Versus Systems Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022 in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Quarterly Report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022, in addition to the Quarterly Report for the period ended March 31, 2024, in conjunction with our unaudited condensed consolidated interim financial statements and the related notes included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Quarterly Report.

Previous wording

Our customers are mostly sports teams, venues, and advertising agencies, who typically use our products as part of their live events or as part of an advertising campaign with the goal of engaging fans, increasing consented first-party data, and increasing sales. At December 31, 2022, we had 16 active customers. At December 31, 2023 and at March 31, 2024, we had five active customers.

Current wording

Our customers are mostly sports teams, venues, and advertising agencies, who typically use our products as part of their live events or as part of an advertising campaign with the goal of engaging fans, increasing consented first-party data, and increasing sales. At December 31, 2022, we had 16 active customers. At December 31, 2023 and at June 30, 2024, we had five active customers due to the decrease in our sales force.

Previous wording

Comparison of Results of Operations for the Three-Month periods ended March 31, 2024 and March 31, 2023

Current wording

Comparison of Results of Operations for the three months ended June 30, 2024 and June 30, 2023

Previous wording

The following table summarizes our results of operations for the three month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:

Previous wording

Our revenues are derived primarily from software licensing. Revenue was $26,503 for the three month period ended March 31, 2024, representing a decrease of $131,447, or 83%, from $157,950 for the three month period ended March 31, 2023. The decrease was primarily due to a significant reduction in the number of clients from 16 active clients at March 31, 2023 to five active clients at March 31, 2024.

Current wording

Our revenues are derived primarily from software licensing. Revenue was $26,937 for the three month period ended June 30, 2024, representing a decrease of $29,116, or 52%, from $56,053 for the three month period ended June 30, 2023. The decrease was primarily due to a significant reduction in the number of clients from June 30, 2023 to June 30, 2024.

Previous wording

Cost of revenues was $24,046 for the three month period ended March 31, 2024, representing a decrease of $8,311, or 26%, from $32,357 for the three month period ended March 31, 2023. The decrease was primarily due to significant reductions in staff related to our company restructuring.

Current wording

Research and development was $67,203 for the three month period ended June 30, 2024, representing a decrease of $650,464, or 91%, from $717,667 for the three month period ended June 30, 2023. The decrease was primarily due to significant reductions in staff related to our company restructuring.

Previous wording

Loss from operations was $1,503,893 for the three month period ended March 31, 2024, representing an increase of $51,411, or 4%, from $1,452,482 for the three month period ended March 31, 2023. The increase was primarily the result of increased spend on professional fees.

Current wording

Loss from operations was $1,499,742 for the three month period ended June 30, 2024, representing a decrease of $810,913, or 35%, from $2,310,655 for the three month period ended June 30, 2023. The decrease was primarily the result of decreased spend on professional fees and payroll.

Previous wording

Research and development was $39,412 for the three month period ended March 31, 2024, representing a decrease of $27,728, or 41%, from $67,140 for the three month period ended March 31, 2023. The decrease was primarily due to a reduction in staffing levels, including a large portion of our engineering staff, and a reduction in software costs.

Current wording

Research and development was $106,615 for the six month period ended June 30, 2024, representing a decrease of $678,192, or 86%, from $784,807 for the six month period ended June 30, 2023. The decrease was primarily due to a reduction in staffing levels, including a large portion of our engineering staff, and a reduction in software costs.

Previous wording

We had cash of $2,892,356 and a working capital surplus of $3,166,672 as at March 31, 2024, compared to a cash position of $4,689,007 and working capital surplus of $4,546,227 as at December 31, 2023. The decrease in our cash position and decrease in working capital surplus was related to using cash to fund operations and ongoing losses.

Current wording

We had cash of $905,915 and a working capital surplus of $1,796,886 as at June 30, 2024, compared to a cash position of $4,689,007 and working capital surplus of $4,546,227 as at December 31, 2023. The decrease in our cash position and decrease in working capital surplus was related to using cash to fund operations and ongoing losses.

