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Venzee Technologies Inc. — Management Reports 2023
Apr 11, 2023
44470_rns_2023-04-11_21dd2a3a-bdfa-40ee-b2b1-fb843ebe5694.pdf
Management Reports
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (this “MD&A”) provides a review of the results of operations, financial condition and cash flows for Venzee Technologies Inc. (“Venzee” or the “Company”) for the three and twelve month period ended December 31, 2022, with analysis and comparisons to prior periods.
This document should be read in conjunction with the information contained in the Company’s unaudited condensed interim consolidated financial statements for the three and twelve month period ended December 31, 2022 (the “2022 Financial Statements”), as well as the audited consolidated financial statements and related notes for the year ended December 31, 2021 (the “2021 Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB").
Unless otherwise indicated, all dollar (“$”) and “USD” amounts and references in this MD&A are in U.S. dollars, and references to “CAD” or “CAD$” are to Canadian dollars.
In preparing this MD&A the Company has taken into account information available to it up to the date of this MD&A, April 6, 2023 being the date the Company’s board of directors (the “Board”) approved this MD&A and the 2022 Financial Statements. All quarterly information contained herein is unaudited. Additional information about the Company can be found in the Company’s filings with securities regulatory authorities, which are available under the Company’s profile on SEDAR at www.sedar.com.
CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION
This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”.
Forward-looking information is provided for the purposes of assisting the reader in understanding the Company and its business, operations, prospects and risks at a point in time in the context of historical and possible future developments and therefore the reader is cautioned that such information may not be appropriate for other purposes.
Forward-looking information is based upon a number of assumptions and is subject to a number of known and unknown risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the risk factors which are discussed in greater detail under “Risk Factors and Uncertainties”.
Although the forward-looking information contained herein is based upon what we believe are reasonable assumptions, readers are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking information. Certain assumptions were made in preparing the forward-looking information concerning availability of capital resources, business performance, market conditions, and customer demand. Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained herein is provided as of the date hereof, and we do not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
OVERVIEW AND OUTLOOK
Venzee is on a mission to create shareholder value by displacing inefficient manual supply chain processes with our unique, intelligent, scalable, and modern technology platform.
Based on a proprietary, cloud-based, Artificial Intelligence (“AI”) platform, Venzee sells Mesh Connectors™ that enable Consumer Brands to save time and money with a modern tool that matches an infinite range of brand Product Data to the ever-expanding requirements of global Retailers.
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To sell any product, brands - those that make products - and retailers - those that sell products - must complete a difficult and lengthy process to agree on and match all of the data that describes a product.
Legacy solutions match descriptive product data using manual effort and human labor augmented with outdated technology. These legacy solutions currently dominate the product information management market and are often reliant on 1970s-era technologies that are slow, costly, and do not scale.
Venzee intends to displace legacy market alternatives with its modern, intelligent, scalable platform solution. Venzee was built to match any brand product attribute to any retailer requirement using AI rather than human skill. As a result, the Venzee solution is cheaper and more efficient than any alternative. Our AI platform is the missing link that finally optimizes the multi-billion dollar, “last mile” supply chain space with proven traction in the market.
As a modern Software as a Service (“SaaS”) platform, Venzee delivers solutions that enable consumer brands to communicate the product information buyers demand at the speed of commerce today. Venzee replaces manual effort with efficient, machine-driven integration that enables consumer brands to connect with more selling channels with less effort and less cost.
Venzee’s services are typically paid by Consumer Brands directly or through a product information management PIM service or a content management service (“CMS”) that has a contract-based partner or teaming agreement with Venzee.
The Company’s focus at the start of fiscal 2022 was to increase revenues by developing and executing on highly scalable strategic selling partner engagements and expanding the number of available retail channel integrations. In line with this strategy, Venzee eliminated the bulk of its sales and marketing staff in order to focus on expanding revenue generation from a core set of partner engagements. Unfortunately, the sales from this strategy did not materialize in a timely manner and with the downturn of the financial markets, Venzee found itself in a difficult situation with deteriorating capital. By the end of the third quarter, Venzee was down to a few key staff members who were accruing their salaries as the Company looked for alternative financing arrangements and searched for key strategic partnerships. As at the date of this MD&A, the Company was able to secure an additional $245,000 CAD of convertible debt financing mainly from one key strategic funder, with whom it is working on a strategy for settling its debts allowing it to restructure and implement a funding plan for the future.
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
SUMMARY OF SIGNIFICANT EVENTS
General highlights
Venzee was created in 2014 and has since focused on its mission: to unlock the potential of global commerce by eliminating inefficient and labor-intensive processes used to distribute consumer-relevant product information across the global supply chain.
