Versus Systems (VS) - 2023 Q1 - Quarterly Report

Financial Performance - Revenues for the three months ended March 31, 2023, were $157,950, a decrease of 51.1% compared to $323,756 for the same period in 2022[4] - Total operating loss for Q1 2023 was $1,326,889, significantly improved from a loss of $3,559,057 in Q1 2022, marking a 62.7% reduction in losses[4] - The company reported a net loss of $1,326,889 for Q1 2023, compared to a net loss of $3,355,418 in Q1 2022, reflecting a 60.5% improvement[4] - For the three months ended March 31, 2023, Versus Systems Inc. reported a loss of $1,326,889, a decrease of 60.5% compared to a loss of $3,355,418 in the same period of 2022[7] - Cash used in operating activities was $2,257,959, a slight improvement from $2,546,492 in the prior year[7] - The company generated cash from financing activities amounting to $6,367,073, compared to $7,022,095 in the previous year[7] Assets and Liabilities - Total assets increased to $12,321,197 as of March 31, 2023, up from $8,802,517 at December 31, 2022, representing a 40.5% increase[2] - Cash and cash equivalents rose to $5,279,410 as of March 31, 2023, compared to $1,178,846 at the end of 2022, indicating a 348.5% increase[2] - Total liabilities decreased to $2,938,236 as of March 31, 2023, down from $3,324,558 at December 31, 2022, a reduction of 11.6%[2] - The company’s deficit increased to $(126,376,607) as of March 31, 2023, compared to $(125,182,412) at the end of 2022, reflecting a 1% increase in deficit[2] - As of March 31, 2023, accounts receivable totaled $17,761, net of an allowance for doubtful accounts of $300, compared to $46,592 as of December 31, 2022[93] - Accounts payable and accrued liabilities decreased to $260,116 as of March 31, 2023, from $522,012 as of December 31, 2022, representing a reduction of approximately 50%[114] Shareholder Equity - Share capital increased to $128,823,181 as of March 31, 2023, up from $122,353,525 at December 31, 2022, indicating a 5.8% increase[2] - The weighted average common shares outstanding increased to 8,244,860 in Q1 2023 from 1,272,094 in Q1 2022, representing a 547.5% increase[4] - Share-based compensation for Q1 2023 was $(1,247,113), a significant change from $508,403 in Q1 2022, indicating a shift in compensation strategy[4] - Share-based compensation expenses totaled $1,247,113, compared to $508,403 in the same period last year, indicating an increase of 145.5%[7] - The balance of share purchase warrants decreased to 1,411,535 as of March 31, 2023, following the exercise of 4,042,000 warrants[128] Business Operations - The company is focused on developing a proprietary prizing and promotions tool to enhance consumer engagement in various content formats[10] - The company operates in three business segments: live events, software licensing, and a B2B software platform for video game publishers[151] - The Company recognizes revenue primarily through software-as-a-service (SAAS) sales, custom software development, and advertising sales[81] - The acquired business contributed revenues of $141,270 for the three-month period ended March 31, 2023, compared to $314,017 for the same period in 2022, indicating a decline of approximately 55%[110] Acquisitions and Investments - Versus Systems Inc. completed the acquisition of Xcite Interactive in June 2021, enhancing its capabilities in audience engagement technology[11] - The Company acquired Xcite Interactive Inc. for a total consideration of $13,184,383, including common shares valued at $12,890,029[107] - Goodwill recognized from the acquisition of Xcite Interactive is $6,580,659, attributed to expected synergies[107] Cash Flow and Financing - The cash balance at the end of the period was $5,279,410, up from $1,178,846 at the beginning of the period, reflecting a change in cash of $4,100,564[7] - The company incurred $226,544 in issuance costs related to a registered direct offering that raised $2,250,000 during the year ended December 31, 2022[121] - In 2022, the company completed a public offering on February 28, raising $7,000,000 by issuing 291,669 units at $24.00 per unit[129] Operational Challenges - The company has not achieved positive cash flow from operations as of March 31, 2023, raising substantial doubt about its ability to continue as a going concern[12] - The company vacated its leased office space in Los Angeles on April 30, 2023, and is now operating with a fully remote workforce[157] Financial Instruments and Valuation - The company uses the Black-Scholes Option Pricing Model for valuation of share-based payments and derivative financial assets, which requires subjective assumptions[76] - The fair value of stock options is measured on the date of grant using the Black-Scholes option pricing model and is recognized over the vesting period[78] - The company recognizes impairment losses for intangible assets when the recoverable amount is less than the carrying amount[53] - The recoverable amount was determined to be $4,425,000, resulting in an impairment of $8,254,000, with goodwill written down to $0[109]