Facedrive Provides a Corporate Update and Growth Report

Facedrive Inc. (“Facedrive” or the “Company”) (TSXV:FD) (OTCQX:FDVRF), a Canadian “people-and-planet first” tech ecosystem is pleased to provide this general corporate update and growth report as at the completion of the first fiscal quarter of 2021.

Facedrive is a multi-faceted “people-and-planet first” tech ecosystem offering socially-responsible services to local communities with a strong commitment to doing business fairly, equitably and sustainably. As part of this commitment, Facedrive’s vision is to fulfil its mandate through a number of services and offerings that either leverage existing technologies of the Company or project initiatives with existing lines of business. Facedrive’s services and offerings include: (i) its eco-friendly rideshare business, Facedrive Rideshare; (ii) its food delivery service, Facedrive Foods; (iii) its contact-tracing and connected health services business, Facedrive Health; (iv) its e-commerce platform, Facedrive Marketplace; and (v) its e-social platform, Facedrive Social.

As a result of a Continuous Disclosure Review of staff of the Ontario Securities Commission (“OSC”) that commenced in 2020, the staff of the Corporate Finance Branch requested that the Company provide clarifying information regarding the Foodora Transaction, the HiRide Acquisition, the Medtronics Consulting Agreement (as each of such term is defined herein), the status of Facedrive’s early stage and non-revenue generating “projects” during fiscal Q2 and Q3 2020. The staff of the Corporate Finance Branch also requested that specific performance data and growth statistics be provided in this clarifying press release in order to specifically quantify and clarify facts about the growth and demand for the Company’s products and services with respect to Foodora Canada, HiRide, TraceSCAN and the Steer Acquisition (as each of such term is defined herein). This press release contains such clarifying information.

1. Facedrive Rideshare

Facedrive Rideshare was among the first to offer a wide variety of environmentally and socially responsible solutions in the Transportation as a Service (TaaS) sector, where the Company competes head-to-head with a number of established competitors. However, Facedrive has created a unique niche in such sector, as the Company offers its riders something different among competitors – the opportunity to mitigate the carbon footprint of their ride with carbon offsets. Facedrive Rideshare incentivizes drivers and passengers to choose a green alternative, thereby promoting the use of electric and hybrid vehicles and ultimately reducing carbon emissions. Using the Facedrive application on their mobile device, riders can request rides in electric, hybrid and gas-powered vehicles. The Facedrive app calculates the estimated CO2 emissions for each ride by vehicle type and the CO2 emissions can be offset by contributing a portion of the fare to carbon offset, tree planting and other measured, sustainable programs. At the same time, drivers of electric and hybrid vehicles are paid at increased rates to incentivize the switch towards environmentally friendly transportation. Facedrive works with Forests Ontario, a non-profit registered charity engaged in tree-planting, forestry education and other sustainable initiatives.

The impacts of the COVID-19 pandemic, including legally mandated lock-downs and social isolation measures, have dramatically lowered the demand for both work-related and personal transportation. As a result, Facedrive Rideshare has experienced a slowdown in ride volume and growth over the past 12 months, as have all ridesharing platforms. This, in turn, has had a number of knock-on effects including pausing the Company’s planned expansions into new cities, delays in renewals of Facedrive’s licenses at the municipal level, and a reduction in registered and active drivers. Currently, Facedrive Rideshare operates in the Greater Toronto Area, Hamilton, Brantford, London, Guelph, Cambridge, Orillia, and Ottawa.

While Facedrive encourages the public to reduce unnecessary travel in line with public guidelines, the Company has continued to offer transportation programs throughout the pandemic. This includes providing rides to frontline healthcare workers and, in partnership with local health units and partner community organizations, the Company also provides non-emergency medical transportation, including rides to and from COVID-19 assessment centres, to those who have no transportation options, live in communities with high rates of COVID-19 and who have challenges travelling to be tested - all by dedicated COVID-19 trained drivers.

Steer

In response to the pandemic, Facedrive Rideshare focused on services that enabled individuals to more easily and effectively comply with pandemic-related safety protocols. One such service was an electric vehicle subscription service that enabled social isolation practices by excluding driver-rider interaction. On September 5, 2020, the Company (through its newly-formed wholly-owned subsidiary, Steer Holdings, LLC) completed an acquisition of the substantive assets of Steer (“Steer”), a division of Exelorate Enterprises, LLC (“Exelorate”), a wholly-owned subsidiary of Exelon Corporation (NASDAQ: EXC) (the “Steer Acquisition”). Steer specializes in the electric vehicle subscription businesses. Steer was created to challenge traditional car ownership and accelerate the switch to environmentally-friendly transportation.

