at the point of sale; ● reward points/customer loyalty; ● convert to paperless billing and auto-bill payment. ● motivate specific customer behavior such as free home repair estimates and test drives for auto dealers; ● renew subscriptions and memberships; and ● address customer service issues. Restaurant.com Other Business We also generate revenue through third-party offers and display ad revenue. This comprises a de minimis portion of our gross revenue. Restaurant.com Attractive Customer Demographics We intend to grow and leverage our customer database of 6.2 million which we believe is of value to merchants for a variety of services and products. In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, 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 were accepted and where dining was being restricted to outdoor locations or to capacity constraints for indoor dining. Our revenues from purchase of our discount certificates in 2020, 2021 and 2022 declined since they could only be redeemed when dining in the restaurants and also were not accepted for payment by third-party platforms that facilitated ordering and delivery of food on-demand. As the COVID-19 pandemic has abated, our revenues improved in fiscal 2023. 31 Inflation Global inflation also increased during 2021 and in 2022. The Russia and Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and the restaurant customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected. Going Concern The Company has a history of reporting net losses. At December 31, 2023, the Company had cash of $4,099,737 available to fund its operations, including expansion plans, and to service its debt, and a negative working capital of $1,849,427. Our consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced operating losses and negative operating cash flows during 2023 and 2022. We have financed our working capital requirements through borrowings from various sources and the sale of our equity securities. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2023, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability. As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus may have on the Company’s business plans and the amount and type of financing available to the Company in the future. 32 If the Company is unable to obtain the cash resources necessary to satisfy the Company’s ongoing cash requirements, the Company could be required to scale back its business activities or to discontinue its operations entirely. Basis of Presentation On August 18, 2023, RDE, Inc. (“RDE”) entered into an agreement and plan of merger to acquire CardCash Exchange Inc (“CardCash”). On December 29, 2023, the merger was completed. RDE’s operations are not considered significant compared to the operations of CardCash before the acquisition. Accordingly, for the purpose of the accompanying consolidated financial statements, periods before December 29, 2023 reflect the financial position, results of operations and cash flows of Card Cash prior to the acquisition, and is referred to as the “Predecessor”. Periods beginning after December 29, 2023 reflect the financial position, results of operations and cash flows of RDE consolidated with CardCash, and is referred to as the “Successor”. A black-line between the Successor and Predecessor periods has been placed in the consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these periods. Collectively, RDE (Successor) and CardCash (Predecessor) are referred to as the “Company”. Year ended December 31, 2023 compared to Year ended December 31, 2022 Results of Operations – Twelve months ended December 31, 2023, compared to twelve months ended December 31, 2022 RDE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Net Sales $ 484,860 $ 86,661,944 $ 97,008,102 Cost of sales 418,350 76,220,645 86,527,509 Gross profit 66,510 10,441,299 10,480,593 Operating Expenses Selling, general and administrative expenses 5,086,510 11,152,428 11,268,508 Amortization of capitalized software costs - 1,080,537 3,678,233 Amortization of intangible assets - 300,000 300,000 Intangibles and property and equipment 738,740 - Impairment of intangibles - 250,000 - Goodwill impairment - - 834,200 Total operating expenses 5,086,510 13,521,705 16,080,941 Loss from operations (5,020,000 ) (3,080,406 ) (5,600,348 ) Other income (expense): Interest expense - (2,890,466 ) (2,723,332 ) Gain on forgiveness of debt - 5,876,000 - Total other income (expense), net - 2,985,534 (2,723,332 ) Net loss before income taxes (5,020,000 ) (94,872 ) (8,323,680 ) Income taxes - (29,673 ) (899 ) Net loss $ (5,020,000 ) $ (124,545 ) $ (8,324,579 ) Sales Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Sales $ 484,860 $ 86,661,944 $ 86,527,509 For the years ended December 31, 2023 and 2022, the Company’s operating revenues consisted of sales generated by our CardCash business. Predecessor Sales for the period January 1, 2023 to December 29, 2023, were $86,661,944, a decrease of approximately $10,346,158 or 10.7%, as compared to $97,008,102 in the year ended December 31, 2022. During the current year period, we focused on improving our gross margin. We assessed the quality of our purchased gift card brands, allowing us to increase the sales price to our customers, resulting in a gross margin of 12.0%, as compared to a gross margin of 10.8% in the prior year period. While our sales decreased 10.7% over the prior year period, our gross profit was consistent with the prior year period. Successor Sales for the period December 30, 2023 to December 31, 2023, were $484,860. Cost of Sales Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Cost of Sales $ 418,350 $ 76,220,645 $ 97,008,102 Cost of sales consists primarily of the cost to purchase merchant gift cards. Amortization of developed technology is excluded from cost of sales and included in amortization expense in the Statements of Operations. Predecessor Costs of sales for the period January 1, 2023 to December 29, 2023 decreased to $76,220,645, as compared to $86,527,509 during the year ended December 31, 2022. Our cost of sales, as a percentage of sales, were 88.0% and 89.2%, respectively. The decline in our cost of sales, and the increase in our gross margin, as compared to the prior year period, is discussed above. Successor Cost of sales for the period December 30, 2023 to December 31, 2023, were $418,350, and were related to our Successor sales discussed above. 