On January 5, 2018, after the completion of a reverse takeover, the Company was trading its common shares on the TSX Venture Exchange (“TSXV”) under the symbol “VENZ”. On May 18, 2021, Venzee received approval and started trading Over the Counter market under the symbol OTCQB:VENZF.
The Venzee platform was built to provide a modern, platform-based alternative to high cost, labor intensive data mapping processes traditionally used to enable products to be sold in any retail environment. Venzee provides an efficient, modern, SaaS-based syndication solution and leverages Artificial Intelligence to provide an infinitely scalable service to Consumer Brands globally. It automates product content distribution, accelerates Consumer Brand retail channel expansion, improves retail margin, and deeply engages consumers with more accurate, relevant, and actionable product information.
Recent Developments (2022)
Throughout fiscal 2022, Venzee continues to develop its technology, sales, and operational processes in efforts to streamline efforts, gain efficiencies and cut costs, all the while striving to grow revenues.
Throughout the twelve-months ended December 31, 2022, the Company received support from its shareholder base with it providing $1.15 million of capital through convertible debenture and share issuances as well as the exercise of warrants and options.
On April 6, 2022, the Company closed a non-brokered private placement for total proceeds of $323,927 (CAD $405,200) resulting in the issuance of 5,065,000 units. Each unit is comprised of one share and one warrant. Each warrant is exercisable until April 6, 2025 (subject to an acceleration clause) at a price of CAD $0.12 per warrant to acquire one common share.
On June 9, 2022, the Company closed a second non-brokered private placement for total proceeds of $134,930 (CAD $171,000) resulting in the issuance of 3,420,000 units. Each unit is comprised of one share and one warrant. Each warrant is exercisable until September 6, 2025 (subject to an acceleration clause) at a price of CAD $0.10 per warrant to acquire one common share.
In July 2022, the Company closed CAD $275,000 of convertible debentures. Subsequent to December 31, 2022, the Company received $245,000 CAD of additional convertible debenture funding.
In addition, subsequent to December 31, 2022, the Company;
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entered into a contract for advisory services from a third party for a monthly fee of $30,000 CAD which shall be payable in common shares of the Company at the end of each month, based on the closing price on the last day of trading in that particular month; and,
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changed its fiscal yearend to March 31 to better facilitate the schedules of the auditors, making the process more efficient and less costly.
With the financial market downturn, the Company has had its challenges accessing capital. In order to preserve its capital, the Company implemented numerous cost-cutting measures. As at the date of this MD&A, there is minimal operation and staffing within the Company and the Company is currently in negotiations with a third party to secure
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
financing to fund operations. In the event this financing does materialize, the Board of Directors and management will need to decide on whether the future of the Company is viable and might need to wind down operations.
SELECTED FINANCIAL INFORMATION
Selected financial information of the Company for the three and twelve months ended December 31, 2022 and 2021 is set forth below.
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For the Three Months Ended December 31, For the Year Ended December 31,
2022 2021 2022 2021
Revenue $ 13,463 $ 28,944 $ 40,263 $ 67,519
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| Operating costs | $ | 281,996 |
$ | 884,850 |
$ | 2,330,164 |
$ | 2,933,268 |
|---|---|---|---|---|---|---|---|---|
| Net loss | $ | (321,362) |
$ | (1,223,899) |
$ | (2,586,603) |
$ | (3,606,109) |
| Total assets | $ | 25,422 |
$ | 605,399 |
$ | 25,422 |
$ | 605,399 |
| Basic and diluted EPS | $ | (0.00) | $ | (0.01) |
$ | (0.01) | $ | (0.02) |
For the three and twelve months ending December 31, 2022, revenues were $13,463 and $40,263 (2021 - $28,944 and $67,519).
Net loss for the three and twelve months ended December 31, 2022 was $321,362 and $2,586,603 (2021 - $1,223,899 and $3,606,109).
Net loss decreased during the three and twelve months ended December 31, 2022, as compared to the prior year, due to a general reduction of operations as part of its cash preservation measures.