The Company acquired Steer for aggregate consideration of USD$3,250,000, which was satisfied through the issuance of 222,819 Shares, issued at a deemed price of $19.27 per share (calculated on the 30-day volume weighted average trading price of the Shares as reported on Bloomberg, ending three trading days prior to the date of the Steer Acquisition). The fair value of the Shares issued to Exelorate was determined to be a discounted $15.44 per Share, and includes a discount of 36.2% as the Shares are subject to an 18-month lock-up that ends on March 5, 2022.

The Steer Acquisition was determined to be a business combination as substantive processes and assets were acquired as part of the transaction. The Company also retained the services of Steer’s former employees and its contracted management services provider.

Consideration paid:
Fair value of Shares issued (222,819 Shares at $15.44 per Share - Issued at $19.27 per Share and discounted by 36.2%)	$	2,196,173
	$	2,196,173
Net identifiable assets acquired:
Intangible assets - Brand name	$	650,000
Vehicle subscription agreements (the “Steer Customer list”)		649,000
Right-of-use assets		8,423,259
Lease liability		(8,423,259)
Goodwill		897,173
	$	2,196,173

Concurrent with the closing of the Steer Acquisition, Exelorate invested in the Company by subscribing for Shares as part of a strategic investment. Exelorate subscribed for 137,119 Shares (“Strategic Investment Shares”) at CAD$19.27 per share for gross proceeds of USD $2,000,000 (CAD$2,617,800). No finder’s fee was paid in connection with such strategic investment. All Strategic Investment Shares are subject to an 18-month lock-up.

Facedrive is actively growing its Steer business and launched the service in Canada in March 2021.

Revenue and User Growth

The Company’s revenues from Facedrive Rideshare grew during the second half of 2020, despite the continuing COVID-19 pandemic. Specifically, the Company’s total revenues attributable to Facedrive Rideshare grew as follows: Q4 2019 - $134,525; Q1 2020 - $287,901 (COVID-19 started)¹; Q2 2020 - $36,650; Q3 2020 - $250,126; Q4 2020 - $676,200; for a total of $1,250,877 of revenue during 2020. Of this revenue, the following figures are attributable to Ridesharing in Canada: Q4 2019 - $134,525; Q1 2020 - $287,901; Q2 2020 - $36,650; Q3 2020 - $75,978; Q4 2020 - $111,520; for a total of $512,094 of revenue from Rideshare during 2020. The following revenue figures are attributable to Steer’s vehicle subscription business in the USA (which was acquired by the Company on September 5, 2020): Q3 2020 - $174,148; Q4 2020 - $564,680; for a total of $738,828 of revenue during 2020. Steer has generated revenue for the Company of approximately $700,000 since its acquisition on September 5, 2020 to December 31, 2020, which annualizes to approximately $2.1 million per annum. Of this revenue, approximately 1 to 3 percent represents activation fees, with the remaining amount representing recurring subscription-based revenues.

The Company was also able to grow the number of drivers and users during 2020. The number of registered Facedrive Rideshare drivers in Canada has grown as follows: 10,376 as of December 31, 2019 (with 3,275 being fully approved to operate); 13,647 as of March 31, 2020 (with 3,515 being fully approved to operate); 14,323 as of June 30, 2020 (with 3,596 being fully approved to operate); 16,872 as of September 30, 2020 (with 3,928 being fully approved to operate); and 18,964 as of December 31, 2020 (with 4,175 being fully approved to operate). Registered Facedrive Rideshare drivers only become fully approved to operate after satisfying a car inspection, background check and receiving any requisite approvals from the jurisdictions in which they intend to operate. The number of registered Facedrive Rideshare users in Canada has grown as follows: December 31, 2019 – 34,031; March 31, 2020 – 46,138; June 30, 2020 – 48,645; September 30, 2020 – 56,870; December 31, 2020 – 64,224. The number of Steer vehicle subscription service customers in the USA was: September 30, 2020 – 133; December 31, 2020 – 123; and March 31, 2021 - 121. Revenues from HiRide (see below) are expected to commence upon the conclusion of the COVID-19 pandemic and the return of Canadian and American university and college students to their campuses.

