Facedrive Inc. (" Facedrive " or the " Company ") (TSXV: FD), a Canadian "people-and-planet first" tech ecosystem, today announced its Q3 interim financial statements for the period ended September 30, 2021 (" Q3 2021 "). All financial results are reported in Canadian dollars, unless otherwise stated.
Facedrive is a multi-faceted "people-and-planet first" tech ecosystem offering socially responsible services to local communities with a strong commitment to doing business fairly, equitably and sustainably. As part of this commitment, Facedrive's vision is to fulfil its mandate through a number of services and offerings that either leverage existing technologies of the Company or project initiatives with existing lines of business. Facedrive's services and offerings include eco-friendly rideshare; food delivery services (Facedrive Foods); its Steer electric and hybrid vehicle subscription service; contact-tracing and connected health technology services (Facedrive Health); e-commerce; and e-social platform (Facedrive Social).
Q3 2021 Interim Financial and Operational Highlights
- Revenue for Q3 2021 was $8,371,021 , up from $266,460 in the same period a year earlier.
- Rideshare revenue was $75,516 in Q3 2021, down from $75,978 the same period a year earlier.
- Facedrive Foods' revenue was $7,379,910 in Q3 2021, compared to $1,953 the same period a year earlier.
- Steer subscription revenue was $798,931 in Q3 2021, compared to 174,148 the same period a year earlier.
- Net loss was $9,930,182 in Q3 2021, as compared to a net loss of $3,874,179 in the same period a year earlier.
- Cost of revenue in Q3 2021 was $7,951,732 , an increase from $395,918 in the same period a year earlier.
- General and administration expenses were $1,703,803 in Q3 2021, up from $1,096,034 in the same period a year earlier.
- Operational support expenses increased to $3,255,501 in Q3 2021, up from $846,870 in the same period a year earlier.
- Research and development expenses increased to $668,221 in Q3 2021, as compared to $490,549 in the same period a year earlier.
- Sales and marketing expenses were $1,349,476 in Q3 2021, as compared to $833,155 in the same period a year earlier.
- Basic loss per share was $0.10 in Q3 2021, as compared to $0.04 in the same period a year earlier.
Selected Financial Highlights
See Facedrive's Q3 2021 Interim Financial Statements and its Management's Discussion and Analysis of Financial Condition and Results of Operations (the " Q3 MD&A "), filed on SEDAR at www.SEDAR.com.
|
|
| For the
three
months
ended
September
30, 2021 |
| For the
three
months
ended
September
30, 2020 |
| For the
nine
months
ended
September
30, 2021 |
| For the
nine
months
ended
September
30, 2020 |
| REVENUE |
| $ | 8,371,021 | $ | 266,460 | $ | 17,443,262 | $ | 747,976 |
|
|
| Cost of revenue |
|
| 7,951,732 |
| 395,918 |
| 16,668,168 |
| 769,778 |
| General and administration |
|
| 1,703,803 |
| 1,096,034 |
| 5,442,643 |
| 2,411,229 |
| Operational support |
|
| 3,255,501 |
| 846,870 |
| 8,905,387 |
| 1,602,227 |
| Research and development |
|
| 668,221 |
| 490,549 |
| 1,477,769 |
| 1,014,406 |
| Sales and marketing |
|
| 1,349,476 |
| 833,155 |
| 4,923,926 |
| 6,623,891 |
| Amortization |
|
| 698,330 |
| 171,980 |
| 2,057,084 |
| 275,881 |
| Depreciation |
|
| 96,092 |
| 17,210 |
| 218,270 |
| 50,537 |
| Total operating expenses |
|
| 15,723,155 |
| 3,851,716 |
| 39,693,247 |
| 12,747,949 |
| OPERATING LOSS |
|
| (7,352,134) |
| (3,585,256) |
| (22,249,985) |
| (11,999,973) |
|
|
|
|
|
|
|
|
|
|
| OTHER INCOME (EXPENSES) |
|
|
|
|
|
|
| Government grants |
|
| 1,059,351 |
| 106,571 |
| 3,053,606 |
| 285,620 |
| Foreign exchange gain (loss) |
|
| 132,491 |
| (6,911) |
| (27,144) |
| 61,193 |
| Interest expenses |
|
| (209,232) |
| (49,044) |
| (590,299) |
| (57,420) |
| Interest income |
|
| 9,596 |
| 10,461 |
| 28,488 |
| 31,415 |
| Gain or Loss on Termination |
|
| (12,535) |
| - |
| (25,385) |
| - |
| Derecognition of long-term investment |
|
| (3,489,916) |
| - |
| (3,489,916) |
| - |
| Impairment of intangible assets |
|
| (67,803) |
| (350,000) |
| (67,803) |
| (350,000) |
| LOSS BEFORE INCOME TAXES |
| $ | (9,930,182) | $ | (3,874,179) | $ | (23,368,438) | $ | (12,029,165) |