DISCUSSION OF OPERATIONS
Comparison of the Three Months Ended December 31, 2022 and 2021
| Revenue Cost of revenues Selling and marketing General and administrative Research and development Interest expense |
2022 2021 Variance % Change 13,463 $ 28,944 $ (15,481) $ (53%) 8,329 $ 7,687 $ 642 $ 8% 188,381 $ 397,377 $ (208,996) $ (53%) 81,807 $ 271,922 $ (190,115) $ (70%) 11,808 $ 215,551 $ (203,743) $ (95%) 2,881 $ - $ 2,881 $ n/a For the Three Months Ended December 31, |
|---|---|
Comparison of the Twelve Months Ended December 31, 2022 and 2021
| Revenue Cost of revenues Selling and marketing General and administrative Research and development Interest expense |
For the Year Ended | December 31, | |
|---|---|---|---|
| 2022 40,263 $ 30,417 $ 1,298,898 $ 691,933 $ 339,333 $ 2,881 $ |
2021 67,519 $ 24,616 $ 1,345,539 $ 1,001,507 $ 586,222 $ - $ |
Variance % Change (27,256) $ (40%) 5,801 $ 24% (46,641) $ (3%) (309,574) $ (31%) (246,889) $ (42%) 2,881 $ n/a |
Revenue
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
The Company has seen a reduction in revenues quarter over quarter and throughout the year due to the reduction of operational and staffing levels as it tries to preserve it cash and reduce its monthly cash burn.
Current sales are legacy clients, but sales efforts have stagnated, thus the lower, quarter over quarter revenues.
Cost of revenue
Cost of revenue is comprised of contractors, hosting, and software tools related to revenue and partnership support. Currently, the only cost directly associated with the sale of a Mesh Connector™ is the hosting costs for the platform itself. During the three and twelve months ended December 31, 2022, the Company’s fixed sales costs have increased marginally over the same period in the prior year.
Selling and marketing
As mentioned above, the Company implemented cost cutting measures in Q2, reducing expenses and staffing and its monthly burn rate. The Company saw a reduction in selling and marketing expense for the three and twelve months ended December 31, 2022, as compared to the prior year.
General and administrative
The decrease in general and administrative expense for the three and twelve months ended December 31, 2022, as compared to the prior year, was primarily a result of the decreased staffing levels and general cost-cutting measure implemented at the start of the quarter.
Research and development
Research and development expense for the three and twelve months ended December 31, 2022, as compared to the prior year, has decreased due to staff reductions.
A detailed expense comparison for the three and nine month periods is as follows:
Comparison of the Three Months Ended December 31, 2022 and 2021
| Administration Accredtion expense Advertising, promotion and marketing Employees and contractors Interest expense Investor relations Legal and professional fees Share-based compensation Software and support tools Travel and entertainment |
2022 2021 Change % $ 20,596 $ 39,923 (19,327) (48%) 3,780 - 3,780 n/a - 9,008 (9,008) (100%) 252,912 701,247 (448,335) (64%) 2,029 - 2,029 n/a - 70,283 (70,283) (100%) 8,425 15,151 (6,726) (44%) 38,691 360,306 (321,615) (89%) 63 27,009 (26,946) (100%) - 22,229 (22,229) (100%) $326,496 $1,245,156 (918,660) $ (74%) For the Three Months Ended December 31, |
|---|---|
| 2022 $ 20,596 3,780 - 252,912 2,029 - 8,425 38,691 63 - $326,496 |
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
Comparison of the Twelve Months Ended December 31, 2022 and 2021
| Administration Accredtion expense Advertising, promotion and marketing Depreciation Employees and contractors Forgiveness of debt Interest expense Investor relations Legal and professional fees Share-based compensation Software and support tools Travel and entertainment |
2022 $ 102,436 7,318 53,906 - 1,915,275 - 2,881 99,583 59,533 256,086 54,529 44,902 $ 2,596,449 For the Year Ended |
2021 Change % $ 141,192 (38,756) $ (27%) - 7,318 n/a 87,751 (33,845) (39%) 5,603 (5,603) 100% 2,150,640 (235,365) (11%) (90,625) 90,625 100% - 2,881 n/a 306,404 (206,821) (67%) 101,625 (42,092) (41%) 800,766 (544,680) (68%) 97,622 (43,093) (44%) 48,034 (3,132) (7%) $ 3,649,012 (1,052,563) $ (29%) December 31, |
|---|---|---|
SUMMARY OF QUARTERLY RESULTS
The following financial data for each of the eight most recently completed quarters has been prepared in accordance with IFRS:
| with IFRS: | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the | three months ended (unaudited) | |||||||||||||||
| March 31, | June 30, | Sept. 30, | Dec. 30, | March 31, | June 30, | Sept. 30, | Dec. 30, | |||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2021 | |||||||||
| Revenue | $ | 10,375 |
$ | 13,000 |
$ | 3,425 |
$ | 13,463 |
$ | 8,750 |
$ | 13,595 |
$ | 16,230 |
$ | 28,944 |
| Net loss | (1,008,696) | (709,199) | (550,934) | (321,362) | (657,072) | (932,917) | (792,221) | (1,223,899) | ||||||||
| Total assets | 192,148 | 215,670 | 82,075 | 25,422 | 2,423,165 | 1,759,019 | 959,271 | 605,399 | ||||||||
| Basic and diluted loss | ||||||||||||||||
| per common share | $ | (0.01) | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.01) |
LIQUIDITY AND CAPITAL RESOURCES
The condensed interim consolidated financial statements for the three and twelve months ended December 31, 2022 have been prepared by management on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred ongoing losses and expects to incur further losses in the development of its business.
