UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(ZIP Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were shares of common stock outstanding as of May 5, 2025.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, growth, product development, sales, business strategy, statements related to any further expected effects on our business from the coronavirus (“COVID-19”) pandemic, inflation, the Russia-Ukraine conflict, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the continued duration and scope of the COVID-19 pandemic and any impact on the demand for our products; our ability to obtain needed raw materials and components from our suppliers; additional actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that we could take to reduce operating costs; our inability to sustain profitable sales growth, or reduce our costs to maintain competitive prices for our products; circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives; and those factors detailed by us in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2024. In light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.
| ii |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIFTIFY, INC. AND SUBSIDIARIES (FKA RDE, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | ||||||||
March
31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents (includes restricted cash of $ | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use asset, net | ||||||||
| Deposits | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Customer deposits | ||||||||
| Deferred revenue | ||||||||
| Secured revolving line of credit | ||||||||
| Convertible promissory notes | ||||||||
| Secured note payable — related party, net of debt discount of $ | ||||||||
| Notes payable, current portion, net of debt discount of $ | ||||||||
| Operating lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Deferred income taxes | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized; | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable, and shares, respectively | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
GIFTIFY, INC. AND SUBSDIARIES (FKA RDE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net Sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating Expenses | ||||||||
| Selling, general and administrative expenses | ||||||||
| Depreciation of capitalized software costs | ||||||||
| Amortization of intangible assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other expense: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Net loss before income tax benefit | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
GIFTIFY, INC. AND SUBSIDIARIES (FKA RDE, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
For the Three Months Ended March 31, 2025
| Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Fair value of vested options | - | - | ||||||||||||||||||||||||||
| Fair value of vested restricted stock units | - | |||||||||||||||||||||||||||
| Fair value of common stock issued for services | - | |||||||||||||||||||||||||||
| Fair value of common stock issued for vendor settlement | ||||||||||||||||||||||||||||
| Issuance of common stock for cash under at-the-market sale agreement, net | - | |||||||||||||||||||||||||||
| Issuance of common stock for cash under stock purchase agreement, net | ||||||||||||||||||||||||||||
| Issuance of common stock for cash under public placement | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2025 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| F-3 |
For the Three Months Ended March 31, 2025
(Unaudited)
| Successor: | Common Stock | Common Stock Issuable | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Fair value of vested options | - | - | ||||||||||||||||||||||||||
| Fair value of vested restricted stock units | - | - | ||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||
| Common shares issued on cashless exercise of stock options | - | ( | ) | |||||||||||||||||||||||||
| Common shares issued | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of private placement of common stock for cash | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| F-4 |
GIFTIFY, INC. AND SUBSDIARIES (FKA RDE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Fair value of vested stock options | ||||||||
| Fair value of vested restricted common stock | ||||||||
| Fair value of common stock issued for services | ||||||||
| Loss on fair value of common stock issued for settlement of vendor | ||||||||
| Depreciation of capitalized software costs | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of debt discount | ||||||||
| Accrued interest | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Right of use assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Deferred taxes | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | ( | ) | ||||||
| Net cash provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit | ||||||||
| Repayment of line of credit | ( | ) | ( | ) | ||||
| Proceeds from note payable | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| Repayment of notes payable – related party | ( | ) | ||||||
| Proceeds from sale of common stock, net of expenses, under at-the-market sale agreement | ||||||||
| Proceeds from sale of common stock, net of expenses, under stock purchase agreement | ||||||||
| Proceeds from public offering of common stock | ||||||||
| Repayment of acquisition obligation | ( | ) | ||||||
| Proceeds from private placement of common stock | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents beginning of period | ||||||||
| Cash and cash equivalents end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Common shares issued for trade accounts payable | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-5 |
GIFTIFY, INC. AND SUBSDIARIES (FKA RDE, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
1. Organization and Basis of Presentation
Giftify, Inc. (the “Company” or “Giftify”)
was formed in 2011. Since 2020, the Company, through its wholly-owned subsidiary Restaurant.com, Inc., has been in the business of connecting
digital consumers, businesses and communities with dining and merchant deal options throughout the United States. In December 2023, the
Company acquired CardCash Exchange Inc (“CardCash”, see Note 3). CardCash was formed in 2013 and purchases merchant gift cards
and resells them at a markup. During the three months ended March 31, 2025 and 2024, Card Cash accounted for
On September 4, 2024, the Company’s Board of Directors approved and, by written consent dated September 5, 2024, the holders of a majority of our common stock approved an amendment to our Certificate of Incorporation to change the Company’s name from RDE, Inc. to Giftify, Inc. The change to Giftify, Inc. became effective on October 28, 2024. All references throughout this filing to RDE, Inc. have been changed to Giftify, Inc.
On August 6, 2024, The Nasdaq Stock Market (“Nasdaq”) granted the Company’s application for listing on the Nasdaq.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements for the year ended December 31, 2024, and, in the opinion of management, reflect all adjustments, which consist of normal recurring adjustments, considered necessary for a fair presentation of the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31,2025. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Card Cash Exchange, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date the accompanying financial statements were issued. Giftify and CardCash have a history of reporting net losses and negative operating cash flows. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2024, expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability. The Company has financed its working capital requirements through borrowings from various sources and the sale of its equity securities.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus may have on the Company’s business plans and the amount and type of financing available to the Company in the future. If the Company is unable to obtain the cash resources necessary to satisfy the Company’s ongoing cash requirements, the Company could be required to scale back its business activities or to discontinue its operations entirely.
| F-6 |
2. Significant Accounting Policies
Use of Estimates
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are adjusted. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions used in valuing assets acquired in business acquisitions, impairment testing of goodwill and other long-term assets, assumptions used in valuing stock-based compensation, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells the gift cards at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
Certain customers may receive incentives, which are accounted for as variable consideration. Provisions for sales returns are recognized in the period when the sale is recorded based upon the Company’s prior experience and current trends. These revenue reductions are established by the Company based upon management’s best estimates at the time of sale following the historical trend, adjusted to reflect known changes in the factors that impact such reserves and allowances, and the terms of agreements with customers.