33 Operating Expenses Selling, General and Administrative Expenses Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Selling, general and administrative expenses $ 5,086,510 $ 11,152,428 $ 11,268,508 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. Predecessor Selling, general and administrative expenses were $11,152,428 for the period January 1, 2023 to December 29, 2023, as compared to $11,268,508 during the year ended December 31, 2022, an increase of $339,920. The increase was from general changes in our business and operations. Successor Selling, general and administrative expenses were $5,086,510 during the period December 30, 2023 to December 31, 2023. Selling, general and administrative expenses were for common shares issued per the term of executive employment agreements including $5,000,000 recognized upon the close of the Merger, and $86,510 general changes in our business and operations. Amortization of capitalized software costs . Amortization expenses are primarily attributable to the Company’s capitalized software development costs. Amortization expenses were $1,080,537 during the year ended December 31, 2023, as compared to $3,678,000 during the year ended December 31, 2022, a decrease of $2,597,696. Amortization of intangible assets. A mortization expenses are primarily attributable to the Company’s amortization of intangible assets with finite lives. A mortization expenses were $3 00 , 000 during the year ended December 31, 2023, as compared to $ 300,000 during the year ended December 31, 2022 . Impairment of property and equipment. During the year ended December 31, 2023, the Company determined that certain property and equipment were impaired, resulting in a charge to operations of $738,740 at December 31, 2023. No similar event occurred in the prior year period. Write-off of Impaired Intangible Assets During the year ended December 31, 2023, the Company determined that certain intangible assets were impaired, based on a third party valuation, resulting in a charge to operations of $250,000 at December 31, 2023. No similar event occurred in the prior year period. Impairment of Goodwill . We test for goodwill annually or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the year ended December 31, 2022, the Company determined that its goodwill was impaired, resulting in a charge to operations of $834,200 at December 31, 2022. No similar event occurred in the current year period. Loss from Operations Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Loss from operations $ (5,020,000 ) $ (3,080,406 ) $ (5,600,348 ) Predecessor For the period January 1, 2023 to December 29, 2023, we incurred a loss from operations of $3,080,406, as compared to a loss from operations of $5,600,348 for the year ended December 31, 2022. The decrease in loss from operations was due to our decreased operating costs discussed above. Predecessor For the period December 30, 2023 to December 31, 2023, we incurred a loss from operations of $5,020,000, due primarily to stock compensation of $5,000,000 and routine operating costs of $86,510 as discussed above. Other Income (Expenses) We had other income of $2,985,534 for the year ended December 31, 2023, as compared to other expenses of $2,723,332 for the year ended December 31, 2022. Other income for the year ended December 31, 2023, consisted of a gain from the forgiveness of convertible notes and promissory notes totaling $5,876,000, offset by interest expense of $2,890,466. Other expense for the year ended December 31, 2022, consisted of interest expense of $2,723,332. 34 Net Loss Successor Predecessor December 30, 2023 to December 31, January 1, 2023 to December 29, Year Ended December 31, 2023 2023 2022 Net loss $ (5,020,000 ) $ (124,546 ) $ (8,324,579 ) Predecessor We realized a net loss of $124,546 for the period January 1, 2023 to December 29, 2023, as compared to a net loss of $8,324,579 for the year ended December 31, 2022. The decrease in net loss is primarily due to a gain on forgiveness of convertible notes and promissory notes, and decreased depreciation and amortization expense, as discussed above. Successor We realized a net loss of $5,020,000 for the period December 30, 2023 to December 31, 2023 due primarily to stock compensation of $5,000,000 and routine operating costs of $86,510 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, 2023 and 2022 presented elsewhere in this report, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources. Revenue Recognition The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers . The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects. Stock-Based Compensation The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. Acquisitions and Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations. 