At December 31, 2022, the Company had a working capital deficiency of $972,679, has not yet achieved profitable operations, and has an accumulated deficit of $23,142,389 since its inception. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing, to commence profitable operations in the future, and repay its liabilities arising from normal business operations as they become due. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future.
Although the Company has, in the past, been successful in obtaining financing, there are inherent risks related to the Company’s ability to raise capital in the future and there is no assurance that the Company will be able to continue to do so in the future on similar terms as past financings, or at all. Purchasing the Company’s common shares involves a high degree of risk, which could affect our ability to attract investors should additional financings be required. See "Outlook & Going Concern", above, and "Business Risks and Uncertainties" as noted in the MD&A for the year ended December 31, 2021.
Contractual obligations
The Company has no material contractual obligations.
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
Risks and Uncertainties
The nature of the Company’s operations exposes the Company to liquidity risk and market risk, which may have a material effect on cash flows, operations and comprehensive income.
The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and to monitor market conditions and the Company’s activities. The Board has overall responsibility for the establishment and oversight of the Company’s risk management framework and policies.
Foreign Exchange Risk
Foreign exchange risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates. As of December 31, 2022, the Company’s significant foreign exchange currency exposure on its financial instruments by currency was as follows (in U.S. dollar equivalents):
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The table below details the effect on earnings before tax of a 10% strengthening or weakening of the USD exchange rate at the balance sheet date for balance sheet items denominated in CAD:
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Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s cash and accounts receivable are exposed to credit risk. The Company reduces its credit risk on cash by placing these instruments with institutions of high credit worthiness. The accounts receivable are primarily comprised of sales tax receivables from the Government of Canada. As at December 31, 2022, the Company is not exposed to any significant credit risk.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The loan payable does not bear interest until December 31, 2023 and the convertible debenture interest is fixed. As at December 31, 2022, the Company is not exposed to any significant interest rate risk
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company manages liquidity risk by maintaining sufficient cash balances to enable settlement of transactions on the due date. The Company addresses its liquidity through equity financing obtained through the sale of securities of the Company. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future.
CASH FLOWS BY ACTIVITY
During the twelve months ended December 31, 2022:
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the Company’s cash used in operating activities was approximately $1.6 million (2021 - $2.8 million), and;
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● the Company’s cash generated from financing activities was approximately $1.1 million (2021 - $2.0 million) related primarily to the exercise of warrants.
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For a description of the Company’s significant accounting policies, critical accounting estimates and judgments, and related information, see Note 2 and Note 3 to the 2021 Financial Statements. Except as described below, the accounting policies in the 2021 Financial Statements are the same as those applied in the Company’s condensed interim consolidated financial statements for the period ended December 31, 2022.
RELATED PARTY TRANSACTIONS
Key management personnel are the persons responsible for the planning, directing and controlling the activities of the Company and include certain executive directors, and entities controlled by such persons. The key management personnel of the Company are certain members of the Company’s executive management team and the Board of Directors.
The compensation of such key management for the three and twelve months ended December 31, 2022 and 2021 included the following:
As at December 31, 2022, included in accounts payable and accrued liabilities was $294,486 (December 31, 2021 - $6,598) of fees owed to key management personnel.
OFF BALANCE SHEET ARRANGEMENTS
As at December 31, 2022, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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VENZEE TECHNOLOGIES INC. Management’s Discussion and Analysis For the three and twelve months ended December 31, 2022
OUTSTANDING SHARE DATA
As at the date of this MD&A, the Company had issued and outstanding:
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246,461,509 common shares - total number of shares authorized to be issued by the Company is unlimited common shares.
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Stock options entitling their holders to acquire a total of 14,850,000 common shares at various prices.
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Warrants entitling their holders to acquire a total of 65,368,631 common shares at various prices.
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Restricted share units entitling their holders to acquire a total of 1,900,000 at $nil price upon achieving certain targets and milestones.
Additional information about the Company can be found in the Company’s filings with securities regulatory authorities, which are available under the Company’s profile on SEDAR at www.sedar.com.
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