Amounts billed and due from the Company’s customers are classified as accounts receivable on the balance sheet. Amounts received in advance from customers are recorded as deferred revenue on the balance sheet until the performance obligations have been satisfied. The Company has elected to apply the practical expedient to not assess contracts for significant financing component because the period between the receipt of advance payment and the Company’s transfer of services to the customer is less than one year.
Other
Sale of promotional gift cards, sale of travel, vacation and merchandise, and advertising revenues
The Company also recognizes revenue from the sale of Restaurant.com promotional gift cards (revenue recognized based on the Company’s historical redemption rates of its promotional gift cards), the sale of travel, vacation, and merchandise on behalf of third-party merchants (revenue reported on a net basis equal to the purchase price received from the customer less a portion of the purchase price paid by the Company to its merchant partners), and advertising revenue for third-party partners, such as Google Ads, wherein third-party website(s) and/or product(s) are shown or incorporated in the Company’s platform or website (revenue recognized when its determinable, which is generally upon receipt of a statement and/or proceeds from the third-party partners).
| F-7 |
In the following table, revenue is disaggregated by our divisions and type of revenue for the three months ended March 31, 2025 and 2024:
| Sales Channels | CardCash Gift Cards | Restaurant.com Gift Cards and Coupons | Advertising | Total | ||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||
| Business to consumer (B2C) | $ | $ | $ | $ | ||||||||||||
| Business to business (B2B) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Cost of Sales
Cost of sales consists primarily of the cost to purchase merchant gift cards, and transaction fees and costs.
Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Intangible Assets
The Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition. The finite-lived intangible assets consist of customer relationships, trade name, and developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of three years.
The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.
Goodwill
Goodwill represents the excess purchase price and
related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. Goodwill that arose from acquisition of CardCash (see Note 3) was $
| F-8 |
Long-Lived Assets
The Company evaluates long-lived
assets, other than goodwill and indefinite lived intangible assets, for impairment whenever events or changes in circumstances
(“triggering events”) indicate that their net book value may not be recoverable. The measurement of possible impairment
is based upon the ability to recover the carrying value of the asset through the expected future undiscounted cash flows from the
use of the asset and its eventual disposition. An impairment loss, equal to the difference between the asset’s fair value and
its carrying value, is recognized when the estimated future undiscounted cash flows are less than its carrying amount.
Leases
The Company leases certain corporate office space under lease agreements. The Company determines whether a contract contains a lease at contract inception. A contract is or contains a lease if the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. Control is determined based on the right to obtain all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. Operating lease right-of-use assets (“ROU”) for operating leases represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term and is included in the general and administrative line in the Company’s consolidated statements of operations. Leases with an initial term of 12 months or less are not included on the balance sheets.
Advertising
The Company expenses advertising costs as incurred
and amounted to $
The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.
Stock-based compensation expense recognized and recorded as part of selling, general and administrative expenses.
Basic earnings (loss) per share is computed using the weighted average number of common shares issued and outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes and stock issuable upon the exercise of stock options and warrants, have been excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
| F-9 |
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock issued and outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all convertible notes and stock issuable upon the exercise of stock options and warrants outstanding were anti-dilutive.
| March 31, 2025 | March 31, 2024 | |||||||
| Convertible notes payable | ||||||||
| Common stock issuable | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
The issuable and potentially issuable shares as summarized above. These potentially issuable common shares would have been anti-dilutive because the Company had a net loss for the periods ended March 31, 2025 and 2024, such common stock equivalents would have been excluded from the calculation of net loss per share.
Fair Value of Financial Instruments
Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.
A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
The carrying value of the Company’s financial instruments (consisting of cash, accounts receivables, deposits to credit card processors, prepaid expense and other current assets, accounts payable, accrued expenses, notes payable, and other liabilities) are considered to be representative of their respective fair values due to the short-term nature of those instruments.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable and cash. The credit risk exposure surrounding trade accounts receivable are limited as these amounts represent the timing difference between payments being settled by credit card processors and the cash being provided to the Company.
No significant customers comprised more than
| F-10 |
The Company maintains a balance at financial institutions, which at times exceed the federally insured limit. The Company has not experienced a loss on this account.
Segment Information
The Company’s Chief Executive Officer (“CEO”) is our chief operating decision maker (“CODM”) and evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. Because our CODM evaluates financial performance on a consolidated basis, the Company has determined that it operates as a single reportable segment composed of the consolidated financial results of Giftify, Inc. (see Note 2).
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
3. Acquisition of Card Cash
On December 29, 2023, the Company completed the acquisition
of CardCash. The acquisition was made pursuant to an agreement and plan of merger dated August 18, 2023, between the Company and CardCash.
The Company acquired all of the issued and outstanding equity of CardCash for $
The Company utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations, and allocated the purchase price to CardCash’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition. The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill.