| Deferred income tax recovery |
|
| - |
| - |
| 248,000 |
| - |
| NET LOSS |
|
| (9,930,182) |
| (3,874,179) |
| (23,120,438) |
| (12,029,165) |
| Cumulative translation adjustment |
|
| 54,862 |
| 59,336 |
| (18,368) |
| 59,336 |
| NET LOSS AND COMPREHENSIVE LOSS |
|
| (9,875,320) |
| (3,814,843) |
| (23,138,806) |
| (11,969,829) |
| Loss per share – Basic and diluted |
| $ | (0.10) | $ | (0.04) | $ | (0.24) | $ | (0.13) |
| Weighted average number of shares outstanding |
|
| Basic and diluted |
|
| 95,318,111 |
| 92,852,438 |
| 94,790,810 |
| 91,355,278 |
|
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|
|
|
|
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Update Regarding Corrective Disclosure
During the preparation of the Company's Q3 2021 financial results and concurrent with the ongoing Continuous Disclosure Review involving staff of the Corporate Finance Branch of the Ontario Securities Commission (" OSC "), the Company identified certain errors in originally filed continuous disclosure documents and is therefore implementing an accounting or disclosure change on a retroactive basis (each a " Corrective Disclosure "). The Company has two Corrective Disclosures: (i) an error related to accounting for deferred income taxes associated with the Company's acquisition of Food Hwy Inc.; and (ii) errors related to the reporting of the end-user discounts that were offered as market-wide promotions by the Company.
Deferred Income Taxes
On October 1, 2020 , the Company completed the acquisition (the " Food Hwy Acquisition ") of Food Hwy Canada Inc. (" Food Hwy "), a food delivery service, for consideration of $5,038,575 . For accounting purposes, the Food Hwy Acquisition was determined to be a "business combination" as substantive processes and assets were acquired as part of the transaction. In accounting for the transaction, the Company did not assess the associated deferred income tax liability that should have been recognized on the recognition of Food Hwy's intangible assets at the time of acquisition (with an associated increase to goodwill), and consequently any deferred income tax recovery which would have been recognized upon the amortization of the deferred income tax liability. This topic was mentioned in the Company's press release dated October 6, 2021 as a matter to be addressed in respect of the Company's Q2 2021 financial statements.
To correct for the error, the Company has restated the consolidated statement of financial position as at December 31, 2020 to reflect the recognition of the deferred income tax liability of $248,000 , the increase to goodwill of $685,000 and the impact to deficit for the recognition of the associated deferred income tax recovery of $437,000 .
The Company has included in its Q3 2021 MD&A a detailed description of the impact of these restatements on the Company's year-ended December 31, 2020 financial statements, its Q1 2021 financial statements and its Q2 2021 financial statements. Please see "Summary of Quarterly Results - Prior Period Errors" found in the Company's Q3 2021 MD&A for a detailed description of the impact of these misstatements on the Company's year-ended December 31, 2020 , Q1 2021 and Q2 2021 financial statements.
End-user Discounts and Market-wide Promotions
From time to time, the Company's subsidiary, Facedrive Foods, provides discounts to end users. The Company records these discounts as being either net of revenue or as sales and marketing expenses depending on the nature of the promotion.
The Company applies a similar revenue recognition and expense allocation policy as compared to other companies in its peer group. The Company's revenue recognition policies and its policies regarding accounting for end-user incentives and discounts is described in the Company's Q3 2021 MD&A, which can be summarized as follows:
- Targeted end-user discounts and promotions. These are incentives offered by the Company to acquire, re-engage or generally increase end-users use of the platform (akin to a coupon) offered to end users who are not customers. These targeted end-user discounts and promotions are presented as sales and marketing expenses.