The Company is actively working to cross-sell and introduce its customers/users to the Company’s other products and services.

HiRide

On March 20, 2020, the Company announced that it had entered into a share exchange agreement (the “HiRide Acquisition Agreement”) to acquire all of the issued and outstanding common shares of HiRide Share Ltd. (“HiRide”), a socially responsible ride-sharing and car-pooling business primarily targeted to long-distance travel and long distance commuters such as university and college students (the “HiRide Acquisition”). HiRide enabled the Company to enter a new market segment within the TaaS sector and brought a technical team and series of relationships that continues to benefit the Company in other services and product offerings such as Health and Social. The HiRide Acquisition closed following the close of business on March 31, 2020. Shareholders of HiRide received an aggregate of $1,000,000 on closing, payable in common shares of the Company (“Shares') at a price per Share equal to $3.76 (calculated as the 30-day volume weighted average trading price of the Shares on the TSX-V ending four trading days prior to the date of entering into the HiRide Acquisition Agreement). The HiRide Acquisition Agreement provides that the shareholders of HiRide are entitled to receive future conditional payments of up to $2,500,000 (the “Conditional Payments”) over the course of 2 years following closing of the HiRide Acquisition, which payments are contingent upon the achievement of the certain financial and operational milestones. The Conditional Payments, if any, will be payable in Shares or a combination of cash and Shares. As at December 31, 2020, the Company’s management has assessed that it would be improbable that the terms for the first Conditional Payment will be met and as such, no amounts have been accrued in 2020 for the Conditional Payments.

There were no finder’s fees paid in connection with the HiRide Acquisition. All Shares issued were subject to a four-month statutory hold period from the date of issuance, as well as contractual lock-up and escrow restrictions from the date of issuance.

The HiRide Acquisition was determined to be an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset. For accounting purposes, using the fair value method of accounting, consideration consisted of 265,957 Shares with a fair value of $739,360, representing a grant date fair value of the Shares of $2.78 per Share and $51,549 of acquisition costs. The Conditional Payments were determined to be consideration for post transaction services and will be accounted for by the Company as post-transaction compensation costs. In addition, contrary to what the Company disclosed in its Q3 2020 interim financial statements, the Company did test for impairment of the asset at the end of Q3, 2020.

Consideration paid:
Fair value of Shares issued (265,957 Shares at $2.78 per Share)		$				739,360
Transaction costs						51,549
		$				790,909
Net identifiable assets acquired:
Cash		$				40
Intangible assets - Brand name						70,000
Intangible assets - HiRide platform						761,209
Accounts payable						(20,340)
Shareholders loans						(20,000)
		$				790,909

HiRide enabled the Company to enter a new market segment within the Taas sector, leveraging HiRide’s developed ride-pooling software platform with its relatively high-profile brand name (the company and its founders had appeared on Season 13 of the CBC television show Dragon’s Den in 2019). The Company paid an arms-length transaction price based on the Company’s estimate of what it would take for the Company to build similar brand recognition and to develop a similar and fully tested and operational software platform. The Company’s primary objective with the HiRide Acquisition was to acquire its brand name and ride-pooling platform, and not to purchase an operating business, or any already existing cash flows to that business, but rather continue to build and gain further entry into the general ride-sharing market by using the HiRide platform in conjunction with the Company’s other TaaS assets.

Whereas on March 20, 2020, Facedrive announced that HiRide gave the Company “immediate access to HiRide’s 20,000+ social network of car-poolers, giving riders an end-to-end experience without interruptions”, to clarify, what the Company meant by that statement was that the acquisition of HiRide gave the company access to an existing network of HiRide account holders who formed a social network of potential car poolers who through the HiRide app could arrange potential rides. HiRide’s March 31, 2020 acquisition date occurred at the time that the COVID-19 pandemic was already underway. Since HiRide is primarily targeted at post-secondary students who desire a carpooling app for long-distance travel and commuting, and since most post-secondary schools are currently operating on a remote-learning basis with students residing at their homes and attending online classes, the Company is deferring any significant marketing efforts into the HiRide service until clear signs emerge that the pandemic will be ending. As a result of the foregoing, and notwithstanding a high number of HiRide downloads, the HiRide service has not generated revenues to date. A high number of downloads does not necessarily guarantee future, sub