In accordance with ASC 805, the Company made an allocation of the purchase price for CardCash based on the fair value of the assets acquired and liabilities assumed.
| F-11 |
The following table summarizes the allocation of the fair value of the purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of CardCash on the date of acquisition:
| Fair Value | ||||
| Fair value of consideration: | ||||
| Cash | $ | |||
| Notes payable (see Note 11) | ||||
| Common stock ( shares of common stock at $ per share) | ||||
| Total purchase price | $ | |||
| Allocation of the consideration to the fair value of assets acquired and liabilities assumed: | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaids, deposits, and other | ||||
| Property and equipment, net | ||||
| Accounts payable and accrued liabilities | ( | ) | ||
| Line of credit | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Net tangible assets | ( | ) | ||
| Intangible assets: | ||||
| Developed technology | ||||
| Trade name | ||||
| Customer relationships | ||||
| Net identifiable intangible assets | ||||
| Goodwill | ||||
| Fair value of net asset acquired | $ | |||
4. Property and Equipment, Net
Property and equipment, net consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Website development costs | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Property and equipment, gross | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended March 31, 2025 and 2024 was $
| F-12 |
5. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
March 31, 2025 | December 31, 2024 | ||||||||
| Goodwill | $ | $ | |||||||
March 31, 2025 | December 31, 2024 | |||||||
| Intangible Assets | ||||||||
| Customer relationships | $ | $ | ||||||
| Trade name | ||||||||
| Developed technology | ||||||||
| Intangible assets, gross | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
On December 29, 2023, in relation to the acquisition
of CardCash (See Note 3), the Company recorded goodwill of $
On December 29, 2023, in relation to
the acquisition of CardCash (See Note 3), the Company recorded intangible assets of $
Identifiable intangibles are amortized over their estimated remaining useful lives, which are as follows:
| Description | Weighted Average Useful Life (in years) | |||
| Customer relationships | ||||
| Trademarks, trade names and service marks | ||||
| Developed technology | ||||
Amortization expense on intangible assets was as follows:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Amortization expense | $ | $ | ||||||
Estimated amortization expense for the Company is as follows:
| 2025 (Remainder) | $ | ||||
| 2026 | |||||
| $ |
| F-13 |
6. Leases
The Company leases its office facilities under noncancelable operating lease agreements. The Company has leases for office facilities in Woodbridge, New Jersey and Schaumburg, Illinois. The operating lease agreement for the Woodbridge, New Jersey location was renewed in April 2024 for a 60-month period ending in April 2029.
The Company’s operating lease liability balance
was $
During the three months ended March 31, 2025 and 2024,
lease costs totaled approximately $
As of March 31, 2025, the weighted average remaining
lease terms for operating lease is
Maturities of the Company’s operating lease liabilities are as follows as of March 31, 2025:
| As of March 31, 2025 | |||||
| 2025 (remaining) | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | |||||
| Less: Imputed interest | ( | ) | |||
| Total operating lease liability | $ | ||||
7. Secured Revolving Line of Credit
The outstanding line of credit consists of the following at March 31, 2025 and December 31, 2024:
March 31, 2025 | December 31, 2024 | ||||||||
| Line of credit | $ | $ | |||||||
In November 2020, CardCash entered into
an amended and restated promissory note for a revolving line of credit with availability of up to $
8. Convertible Debt
Convertible debt consists of the following at March 31, 2025 and December 31, 2024:
March 31, 2025 | December 31, 2024 | |||||||
| Incumaker, Inc. principal balance | $ | |||||||
| Accrued interest | ||||||||
| Total principal and accrued interest (all current) | $ | $ | ||||||
| F-14 |
On November 5, 2018, the Company completed the acquisition
of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December 31, 2024, there was one remaining assumed convertible
note payable outstanding that matured July 2017. The Company continues to be unsuccessful in reaching the Note holder to remit payment
in full. At December 31, 2024, the principal balance of $
9. Secured Notes Payable – Related Party
Secured notes payable to a related party consists of the following at March 31, 2025 and December 31, 2024:
March 31, 2025 | December 31, 2024 | |||||||
| Secured note payable – related party | $ | $ | ||||||
| Less debt discount | ( | ) | ||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ||||||
| Non-current portion | $ | $ | ||||||
On September
20, 2024, the Company entered into a secured promissory note (the “Note”) with Spars Capital Group LLC (“Spars Capital”)
in the principal amount of $
10. Notes Payable
Notes payable consist of the following at March 31, 2025 and December 31, 2024:
March 31, 2025 | December 31, 2024 | |||||||
| CardCash acquisition notes payable | $ | $ | ||||||
| Real Word Digital Assets note payable | ||||||||
| GameIQ acquisition note payable | ||||||||
| Economic Injury Disaster Loans (EIDL) note payable | ||||||||
| Less debt discount | ( | ) | ||||||
| Total principal balance | ||||||||
| Accrued interest | ||||||||
| Total principal and accrued interest | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
CardCash Acquisition Notes Payable
On December
29, 2023, the Company issued two-year promissory notes totaling $
| F-15 |
Real World Digital Assets Note Payable
On February 19, 2025, the Company entered into a secured
promissory note with Real World Digital Assets LLC (“Real World”) in the principal amount of $
GameIQ Acquisition Note Payable
On February 1, 2022, the Company issued two notes
payable for the purchase of GameIQ, one for $
As of December 31, 2024, the notes payable had an
aggregate principal balance outstanding of $
Economic Injury Disaster Loans (EIDL)
On June 17, 2020, the Company received $
The loans bear interest at
As of March 31, 2025, the note payable had a principal
balance outstanding of $
11. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2025 and December 31, 2024, there were shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of March 31, 2025 and December 31, 2024, the Company had shares and shares, respectively, of common stock issued and outstanding.
Common Stock Transactions
Three Months Ended March 31, 2025
Common Shares Issued on Vesting of Restricted Stock
During the three months ended March 31, 2025, the Company issued shares on vesting of restricted common stock to its employees and executive.
Common Stock Issued for Services
During the three months ended March 31, 2025, the
Company issued shares of common stock with a fair value of $
| F-16 |
Issuance of Common Stock for Settlement of Vendor Balance
During the three months ended March 31, 2025, the
Company issued shares of common stock with a fair value of $
Issuance of Common Stock on At-the-Market Issuance Sales Agreement
During the three months ended March 31, 2025, the
Company sold shares of Common Stock and received proceeds, net of expenses, of $
Issuance of Common Stock on Stock Purchase Agreement
On December 16, 2024, the
Company entered into a Securities Purchase Agreement and Strata Purchase Agreement with ClearThink Capital Partners, LLC (ClearThink Capital”).
