GIFTIFY, INC. / RDE, INC. Form 10-Q Summary
Reporting period: Three months ended March 31, 2023. The supplied filing identifies the registrant as RDE, Inc., not GIFTIFY, INC.; this should be verified. The company operates Restaurant.com, an online platform offering restaurant coupons, travel and merchandise deals, advertising, and business-to-business gift card programs.
Financial Performance and Position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $811,711 | $759,780 |
| Cost of revenues | $94,877 | $100,565 |
| Gross profit | $716,834 | $659,215 |
| Gross margin | 88.3% | 86.8% |
| Loss from operations | $(399,185) | $(795,860) |
| Operating margin | (49.2%) | (104.8%) |
| Net income (loss) | $(424,916) | $272,081 |
| Net margin | (52.4%) | 35.8% |
| Cash used in operating activities | $(350,814) | $(431,356) |
- Revenue consisted of restaurant coupons of $698,213, travel, vacation and merchandise revenue of $60,270, and advertising revenue of $53,228.
- B2C revenue was $382,676 and B2B revenue was $429,035.
- Cash declined from $1,122,958 at December 31, 2022 to $755,478 at March 31, 2023.
- Total assets were $1,140,759; total liabilities were $2,792,031; and stockholders’ deficiency was $1,651,272.
- Current liabilities of $2,047,548 exceeded current assets of $1,110,542.
- Debt and debt-like obligations included $115,536 of acquisition notes, $702,889 of government assistance loans and accrued interest, and $37,887 of convertible debt and accrued interest. Operating lease liabilities were $36,220.
Material Changes Versus the Prior Comparable Period
- Revenue increased $51,931, or approximately 7%, primarily from increased B2C and B2B activity.
- Cost of revenues decreased approximately 6%, and declined to 12% of revenue from 13%, partly because B2B services have lower issuance costs.
- Selling, general and administrative expense decreased $320,575, primarily because stock-based compensation declined by approximately $221,873. Excluding stock-based compensation, SG&A increased approximately $98,703.
- The operating loss improved by $396,675, reflecting higher revenue and lower operating expenses.
- The company shifted from net income of $272,081 to a net loss of $424,916 because Q1 2022 included a $1,025,535 gain from forgiveness of government assistance debt and a $69,000 legal settlement gain, neither of which recurred.
- The $1.5 million Restaurant.com acquisition note, plus accrued interest, was converted on March 1, 2023 into 554,859 common shares, retiring approximately $1.77 million of principal and interest and increasing share count.
- Operating cash use improved by approximately $80,542, but remained negative. Financing cash outflows were $16,666 for debt repayments.
Outlook, Risks, Contingencies, and Unusual Items
- Management states that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Continued operations depend on additional debt or equity financing and achieving positive operating cash flow.
- Subsequent to March 31, 2023, the company received approximately $1.88 million of net proceeds from selling 937,500 common shares at $2.00 per share. The transaction provides liquidity but causes shareholder dilution.
- The company continues to identify COVID-19 effects, inflation, geopolitical conditions, supply and labor costs, restaurant activity, consumer spending, and general economic conditions as risks to revenue and profitability. Management expected improvement as the pandemic abated but provided no quantified financial guidance.
- Government assistance loans totaled $702,889 including accrued interest and bear interest at 3.75%, with combined monthly principal and interest payments of approximately $3,500 over a 30-year period.
- The company reported no material pending legal proceedings and no off-balance-sheet arrangements.
- Disclosure controls and procedures were reported as not effective as of March 31, 2023. The filing states that there were no material changes to internal control over financial reporting, although it contains an apparent reference to the quarter ended December 31, 2023 that should be checked.
- The filing’s financial statements are unaudited and interim results are not necessarily indicative of full-year results.
Investor Verification Checklist
- Confirm the correct issuer identity and whether the filing relates to GIFTIFY, INC. or RDE, INC.
- Assess the going-concern warning, projected cash runway, financing requirements, and the use of the approximately $1.88 million private-placement proceeds.
- Verify the terms, dilution, and trading status of the 937,500 shares issued after quarter-end and the 554,859 shares issued upon debt conversion.
- Review the reasons for ineffective disclosure controls and any remediation plan.
- Reconcile outstanding debt, accrued interest, scheduled maturities, and potential conversion or equity-settlement features.
- Evaluate whether revenue growth and improved operating losses can continue without relying on nonrecurring gains or additional financing.