Acquisition and Financial Overview - RDE, Inc. acquired CardCash Exchange, Inc. for a total consideration of $26,682,000, which included 6,108,007 shares of common stock valued at $24,432,000, $750,000 in cash, and $1,500,000 in notes payable[19]. - The company completed the acquisition of CardCash Exchange, Inc. for $26,682,000, consisting of 6,108,007 shares of common stock valued at $24,432,000, $750,000 in cash, and $1,500,000 in notes payable[202]. - For the year ended December 31, 2023, the company recorded a loss from operations of $8,100,406 and used cash in operating activities of $541,791[83]. - The company has a history of net operating losses, with losses of $3,080,406 and $5,600,348 for the years ended December 31, 2023 and 2022, respectively[85]. - The outstanding balance on the company's line of credit facility was $6,737,385, with $2,294,779 in promissory notes and $40,137 in past due convertible notes payable[83]. - The company has not declared or paid any cash dividends on its common stock and intends to retain future earnings to finance business expansion[192]. Revenue and Market Performance - The B2C division of Restaurant.com accounted for 45% of gross revenue in the fiscal year ended December 31, 2023, while the B2B division accounted for 55%[37]. - Revenue improved in fiscal 2023 as the impact of COVID-19 abated, following declines in 2020, 2021, and 2022 due to restaurant closures[213]. - CardCash's gross margin is currently 13.3%, with the retail-to-bulk channel having the highest margin at approximately 17% and bulk-to-bulk at about 10%[36]. - CardCash expects to achieve a gross margin of 15% in 2023 and 19% in 2024, anticipating an 8% increase in gross margins over the next two years[36]. - The global gift card market is projected to reach $1.4 trillion by 2026, which CardCash aims to capitalize on by expanding its business channels[28]. Customer Base and Marketing - As of December 31, 2023, the company had a customer base of 6.2 million and featured deals at over 184,000 restaurants and merchants[61]. - CardCash spent only $807,031 on marketing in 2023, representing 0.9% of its gross revenues, and plans to increase marketing efforts to accelerate sales[35]. - The average order value for bundled offerings ("Specials") from Restaurant.com is nearly five times that of standard certificate purchases, generating over 5% of B2C revenue from 60% of orders[38]. - The B2B division contributed 55% of gross revenue in fiscal year 2023, selling certificates and Discount Dining Passes to corporations[211]. - Restaurant.com serves over 182,500 restaurants and retailers, connecting with 7.8 million customers nationwide[208]. Competition and Market Challenges - The company faces competition from larger, established companies with greater financial and technical resources, which may impact its revenue base[59]. - The company faces intense competition in the market for discounts, which may lead to reduced operating margins and loss of market share[129]. - The company’s operating results are affected by its reliance on search engines for traffic, and changes in algorithms could negatively impact visibility and sales[135]. - The company is dependent on the growth of online commerce, with concerns about fraud and privacy potentially hindering customer acquisition[105]. - Economic uncertainty, including the impact of the COVID-19 pandemic, could adversely affect revenue and business operations[113]. Regulatory and Legal Risks - The company is subject to various foreign and domestic laws affecting online business, which could harm its operations[63]. - The company is not currently considered a financial institution under anti-money laundering laws, but proposed amendments could change this status[69]. - The company may incur significant costs related to legal claims, including defamation and copyright infringement, which could materially impact its net income[99]. - The company is subject to evolving internet and e-commerce regulations, which could adversely affect its business operations and revenue growth[97]. - Failure to comply with privacy laws and regulations could result in significant liabilities and adversely affect the company's business[98]. Internal Controls and Governance - The company has identified material weaknesses in its internal control over financial reporting, concluding that these controls were not effective as of December 31, 2023[87]. - The company is committed to remediating its material weaknesses in internal controls, but there is no assurance on the timeline for remediation[89]. - The company has not had its auditors provide an attestation of management's assessment of internal control over financial reporting, which may leave material weaknesses undetected[170]. - The company must maintain effective internal controls to provide reliable financial reports and detect fraud, as failure to do so could harm operating results and investor confidence[163]. - The company has a risk management program overseen by the Board of Directors and Audit Committee, integrating cybersecurity into overall risk management processes[179]. Employee and Operational Considerations - The company employs 64 full-time employees as of December 31, 2023, and considers its employee relations to be good[78]. - The company relies heavily on key personnel, including the President and CEO, and any loss of these executives could significantly harm business operations[120]. - As the business expands, the company needs to hire additional personnel, particularly in IT, engineering, marketing, and customer support, to maintain growth[121]. - The company recognizes that its operating results may vary significantly from quarter to quarter due to seasonality and the rapidly evolving nature of its business[151]. Financial and Stock Market Considerations - Approximately 24% of the company's outstanding shares of common stock are beneficially owned by insiders, which may adversely affect stock price and limit investor influence[166]. - The trading price of the company's common stock is likely to be highly volatile, which could lead to losses for investors[164]. - The company may experience dilution of ownership interests due to future issuance of additional shares or convertible securities[165]. - Limited trading activity in the company's common stock may make it difficult for shareholders to sell shares at attractive prices[160]. - The company may need to raise additional capital to meet long-term business requirements, which could dilute current stockholders' ownership interests[145].
RDE Inc(RSTN) - 2023 Q4 - Annual Report