35 Recent Accounting Pronouncements See discussion of recent accounting pronouncements in Note 1 to the accompanying financial statements. Liquidity and Capital Resources The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern. Our consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We experienced operating losses and negative operating cash flows during 2023 and 2022. We have financed our working capital requirements through borrowings from various sources and the sale of equity securities. We have a history of reporting net losses. At December 31, 2023, we had cash of $4,099,737 available to fund our operations, including expansion plans, and to service our debt, and a negative working capital of $1,099,428. We anticipate our cash balance will last until approximately December 2024. As a result, we have concluded that there is substantial doubt about the Company’s ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability. As market conditions present uncertainty as to our ability to secure additional funds, there can be no assurances that we will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations. There is also significant uncertainty as to the amount and type of financing available to us in the future. If we are unable to obtain the cash resources necessary to satisfy our ongoing cash requirements, we could be required to scale back its business activities or to discontinue its operations entirely. Our consolidated statements of cash flows as discussed herein are presented below. Successor Predecessor December 30, 2023 to December 31, 2023 January 1, 2023 to December 29, 2023 Year Ended December 31, 2022 Net cash used in operating activities $ - $ (541,791 ) $ (102,411 ) Net cash used in investing activities - (900,000 ) (1,000,479 ) Net cash provided by financing activities - 1,462,376 409,331 Net increase (decrease) in cash and cash equivalents $ - $ 20,585 $ (693,559 ) 36 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, 2023 was approximately $541,791 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, impairment of intangible assets, fair value of vested stock options, and the fair value of common stock issued to executives, and routine changes in working capital and other activities. Cash used in operating activities for the year ended December 31, 2022 was approximately $102,411 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, goodwill impairment, fair value of vested stock options, and the fair value of common stock issued to executives, and routine changes in working capital and other activities. Investing Activities Cash used for investing activities for the year ended December 31, 2023 was $900,000, which was for capital expenditures (predecessor). Cash provided by investing activities for the year ended December 31, 2023 was $2,038,472, which was from net cash received from the acquisition of CardCash (successor). Cash used for investing activities for the year ended December 31, 2022 was $1,000,479, which was for capital expenditures. Financing Activities For the year ended December 31, 2023, cash provided by financing activities was $1,462,376, which was from net proceeds received from our line of credit facility of $1,212,376, and a $250,000 working capital advance from RDE. For the year ended December 31, 2022, cash provided by financing activities was $409,331, which was from net proceeds received from our line of credit facility. Secured Revolving Line of Credit The outstanding line of credit balance at December 31, 2023 and December 31, 2022 was: December 31, 2023 (Successor) December 31, 2022 (Predecessor) Line of credit $ 6,737,385 $ 5,525,009 In November 2020, CardCash entered into an amended and restated promissory note for a revolving line of credit with availability of up to $10,000,000. The revolving line of credit is payable on demand, with interest based on the Wall Street Journal Prime Rate plus 3.00%, limited to a floor of 6.5%. At December 31, 2023 and 2022, the average interest rate was 12% and 11%, respectively. As of December 31, 2023 the Company was in compliance with customary debt covenants. 37 Convertible Debt On November 5, 2018, RDE completed the acquisition of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December 31, 2023, there was one remaining assumed convertible note payable outstanding that matured July 2017, and is past due. At December 31, 2023, the principal balance of $20,000, and accrued interest of $20,137, are convertible at $1.50 per share into 26,758 shares of the Company’s common stock. Notes Payable CardCash Acquisition Notes Payable On December 29, 2023, the Company issued two year promissory notes totaling $1,500,000 as partial consideration for the acquisition of CardCash. $750,000 is payable on the December 29, 2025, bearing simple annual interest of 5%, and $750,000 is to be paid upon the earlier of (a) the completion of a firm commitment underwriting RDE’s initial public offering to allow the Company to become listed on the Nasdaq Capital Market or (b) December 29, 2024. As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $1,500,000. GameIQ Acquisition Note Payable On February 1, 2022, RDE issued two notes payable for the purchase of GameIQ, one for $78,813 and another for $62,101. In accordance with Notes, the Company promised to pay the principal together with interest at 1% upon the earlier of (i) nine equal biannual installments with the first installment due on October 1, 2022, and the final payment due February 1, 2025 (the “Maturity Date”). As of December 31, 2023, the notes payable had an aggregate principal balance outstanding of $102,199 and accrued interest payable of $821. 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 December 31, 2023, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $27,259. Off-Balance Sheet Arrangements At December 31, 2023 and December 31, 2022, 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. 38