Under the terms of the Strata Purchase Agreement, ClearThink Capital agreed to purchase up to $
During the three months ended
March 31, 2025, the Company received net proceeds of $
On February 4, 2025, the Company exercised its right to terminate the SPA effective by mutual agreement of the parties.
Issuance of Common Stock on Public Offering
On
January 15, 2025, the Company entered into a Placement Agency Agreement with Craft Capital Management LLC (“Craft Capital”),
as placement agent, to issue and sell shares of the Company’s common stock at a purchase price of $ per Share. The shares
were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-282322), that was declared effective
by the Securities and Exchange Commission on October 15, 2024, on a best efforts basis (the “Offering”). The offer and sale
of the shares in the Offering are described in the Company’s prospectus constituting a part of the registration statement, as supplemented
by a final prospectus supplement dated January 15, 2025. On January 16, 2025, the Company
closed the Offering. The Company sold shares for total gross proceeds of $
Common Stock Issuable
At March 31, 2025, shares of common stock with an aggregate value of $ have not been issued and are reflected as common stock issuable in the accompanying consolidated financial statements.
| F-17 |
Three Months Ended March 31, 2024
Issuance of Common Stock for Services
During the three months ended March 31, 2024, the
Company issued shares of common stock with a fair value of $
Issuance of Private Placement of Common Stock
During the three months ended March 31, 2024, the
Company received net proceeds of approximately $
Common Stock Issuable
At December 31, 2023, shares of common stock
with an aggregate value of $
12. Share-Based Compensation
Summary of Restricted Common Stock
| Unvested Shares | Issuable Shares | Fair Value at Date of Issuance | Weighted Average Grant Date Fair Value | ||||||||||||||
| Balance, December 31, 2024 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ) | |||||||||||||||
| Forfeited | |||||||||||||||||
| Issued | ( | ) | ( | ) | |||||||||||||
| Balance, March 31, 2025 | $ | $ | |||||||||||||||
On February 1, 2025, the
Company granted its Chief Executive Officer shares of the Company’s restricted stock and granted shares of the Company’s
restricted stock to other officers with an aggregate fair value of $
On March 1, 2024, the Company
granted its Chief Executive Officer shares of the Company’s restricted stock, and shares of the Company’s
restricted stock to other officers and employees with an aggregate fair value of $
Effective on December 29, 2023, with the closing of
the acquisition of CardCash (see Note 3), the Company entered into an Employment Agreements with Elliot Bohm and Mark Ackerman. Mr. Bohm
was the President of CardCash and Mr. Ackerman was the Chief Operating Officer of CardCash prior to the acquisition by the Company and
now remain in those positions following the acquisition. Bohm also joined the Board of Directors of the Company. Under the terms of the
four-year agreements, Mr. Bohm and Mr. Ackerman each received an annual base salary of $
During the three months ended March 31, 2025 and 2024, the Company recognized stock compensation expense of $ and $ and issued shares of restricted stock based upon its vesting term of the grants. As of March 31, 2025, the unamortized stock compensation expense amounted to $, to be expensed upon vesting in future periods through February 2028.
| F-18 |
Summary of Stock Options
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Stock options outstanding at December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired or forfeited | ( | ) | ( | ) | ||||
| Stock options outstanding at March 31, 2025 | $ | |||||||
| Stock options exercisable at March 31, 2025 | $ | |||||||
On February 1, 2025, the Company, pursuant to the terms of its 2019 Stock Incentive Plan, granted options exercisable into shares of the Company’s common stock to its executives and employees. The stock options vest over 36 months equally. The stock options are exercisable at a weighted average price of $ per share with an average life to expiration of approximately three years. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $ per share, expected term of years, volatility of %, dividend rate of %, and weighted average risk-free interest rate of %. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.
During the three months March 31, 2025 and 2024, the Company recognized $ and $ of stock compensation expense relating to vested stock options. As of March 31, 2025, the aggregate amount of unvested compensation related to stock options was approximately $ which will be recognized as an expense as the options vest in future periods through February 2028.
The weighted average remaining contractual life of common stock options outstanding and exercisable at March 31, 2025, was years. Based on a fair market value of $ per share on March 31, 2025, the intrinsic value attributed to exercisable but unexercised common stock options was $ at March 31, 2025.
| Exercise Prices | Options Outstanding (Shares) | Options Exercisable (Shares) | ||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
13. Commitments and Contingencies
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceedings that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition.
| F-19 |
14. Segment information
The Company operates and manages its business as
The Company’s chief operating decision maker (CODM), its Chief Executive Officer, reviews financial information presented on a consolidated basis and decides how to allocate resources based on net loss. Consolidated net loss is used for evaluating financial performance. The monitoring of budgeted versus actual results is used in assessing performance of the Company and in establishing management’s compensation.
Significant segment expenses include employee compensation, stock-based compensation, merchant fees, and consulting and outside provider costs. Other operating expenses include all remaining costs necessary to operate our business and primarily include advertising, corporate compliance, and overhead expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Less: | ||||||||
| Employee compensation and benefits | ||||||||
| Stock-based compensation expense | ||||||||
| Merchant and bank fees | ||||||||
| Consulting and outside provider costs | ||||||||
| Sales and marketing expenses | ||||||||
| Depreciation of capitalized software costs | ||||||||
| Amortization of intangible assets | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
15. Subsequent Events
Issuance of Common Stock on At-the-Market Issuance Sales Agreement
Subsequent to March 31, 2025, the Company sold
shares of Common Stock and received proceeds net of expenses of $
Repayment of Note Payable
Subsequent to March 31, 2025, the Company repaid in full its GameIQ acquisition note payable (see Note 10).
