RDE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

0
Management's Discussion and Analysis of Financial Condition and Results of
Operations is designed to provide a reader of the financial statements with a
narrative report on our financial condition, results of operations, and
liquidity. This discussion and analysis should be read in conjunction with the
attached unaudited Condensed Consolidated Financial Statements and notes thereto
and our Annual Report on Form 1-K for the year ended December 31, 2021,
including the audited Consolidated Financial Statements and notes thereto. The
following discussion contains forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations, and
intentions. Our actual results could differ materially from those discussed in
the forward-looking statements. Please also see the cautionary language at the
beginning of this Quarterly Report regarding forward-looking statements.



Business Overview



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



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



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



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



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



1






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



Recent Developments



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



Inflation


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

Results of operations – Quarters ended June 30, 2022compared to the three months ended June 30, 2021


Overview



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



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


Revenue


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


2





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


                                                       Sale of Travel,
                                       Restaurant        Vacation and
Sales Channels                          Coupons          Merchandise         Advertising         Total

Three Months Ended June 30, 2022
Business to consumer (B2C)            $    157,774     $         72,874     $      42,632     $   273,280
Business to business (B2B)               1,524,934                    -                 -       1,524,934
Other                                       12,940                    -                 -          12,940
Total                                 $  1,695,648     $         72,874     $      42,632     $ 1,811,154

Three Months Ended June 30, 2021
Business to consumer (B2C)            $    233,230     $        100,232     $      45,405     $   378,867
Business to business (B2B)                 409,579                    -                 -         409,579
Other                                          330                    -                 -             330
Total                                 $    643,139     $        100,232     $      45,405     $   788,776




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



Operating Expenses



Cost of Revenues


Revenue cost primarily includes costs incurred to generate revenue, consisting primarily of transaction costs. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.

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



Selling, general and administrative expenses



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



3






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


Amortization of intangible assets



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



Loss from Operations



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



Other Income (Expenses)


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



Net Income (Loss)



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



Results of operations – Half-year ended June 30, 2022compared to the six months ended June 30, 2021


Overview



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



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


Revenue


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


4





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


                                                       Sale of Travel,
                                       Restaurant        Vacation and
Sales Channels                          Coupons          Merchandise         Advertising         Total

Six Months Ended June 30, 2022
Business to consumer (B2C)            $    355,012     $        149,602     $      91,463     $   596,077
Business to business (B2B)               1,953,709                    -    
            -       1,953,709
Other                                       21,148                    -                 -          21,148
Total                                 $  2,329,869     $        149,602     $      91,463     $ 2,570,934

Six Months Ended June 30, 2021
Business to consumer (B2C)            $    426,818     $        169,156     $      83,123     $   679,097
Business to business (B2B)                 912,825                    -    
            -         912,825
Other                                        7,339                    -                 -           7,339
Total                                 $  1,346,982     $        169,156     $      83,123     $ 1,599,261



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

Operating Expenses



Cost of Revenues


Revenue cost primarily includes costs incurred to generate revenue, consisting primarily of transaction costs. Management expects these costs to increase in the future as the Company focuses on increasing its revenues.



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



Selling, general and administrative expenses



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



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


Amortization of intangible assets



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



5






Loss from Operations


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



Other Income (Expenses)



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



Net Income (Loss)


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


Cash and capital resources

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



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



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



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



                                                Six Months Ended
                                                    June 30,
                                              2022           2021

Net cash used in operating activities ($35,910) ($759,112)
Net cash from investing activities 12,805

               -
Net cash provided by financing activities     250,000       2,239,591
Net increase in cash                        $ 226,985     $ 1,408,479




6






Operating Activities


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



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



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



Investing Activities



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



Financing Activities



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



Convertible Debt Supported in Reverse Merger – Overdue

The convertible debt assumed in the reverse merger consists of the following elements at June 30, 2022 and December 31, 2021:


                                       June 30,       December 31,
                                         2022             2021

Total principal balance                $  20,000     $       20,000
Accrued interest                          15,637             11,537

Total principal and accrued interest $35,637 $31,537

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



7






Acquisition Notes Payable



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



                                            June 30,        December 31,
                                              2022              2021

GameIQ acquisition note payable           $    140,914     $            -

Restaurant.com purchase note payable 1,500,000 1,500,000 Total principal balance

                      1,640,914          1,500,000
Accrued interest                               207,151            162,300
Total principal and accrued interest         1,848,065          1,662,300
Less current portion                        (1,753,848 )                -
Non-current portion                       $     94,217     $    1,662,300



GameIQ acquisition ticket payable

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



Note to be paid on Restaurant.com



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



Government assistance tickets payable

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


                                       June 30,       December 31,
                                         2022             2021

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




8





Payroll checks payable protection note



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



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


Economic Disaster Loans (EIDL):



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



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



Off-balance sheet arrangements


None.


Significant Accounting Policies and Estimates



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



Recently issued accounting pronouncements

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



9

© Edgar Online, source Previews

Share.

Comments are closed.