- End-user referrals. These are credits given to existing end-users for referring new end-users to the Company's platform. End-user referrals are accounted for and presented as sales and marketing expenses.
- Market-wide Promotions. These are general discounts offered to members of the public at large that reduce the end-user's costs. Market-wide promotions are presented net of revenue.
For examples of any of the above or further details, please see "Summary of Quarterly Results - Prior Period Errors" found in the Company's Q3 2021 MD&A.
During the six-months ended June 30, 2021 , the Company estimated that 20% of the discounts offered were market-wide promotions and 80% were targeted end-user promotions. This reasoned estimate was based on Management's familiarity and experiences with the types of different promotions that have historically been offered that have been offered by the Company and were also based upon management's day-to-day familiarity and experience with all of the Company's various promotional programs and an overall consolidated estimate of their effectiveness and uptake. Subsequently during the past few months, management has worked to collect and data mine additional information about the specific uptake and utilization of the Company's incentives and discounts in order to obtain improved accuracy and statistics regarding the utilization of these programs. Based on the Company's new and improved analysis of the data that was created regarding the Company's incentives and discounts, the Company has determined that the amount that should have been recognized as market-wide promotions should have been $1,122,442 for the six-months ended June 30, 2021 rather than $528,382 . Since these promotions are presented net of revenue, their adjustment did not result in any change to the Company's net profits or its cash received during these quarters.
The Company has included in its Q3 2021 MD&A a detailed description of the impact of these restatements on the Company's consolidated statement of loss and comprehensive loss for Q1 2021 and Q2 2021. Please see "Summary of Quarterly Results - Prior Period Errors" found in the Company's Q3 2021 MD&A.
Update Regarding the Company's Investment in Tally
On August 7, 2020 , the Company entered and completed a definitive agreement (the " Tally Agreement ") to partner with and invest in Tally Technology Group Inc. (" Tally "), a white-label, free-to-play sports predictions platform (the " Tally Transaction ").
In return for 727,273 common shares and 2,181,818 preferred shares of Tally (each, the " Initial Tally Common Shares " and the " Initial Tally Preferred Shares ", respectively), the Company paid USD$1,000,000 (CAD $1,340,600 ) in cash and USD$2,000,000 (CAD $2,326,424 ) in Facedrive common shares (each, a " Share ") at a deemed price per Share equal to $17.84 . The Company issued 151,457 Shares which are subject to a twelve month lock-up period from the date of issuance (the " Lock-Up Period ") following which the Shares begin to gradually release from lock-up (" Gradual Lock-Up Release ").
Under the Tally Agreement, when the Lock-Up Period expired the Company had three possible options: (1) increase its ownership in Tally through a USD$1,000,000 investment (the " Tally Equity Option ") into Tally Preferred Shares (the " Series Seed-1 Preferred Stock "); or (2) provide Tally with a USD$1,000,000 loan (the " Tally Loan Option "); or (3) do nothing and forfeit certain securities (the " Tally Forfeiture Option ", detailed below). These scenarios were contemplated to provide both the Company and Tally flexibility upon the one-year anniversary of the Tally Agreement when the Lock-Up Period ends.
On August 8, 2021 , the Company entered into an Amended Agreement with Tally (the " Amended Agreement ") to amend the terms of the original Tally Agreement. The Amended Agreement removed the obligation to exercise either of the Tally Equity Option, the Tally Loan Option and the Tally Forfeiture Option upon the expiry of the Lock-Up Period in exchange for a complete and early release from all lock-up restrictions, namely, the Gradual Lock-up Release.
On October 27, 2021 , despite receiving the benefits of the Amended Agreement such as an early and entire release from the Lock-Up Period, Tally served a notice of alleged default to the Company (" Notice "), claiming that the Company had defaulted on the terms of the original Tally Agreement, meaning the Tally Forfeiture Option applied in which case 727,273 of the Company's Initial Tally Preferred Shares would be converted into common shares of Tally and would, together with the Initial Tally Common Shares, be returned to Tally for cancellation. This would leave Facedrive with 1,454,545 Tally Preferred Shares. Management is strongly of the opinion that the Notice is without merit in light of the Amended Agreement removing all of the Options and is currently reviewing all of its options with U.S. legal counsel and other external advisors. However, as of September 30, 2021 , the Company has decided to derecognize the Tally investment from an accounting perspective due to the uncertainty surrounding the outcome of the claim. The Company has reflected this derecognition in its Q3 2021 financial statements. Please see the sections titled "Derecognition of investment in Tally Technology Group Inc." and "Subsequent Events - Tally Investment" found in the Company's Q3 2021 MD&A.