Secured Revolving Line of Credit Amendment
On April 23, 2025, CardCash Exchange, Inc. (“CardCash”), a wholly owned subsididary of the registrant
(“Giftify”), entered into a second amended and restated secured promissory note (the “Note”) with Pathward, National
Association (“Pathward”) (see Note 7) in the principal amount of $
CardCash must pay interest on the principal amount which is outstanding each month in arrears commencing on the first
day of the month following the funding of the transaction and continuing on the first day of each month thereafter until the unpaid principal
and interest are fully paid. Any failure to pay the entire amount when due will be an event of default that will result in an interest
charge at the “Extra Rate” that is defined in the Note as the Effective Rate plus
The Note is collateralized by a blanket
lien on the assets of CardCash under the terms of an Amended and Restated Loan and Security Agreement dated December 23, 2020. Under
Amendment No. 2 to Amended and Restated Loan and Security Agreement (“Amendment No. 2”) executed on April 23, 2025, advances
under the Note may be measured against a percentage of Eligible Accounts and Eligible Inventory as those terms are defined in Amendment
No. 2.
| F-20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2024, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Background
On September 4, 2024, our Board of Directors approved and, by written consent dated September 5, 2024, the holders of a majority of our common stock approved an amendment to our Certificate of Incorporation to change our name from RDE, Inc. to Giftify, Inc. The change to Giftify, Inc. became effective on October 28, 2024. All references to RDE, Inc. have been changed to Giftify, Inc.
On August 6, 2024, The Nasdaq Stock Market granted our application for listing on the Nasdaq.
On August 18, 2023, we entered into an agreement and plan of merger to acquire CardCash Exchange Inc (“CardCash”). On December 29, 2023, the merger was completed and has been accounted for as a business combination using the acquisition method of accounting. CardCash was formed in 2013 and purchases merchant gift cards and resells them at a markup.
On March 1, 2020, we acquired the assets of Restaurant.com, Inc., a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand.
Business Overview
We have two principal divisions, B2C and B2B, for both CardCash and for Restaurant.com.
CardCash
CardCash operates as a leading gift card exchange platform, facilitating the purchase and sale of unwanted gift cards at discounted rates for both consumers and businesses. The Company’s mission is to provide a seamless marketplace for individuals looking to maximize the value of their gift cards while also offering businesses innovative solutions to leverage this market.
CardCash’s core service offering includes the buying and selling of gift cards from over 1,100 retailers, such as Target, Home Depot, Starbucks and TJ Maxx, among others. By connecting buyers and sellers, CardCash enables consumers to unlock value from unused gift cards and save significant amounts on their purchases.
CardCash purchases unwanted gift cards at a value lower than their face worth and subsequently retails them at a discounted rate to discerning shoppers nationwide. This avenue not only allows individuals to obtain cash for their unneeded gift cards but also enables them to make cost-effective purchases through discounted gift cards.
With advanced fraud prevention technology, known as FraudFix, CardCash ensures the security and integrity of all transactions conducted on its platform. This commitment to trust and reliability has contributed to its success in saving consumers over $100 million since its inception.
Restaurant.com
Restaurant.com is a pioneer in the restaurant deal space and the nation’s largest restaurant-focused digital deals brand. We derive our revenue from transactions in which we sell discount certificates for restaurants on behalf of third-party restaurants. Founded in 1999, we connect digital consumers, businesses, and communities offering dining and merchant deal options nationwide at over 182,500 restaurants and retailers to over 7.8 million customers. Our 10,000 core restaurants and 170,000 Dining Discount Pass restaurants and retailers extend nationwide. Our top three B2C markets are New York, Chicago and Los Angeles.
| 1 |
Restaurant.com Business to Customer Division
To our database of 6.2 million customers, we sell:
● Discounted certificates for 10,000 restaurants. The certificates range from $5 to $100 and never expire.
● Discount Dining Passes, which provide discounts at 170,000 restaurants and other retailers. These passes provide multiple uses for six months.
● “Specials by Restaurant.com” which bundle Restaurant.com certificates with a variety of other entertainment options, including theatre, movies, wine and travel. Customers have favored these bundled offering (“Specials”), generating significantly greater revenue per customer when compared to purchasing our other products. The average order value for these Specials sales is nearly five times a certificate purchase
Restaurant.com Business to Business Division
We sell certificates and Discount Dining Passes to corporations and marketers, which use them to:
| ● | generate new customers; | |
| ● | increase sales at the point of sale; | |
| ● | reward points/customer loyalty; | |
| ● | convert to paperless billing and auto-bill payment. | |
| ● | motivate specific customer behavior such as free home repair estimates and test drives for auto dealers; | |
| ● | renew subscriptions and memberships; and | |
| ● | address customer service issues. |
Restaurant.com Other Business
We also generate revenue through third-party offers and display ad revenue. This comprises a de minimis portion of our gross revenue.
Restaurant.com Attractive Customer Demographics
We intend to grow and leverage our customer database of 6.2 million which we believe is of value to merchants for a variety of services and products.
In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, adversely affected work forces, economies and financial markets globally. The outbreak has negatively impacted our revenues as a result of the temporary closures of restaurants throughout the United States where our discount certificates and Discount Dining Passes were accepted and where dining was being restricted to outdoor locations or to capacity constraints for indoor dining. Our revenues from purchase of our discount certificates in 2020, 2021 and 2022 declined since they could only be redeemed when dining in the restaurants and also were not accepted for payment by third-party platforms that facilitated ordering and delivery of food on-demand. As the COVID-19 pandemic has abated, our revenues improved in fiscal 2023.
| 2 |
Inflation
Global inflation also increased during 2021 and in 2022. The Russia and Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and the restaurant customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected.
Going Concern
The Company has a history of reporting net losses. At March 31, 2025, the Company had cash of $2,121,814 available to fund its operations, including expansion plans, and to service its debt, and a negative working capital of $2,075,999.
Our consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced operating losses and negative operating cash flows during 2024 and 2023. We have financed our working capital requirements through borrowings from various sources and the sale of our equity securities.
