TORONTO, Nov. 29, 2021 /CNW/ - 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
|
|
|
|
|
|
|
|
|
|
|
|
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.