GIFTIFY, INC. — Filing Summary
Filing identity: The supplied Form 10-Q is filed by RDE, Inc., not GIFTIFY, INC. It covers the quarter and nine months ended September 30, 2022, was signed November 4, 2022, and reports 14,152,378 common shares outstanding as of November 2, 2022. The company traded under symbol RSTN on OTCQB and operated primarily through Restaurant.com, offering restaurant discounts, travel and merchandise deals, advertising, and business-to-business gift-card programs.
Business Context and Reporting Period
- Restaurant.com reported approximately 182,500 restaurant and retail locations and more than 7.8 million customers; management stated that B2B sales represented approximately 50% of revenue.
- The company acquired GameIQ, a consumer gamification technology developer, on February 28, 2022, for 600,000 restricted shares valued at $300,000, notes totaling $140,914, and assumed government assistance debt.
- The financial statements are unaudited, prepared under U.S. GAAP, and reflect one operating segment.
Financial Results and Key Metrics
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | $824,747 | $847,386 | $3,395,681 | $2,446,647 |
| Cost of revenue | $38,798 | $88,762 | $637,096 | $299,115 |
| Gross margin | Approximately 95% | Approximately 90% | Approximately 81% | Approximately 88% |
| SG&A | $1,315,716 | $1,298,982 | $4,227,766 | $6,364,348 |
| Operating loss | $(566,911) | $(684,358) | $(1,555,849) | $(4,696,816) |
| Net loss | $(596,342) | $(712,721) | $(517,851) | $(4,151,736) |
| Loss per share | $(0.04) | $(0.06) | $(0.04) | $(0.32) |
| Operating cash flow | Not separately provided | Not separately provided | $(717,244) | $(1,294,711) |
- Q3 revenue declined approximately 3%, while nine-month revenue increased approximately 39%.
- Nine-month revenue included $1,106,447 from a temporary national mobile-provider promotion that ran from May through August 2022. The filing does not indicate that this revenue stream continued after August.
- Nine-month B2B revenue increased to $2,501,066 from $1,429,844, while B2C revenue declined to $869,078 from $982,758.
- Nine-month cost of revenue increased materially, primarily from Fandango movie-ticket costs associated with the mobile-provider promotion.
- Nine-month SG&A decreased primarily because stock-based compensation declined by approximately $1.99 million year over year.
Balance Sheet, Debt, Liquidity and Capitalization
- Cash was $1,462,750 at September 30, 2022, down from $1,930,325 at December 31, 2021. Current assets were $1,793,237 versus current liabilities of $3,811,342.
- Total assets were $2,284,285 and total liabilities were $4,625,291, resulting in stockholders’ deficit of $2,341,006, compared with a deficit of $3,019,739 at year-end 2021.
- Acquisition notes payable totaled $1,857,328 including accrued interest, of which $1,762,905 was classified as current. The $1.5 million Restaurant.com note matures March 1, 2023, bears 6% interest, and is convertible at the company’s option.
- Government assistance debt totaled $703,759 including accrued interest, consisting primarily of $664,500 of EIDL principal. The PPP loan and accrued interest totaling approximately $1.0 million were forgiven in February 2022.
- Convertible debt assumed in the reverse merger totaled $36,387 including accrued interest and was past due; the debt was convertible into 24,258 shares at $1.50 per share.
- The company raised $250,000 through the sale of 100,000 common shares and issued shares for services, the GameIQ acquisition, and settlement of a vendor balance. Common shares outstanding increased from 12,879,428 at December 31, 2021 to 14,152,378 at September 30, 2022.
Material Changes, Outlook and Risks
- Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year. Continued operations depend on obtaining additional debt or equity financing and achieving positive cash flow. No assurance was provided that financing will be available or acceptable; equity financing could substantially dilute shareholders.
- Management expected COVID-19 effects to abate and revenues to improve during the second half of 2022, but noted continuing exposure to restaurant closures, reduced dining activity, inflation, supply-chain disruption, and changes in discretionary spending.
- Management expects SG&A and cost of revenue to increase as the company expands personnel, marketing, operations, and public-company compliance activities.
- The GameIQ purchase price allocation remained provisional. The acquired software and technology had a recorded net balance of $356,842 at September 30, 2022 and a provisional two-year useful life. Future impairment charges remain possible if COVID-19 or inflationary pressures worsen.
- One customer represented 33% of nine-month revenue, creating customer-concentration risk. No customer exceeded 10% of third-quarter revenue.
- Disclosure controls and procedures were deemed not effective as of September 30, 2022. Management reported no material changes to internal control over financial reporting during the quarter.
- A prior legal dispute was settled for $150,000 paid in May 2022, resulting in a $69,000 gain because the settlement was below the amount previously accrued. Management reported no other pending legal proceedings expected to have a material adverse effect.
Most Important Facts to Verify
- Confirm whether this RDE, Inc. filing is the intended filing for GIFTIFY, INC.; the supplied document does not identify GIFTIFY as the registrant.
- Verify the company’s ability to refinance or repay the $1.5 million Restaurant.com note due March 1, 2023 and other current obligations.
- Assess the sustainability of nine-month revenue growth after the $1.106 million temporary mobile-provider promotion ended.
- Review the going-concern disclosure, financing needs, potential dilution, and the company’s path toward positive operating cash flow.
- Investigate the reasons disclosure controls were ineffective and whether remediation has occurred after September 30, 2022.
- Evaluate customer concentration, GameIQ integration and performance, and the risk of impairment of acquired software and technology.