As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2024, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus may have on the Company’s business plans and the amount and type of financing available to the Company in the future.
If the Company is unable to obtain the cash resources necessary to satisfy the Company’s ongoing cash requirements, the Company could be required to scale back its business activities or to discontinue its operations entirely.
| 3 |
Results of Operations – Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024
GIFTIFY, INC. AND SUBSDIARIES (FKA RDE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net Sales | $ | 22,277,013 | $ | 21,521,894 | ||||
| Cost of sales | 18,695,377 | 18,264,618 | ||||||
| Gross profit | 3,581,636 | 3,257,276 | ||||||
| Operating Expenses | ||||||||
| Selling, general and administrative expenses | 6,043,841 | 5,214,041 | ||||||
| Amortization of capitalized software costs | 161,543 | 378,737 | ||||||
| Amortization of intangible assets | 543,917 | 607,917 | ||||||
| Total operating expenses | 6,749,301 | 6,200,695 | ||||||
| Loss from operations | (3,167,665 | ) | (2,943,419 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (209,571 | ) | (247,301 | ) | ||||
| Total other income (expense), net | (209,571 | ) | (247,301 | ) | ||||
| Net loss before income taxes | (3,377,236 | ) | (3,190,720 | ) | ||||
| Income tax (expense) benefit | 159,904 | - | ||||||
| Net loss | $ | (3,217,332 | ) | $ | (3,190,720 | ) | ||
Net Sales
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| CardCash | $ | 21,867,114 | $ | 21,160,007 | ||||
| Restaurant.com | 409,899 | 361,887 | ||||||
| Net Sales | $ | 22,277,013 | $ | 21,521,894 | ||||
CardCash
Net sales for the three months ended March 31, 2025 and 2024, were $21,867,114 and $21,160,007, respectively. During the current year period, we focused on improving our gross margin. We assessed the quality of our purchased gift card brands, allowing us to increase the sales price to our customers, resulting in a gross margin of 14.7%, as compared to a gross margin of 13.8% in the prior year period, which generated an increase in gross profit as compared to the prior year period.
Restaurant.com
Net Sales for the three months ended March 31, 2025 and 2024, were $409,899 and $361,886, respectively.
| 4 |
Cost of Sales
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2025 | |||||||
| CardCash | $ | 18,659,017 | $ | 18,237,448 | ||||
| Restaurant.com | 36,360 | 27,170 | ||||||
| Cost of Sales | $ | 18,695,377 | $ | 18,264,618 | ||||
CardCash
Cost of sales consists primarily of the cost to purchase merchant gift cards. Cost of sales for the three months ended March 31, 2025 and 2024, were $18,659,017 and $18,237,448, respectively. Gross profit increased $ $285,850, or 9.8%, as compared to the prior year period. Our gross margin, as a percentage of sales, were 14.7% and 13.8%, for the three months ended March 31, 2025 and 2024, respectively.
Restaurant.com
Cost of sales for the three months ended March 31, 2025 and 2024, were $36,360 and $27,170, respectively.
Operating Expenses
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Selling, general and administrative expenses | $ | 6,043,841 | $ | 5,214,041 | ||||
| Amortization of capitalized software costs | 161,543 | 378,737 | ||||||
| Amortization of intangible assets | 543,917 | 607,917 | ||||||
| Operating expenses | $ | 6,749,301 | $ | 6,200,695 | ||||
Selling, general and administrative expenses consist of costs incurred to identify, communicate with and evaluate potential customers and related business opportunities, and compensation to officers and directors, as well as legal and other professional fees, lease expense, and other general corporate expenses. Management expects selling, general and administrative expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Selling, general and administrative expenses were $6,043,841 for the three months ended March 31, 2025, as compared to $5,214,041 for the three months ended March 31, 2024, an increase of $829,800. The increase was from increased stock-based compensation expense of $481,628 during the three months ended March 31, 2025, increased payroll and benefit expenses, and general changes in our business and operations.
Amortization of capitalized software costs.
Amortization expenses are primarily attributed to the Company’s capitalized software development costs. Amortization expenses were $161,543 during the three months ended March 31, 2025, as compared to $378,737 during the three months ended March 31, 2024.
Amortization of intangible assets.
Amortization expenses are primarily attributable to the Company’s amortization of intangible assets with finite lives. Amortization expenses were $543,917 during the three months ended March 31, 2025, as compared to amortization expenses of $607,917 during the three months ended March 31 2024.
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Loss from Operations
For the three months ended March 31, 2025, we incurred a loss from operations of $ 3,167,665, as compared to a loss from operations of $2,943,419 for the three months ended March 31, 2024. The increase in loss from operations was due to our increased gross profit offset by increased stock-based compensation expense, and operating costs, as discussed above.
Other Expenses
For the three months ended March 31, 2025, we incurred interest expense of $209,571, as compared to interest expense of $247,301 for the three months ended March 31, 2024. The decrease in interest expense was due to our decreased debt balances.
Income Tax Benefit
For the three months ended March 31, 2025, we realized an income tax benefit of $159,904 as compared to an income tax benefit of $0 for the three months ended March 31, 2024.
Net Loss
We realized a net loss of $3,217,332 for the three months ended March 31, 2025, as compared to a net loss of $3,190,720 for the three months ended March 31, 2024. The increase in net loss was due to our increased gross profit, decreased interest expense, and income tax benefit, offset by increased stock-based compensation expense and operating costs, as discussed above.
Modified EBITDA
In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, and fair value of common stock issued for services.
Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Set forth below is a reconciliation of net loss to Modified EBITDA for the three months ended March 31, 2025 and 2024 (unaudited):
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Net Loss | $ | (3,217,332 | ) | $ | (3,190,720 | ) | ||
| Modified EBITDA adjustments: | ||||||||
| Income taxes | (159,904 | ) | - | |||||
| Interest expense | 209,571 | 247,301 | ||||||
| Amortization of intangible assets | 543,917 | 607,917 | ||||||
| Amortization of capitalized software costs | 161,543 | 378,737 | ||||||
| Loss on fair value of stock issued on vendor settlement | 33,750 | - | ||||||
| Stock option and other noncash compensation | 1,802,135 | 1,298,876 | ||||||
| Total Modified EBITDA adjustments | 2,591,012 | 2,532,831 | ||||||
| Mofified EBITDA | $ | (626,320 | ) | $ | (657,889 | ) | ||
We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:
| ● | Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
| ● | Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| ● | Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and | |
| ● | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements. |
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of operations is based upon the Company’s consolidated financial statements for the years ended December 31, 2024 and 2023 presented elsewhere in this report, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.
The Company buys merchant gift cards from the general public and distributors at a discount and then resells them at a markup. The Company also derives revenue from the sale of discount certificates for restaurants on behalf of third-party restaurants.
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs at a point in time when the risk and title to the product transfers to the customer upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company recognizes revenue on a gross basis for the sales price of the merchant gift cards and discount certificates it collects.
Share-Based Compensation
The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
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Acquisitions and Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Recent Accounting Pronouncements
See discussion of recent accounting pronouncements in Note 1 to the accompanying financial statements.
Liquidity and Capital Resources
The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.
Going Concern
Our consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We experienced operating losses and negative operating cash flows during 2024 and 2023. We have financed our working capital requirements through borrowings from various sources and the sale of equity securities.
We have a history of reporting net losses. At March 31, 2025, we had cash of $2,121,814 available to fund our operations, including expansion plans, and to service our debt, and a negative working capital of $2,026,499. We anticipate our cash balance will last until approximately December 2025. As a result, we have concluded that there is substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm has included an explanatory paragraph in their report with respect to this uncertainty that accompanies the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024. The Company’s independent registered public accounting firm, in their report on the Company’s December 31, 2024 audited consolidated financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our ability to continue as a going concern is dependent upon its ability to raise additional debt or equity capital to fund its business activities and to ultimately achieve sustainable operating revenues and profitability.
As market conditions present uncertainty as to our ability to secure additional funds, there can be no assurances that we will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations. There is also significant uncertainty as to the amount and type of financing available to us in the future.
If we are unable to obtain the cash resources necessary to satisfy our ongoing cash requirements, we could be required to scale back its business activities or to discontinue its operations entirely.
Our consolidated statements of cash flows as discussed herein are presented below.
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Net cash used in operating activities | $ | (1,448,924 | ) | $ | (6,636 | ) | ||
| Net cash used in investing activities | - | (224,815 | ) | |||||
| Net cash (used in) provided by financing activities | (4,138 | ) | 1,532,535 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (1,453,062 | ) | $ | 1,301,084 | |||
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Operating Activities
Cash provided by or used in operating activities primarily consists of net loss adjusted for certain non-cash items, including amortization of intangible assets, impairment of intangible assets, gain on forgiveness of government assistance notes payable, and the fair value of common stock issued for directors, employees, and service providers, and the effect of changes in working capital and other activities.
Cash used in operating activities for the three months ended March 31, 2025 was approximately $1,448,924 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, the fair value of vested stock options, common stock issued to executives, employees, and advisors, and routine changes in working capital and other activities.
Cash used in operating activities for the three months ended March 31, 2024 was approximately $6,636 and consisted of our net loss, adjusted for non-cash items, including amortization of intangible assets, fair value of vested stock options, and the fair value of common stock issued to executives, employees, and advisors, and routine changes in working capital and other activities.
Investing Activities
The Company had no cash flows from investing activities for the three months ended March 31, 2025.
Cash used for investing activities for the three months ended March 31, 2024 was $224,815, which was for capital expenditures.
Financing Activities
Cash used in financing activities for the three months ended March 31, 2025 was $4,138, which was from proceeds of $1,883,613 on the sale of common stock, net proceeds of $985,000 from a note payable, offset by repayment of our line of credit balance of $122,752, and repayment of our notes payable of $2,750,000.
Cash provided by financing activities for the three months ended March 31, 2024 was $1,532,535, which was from proceeds of $2,709,000 on the private sale of common stock, less partial repayment of our line of credit balance of $676,465, and payment of $500,000 on our acquisition obligation.
Secured Revolving Line of Credit
In November 2020, CardCash entered into an amended and restated promissory note for a revolving line of credit with availability of up to $10,000,000. The revolving line of credit is payable on demand, secured by the Company’s inventory, with interest based on the Wall Street Journal Prime Rate plus 3.00%, limited to a floor of 6.5%. At March 31, 2025 and December 31, 2024, the average interest rate was 12% and 12%, respectively. As of March 31, 2025, the Company complied with customary debt covenants. At March 31, 2025 and December 31, 2024, the line of credit requires a deposit of $1,258,826, included in restricted cash.
Convertible Debt
On November 5, 2018, the Company completed the acquisition of Incumaker, Inc. and assumed certain outstanding convertible notes payable. At December 31, 2024, there was one remaining assumed convertible note payable outstanding that matured July 2017. The Company continues to be unsuccessful in reaching the Note holder to remit payment in full. At December 31, 2024, the principal balance of $20,000, and accrued interest of $23,137, are convertible at $1.50 per share into 28,758 shares of the Company’s common stock. At March 31, 2025, the principal balance of $20,000, and accrued interest of $23,887, are convertible at $1.50 per share into 29,258 shares of the Company’s common stock.