Update Regarding the Company's CFO and New VP Finance
The Company is pleased to announce that Nastassia Law has agreed to be hired as the Company's new Chief Financial Officer (" CFO "). Ms. Law is a Chartered Professional Accountant (CPA) and she has over 10 years of experience in business improvement, finance and operations across the globe in industries such as retail, e-commerce, healthcare monitoring, and SaaS base tech companies. Ms. Law has repeatedly demonstrated a track record of delivering KPI driven policies and operational efficiencies across multi-disciplinary and international organizations. Ms. Law's appointment to the position of CFO is conditional upon the approval of the TSX Venture Exchange, in accordance with requirements of TSXV Policy 3.1. Ms. Law will work closely with Fairy Lee , the Company's outgoing Chief Financial Officer, during the remainder of 2021 and thereafter as needed during the required transition period.
In addition, the Company is pleased to announce that Jason Xie (MBA, CPA) has been hired as the Company's new VP Finance. Mr. Xie has over 15 years of accounting and controlling experience involving multinational enterprises and he is skilled in financial reporting, budgeting, treasury, cost and managerial accounting, auditing, business improvement planning, tax planning, M&A, project evaluation and financial modeling.
About Facedrive
Facedrive is a multi-faceted "people-and-planet first" tech ecosystem offering socially-responsible services to local communities with a strong commitment to doing business fairly, equitably and sustainably. As part of this commitment, Facedrive's vision is to fulfil its mandate through a number of services that either leverage existing technologies of the Company or project synergies with existing lines of business. Facedrive's service offerings include: its (i) eco-friendly rideshare business, Facedrive Rideshare; (ii) food delivery service, Facedrive Foods; (iii) electric and hybrid vehicle subscription business, Steer; (iv) contact-tracing and connected health technology services, Facedrive Health; (v) e-commerce platform, Facedrive Marketplace; and (vi) e-social platform, Facedrive Social.
Facedrive Rideshare was among the first to offer a wide variety of environmentally and socially responsible solutions in the Transportation as a Service (TaaS) space, planting thousands of trees based on user consumption and offering choices between electric, hybrid and conventional vehicles (including, more recently, electric and hybrid vehicles on a subscription basis through Steer). Facedrive Marketplace offers curated merchandise typically created from sustainably sourced materials and linked to social causes. Facedrive Foods offers contactless delivery of a wide variety of foods right to consumers' doorsteps, with a focus on doing so in a socially and environmentally-conscious manner. Facedrive Social strives to keep people connected in a physically-distanced world through its HiQ and other e-socialization platforms that invite users to interact based on common interests and by offering gamification and mutual community support features. Facedrive Health strives to develop and offer innovative technological solutions to the most acute health challenges including its proprietary TraceSCAN wearable technology for contact tracing. Facedrive envisions changing the ridesharing, food delivery, e-commerce, social and health tech narratives for the better, for everyone, and is currently operational in Canada and the United States .
For more about Facedrive, visit www.facedrive.com .
100 Consilium Pl, Unit 104, Scarborough, ON , Canada M1H 3E3
Forward-Looking Statements
Certain information in this press release contains forward-looking information. This information is based on management's reasonable assumptions and beliefs in light of the information currently available to the Company and are made as of the date of this press release. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors. Information regarding the Company's expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Statements containing forward-looking information are not facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Many factors could cause the Company's actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements.
See "Forward-Looking Information" and "Risk Factors" in Facedrive's Annual Management Discussion & Analysis (MD&A) for the year ended December 31, 2020 (filed on SEDAR on April 30, 2021 ) and its interim MD&A for the period ended March 31, 2021 (filed on SEDAR on May 31, 2021 ), its interim MD&A for the period ended June 30, 2021 (filed on SEDAR on August 30, 2021 ) and interim MD&A for the period ended Sept. 30, 2021 for a discussion of the uncertainties, risks and assumptions associated with these statements and other risks. Readers are urged to consider the uncertainties, risks and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. We have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities legislation and regulatory requirements.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Facedrive Inc.
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