Previous wording

Since inception, we have incurred significant operating losses. For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $10.5 million and $22.4 million, respectively. During such periods, we have financed our operations primarily through an initial public offering of our common shares in January 2021 and subsequent public offerings, registered direct offerings, and private placements. In February 2023, we completed a registered direct offering of our common shares in which we received gross proceeds of $2.25 million and net proceeds of approximately $2 million. In October 2023, we completed a public direct offering of our common shares in which we received gross proceeds of approximately $3 million and net proceeds of approximately $2.5 million. In November 2023, we completed a private placement of our equity securities in which we received gross proceeds of $2.6 million. Throughout 2023, we received approximately $4.6 million in proceeds from warrant exercises. Our cash and cash equivalents as of December 31, 2023 was $4.7 million. Our primary cash needs are for working capital requirements, capital expenditures and to fund our operations.

Current wording

Since inception, we have incurred significant operating losses. For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $10.5 million and $22.4 million, respectively. For the six months ended June 30, 2024 the company incurred a net loss of $3.0 million. During such periods, we have financed our operations primarily through an initial public offering of our common shares in January 2021 and subsequent public offerings, registered direct offerings, and private placements. In February 2023, we completed a registered direct offering of our common shares in which we received gross proceeds of $2.25 million and net proceeds of approximately $2 million. In October 2023, we completed a public direct offering of our common shares in which we received gross proceeds of approximately $3 million and net proceeds of approximately $2.5 million. In November 2023, we completed a private placement of our equity securities in which we received gross proceeds of $2.6 million. Throughout 2023, we received approximately $4.6 million in proceeds from warrant exercises. Our cash and cash equivalents as of December 31, 2023 was $4.7 million. Our primary cash needs are for working capital requirements, capital expenditures and to fund our operations.

Previous wording

The following summarizes the key components of our cash flows for the three month periods ended March 31, 2024 and 2023:

Current wording

The following summarizes the key components of our cash flows for the six months period ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities for the three month period ended March 31, 2024 was $1,796,651 as compared to $2,257,959 for the three month period ended March 31, 2023. The decrease in cash used in operating activities was primarily attributable to a decrease in the net loss excluding share based compensation expense, which was negative $1,247,113 in the three month period ended March 31, 2023.

Current wording

Net cash used in operating activities for the six month period ended June 30, 2024 was $3,783,092 as compared to $(3,637.544) for the six month period ended June 30, 2023. The increase in cash used in operating activities was primarily attributable to the increase in cash used for prepaid expenses as the Company is required to prepay for its directors and officers insurance.

Previous wording

Net cash used in investing activities for the three month period ended March 31, 2024 was $0 as compared to $8,550 for the three month period ended March 31, 2023. The change in cash flow used in investing activities was primarily attributable to a significant reduction in payroll capitalized for the development of intangible assets, and a reduction in the amount of equipment purchased.

Current wording

Net cash used in investing activities for the six month period ended June 30, 2024 was $0 as compared to $9,670 for the six month period ended June 30, 2023. The change in cash flow used in investing activities was primarily attributable to a significant reduction in payroll capitalized for the development of intangible assets.

Previous wording

Net cash provided by financing activities was $0 for the three month period ended March 31, 2024 as compared to $6,367,073 for the three month period ended March 31, 2023. The change in cash flow provided by financing activities was mainly attributable to proceeds we received from the issuance of common shares, exercise of warrants and options, and repayments on notes payable in 2023.

Current wording

Net cash provided by financing activities was $0 for the six month period ended June 30, 2024 as compared to $5,538,655 for the six month period ended June 30, 2023. The change in cash flow provided by financing activities was mainly attributable to proceeds we received from the issuance of common shares, net of issuance costs, exercise of warrants and options, which was offset by repayments on notes payable and lease liabilities in 2023.