Notes Payable
CardCash Acquisition Notes Payable
On December 29, 2023, the Company issued two-year promissory notes totaling $1,500,000 as partial consideration for the acquisition of CardCash (see Note 3). $750,000 is payable on December 29, 2024, bearing simple annual interest of 5%, and $750,000 is to be paid upon the earlier of (a) the completion of a firm commitment underwriting the Company’s initial public offering to allow the Company to become listed on the Nasdaq Capital Market or (b) December 29, 2025. As of December 31, 2024, the notes payable had an aggregate principal balance outstanding of $1,500,000 and accrued interest payable of $75,000. During the three months ended March 31, 2025, the Company made principal payments of $750,000, leaving at March 31, 2025, an aggregate principal balance outstanding of $750,000 and accrued interest payable of $84,375.
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Real World Digital Assets
On February 19, 2025, the Company entered into a secured promissory note with Real World Digital Assets LLC (“Real World”) in the principal amount of $1,000,000 bearing annual interest of 11.5% that has a maturity date of December 31, 2025. The Note has an origination fee and expenses of $15,000, which were recorded as a debt discount and are being amortized over the term of the Note and may be prepaid without penalty. The note is collateralized by a blanket lien on the assets of Giftify under the terms of a security agreement and is subordinated only to the line of credit owed by the Company to Pathward National Association (see Note 7). Proceeds from the note were used to pay the remaining balance owed on the secured promissory note with Spars Capital (See Note 9). As of March 31, 2025, the notes payable had a principal balance outstanding of $1,000,000, a debt discount balance of $12,857, and accrued interest payable of $12,918.
Economic Injury Disaster Loans (EIDL)
On June 17, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 Economic Injury Disaster Loan (EIDL) Program. On July 14, 2021, the Company received an additional $350,000 of proceeds pursuant to the loan. On July 21, 2020, the Company received $150,000 of proceeds applicable to loans administered by the SBA as disaster loan assistance under the Covid-19 EIDL Program. On January 31, 2022, the Company assumed an additional $14,500 EIDL and accrued interest of $900 as part of the consideration paid for the acquisition of GameIQ.
The loans bear interest at 3.75% per annum, with a combined repayment of principal and interest of $3,500 per month beginning 12 months from the date of the promissory note over a period of 30 years. As of December 31, 2024, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $15,558.
As of March 31, 2025, the note payable had a principal balance outstanding of $664,500 and accrued interest payable of $8,638.
Off-Balance Sheet Arrangements
At March 31, 2025 and December 31, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed at a reasonable assurance level to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that information relating to the Company is accumulated and communicated to management, including our principal officers, as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2024, and have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2024, due to the material weakness described below in the subsection titled “Management’s Annual Report on Internal Control over Financial Reporting.
Notwithstanding the identified material weakness, management has concluded that the Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
On December 29, 2023, the Company completed the acquisition of CardCash Exchange Inc (“CardCash”). As a result of the merger, the Company adopted the controls and procedures of CardCash.
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Inherent Limitations on Effectiveness of Controls
Management does not expect the Company’s disclosure controls or internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s controls and procedures are designed to provide reasonable assurance that control system’s objective will be met, and the CEO and CFO have concluded that the Company’s disclosure controls and procedures are ineffective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2024, based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (COSO). Based on the assessment, management concluded that, as of December 31, 2024, the Company’s internal controls over financial reporting were not effective.
We identified a material weakness in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
As previously reported, the material weaknesses continued to exist as of December 31, 2024, relating to the Company did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of its consolidated financial statements. Specifically, Company did not design and maintain effective program change management controls to ensure that access to information technology program and data changes affecting certain financial IT applications and underlying accounting records are identified, documented, tested, authorized and implemented appropriately.
Remediation Plan for Material Weaknesses in Internal Control Over Financial Reporting
In response to the material weaknesses identified in “Management’s Reporting on Internal Control Over Financial Reporting,” we, with oversight from the Audit Committee of the Board of Directors, developed a plan to remediate the material weakness. Ongoing remediation activities include:
| ● | Continue to design and implement ITGCs, focusing on user access controls, periodic access reviews, and change management; | |
| ● | Continue to enhance documentation and control execution, ensuring the completeness and accuracy of supporting data; and | |
| ● | Continue to provide training to our control operators. |
We believe the foregoing efforts will effectively remediate the material weaknesses described in “Management’s Report on Internal Control Over Financial Reporting.” Because the reliability of the internal control process requires repeatable execution, the successful on-going remediation of the material weaknesses will require on-going review and evidence of effectiveness prior to concluding that controls are effective
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Remediation of Previously Identified Material Weaknesses
In the year ending December 31, 2023, we had the following material weakness:
The Company did not maintain adequate segregation of duties consistent with control objectives. Specifically, certain personnel had the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations.
As of December 31, 2024, management implemented the following to address the previously identified material weakness.
| ● | hiring a Chief Financial Officer in August 2024, who has extensive experience leading public companies; | |
| ● | executing plans to remediate control deficiencies and performing a risk assessment under the COSO framework; and | |
| ● | ensuring optimal segregation of duties and levels of oversight. |
Management determined these controls were in place and were effectively operating for a sufficient period of time as of December 31, 2024 and, therefore, the previously identified material weakness related to inadequate segregation of duties were remediated as of December 31, 2024.
There are, however, inherent limitations in all control systems and no evaluation of controls can provide absolute assurance that all deficiencies have been detected. While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement and diligent review of our internal controls over financial reporting.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, there are no such legal proceedings that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
| Exhibit No. | Description | |
| 31.1 | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a) | |
| 31.2 | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a) | |
| 32.1** | Section 1350 Certification of Chief Executive Officer | |
| 32.2** | Section 1350 Certification of Chief Financial Officer | |
| 101.INS† | Inline XBRL Instance Document | |
| 101.SCH† | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL† | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF† | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB† | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE† | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in such filing.+ Management contract or compensatory plan or arrangement.
† Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GIFTIFY, INC. | ||
| Date: May 13, 2025 | By: | /s/ Ketan Thakker |
| Ketan Thakker | ||
| President and Chief Executive Officer | ||
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