Versus Systems (VS) - 2023 Q4 - Annual Report

Revenue Performance - Revenue for the year ended December 31, 2023, was $271,169, a decrease of $847,671 or 76% from $1,108,840 in 2022, primarily due to a reduction in active customers from 16 to 5[187]. Cost Management - Cost of revenues decreased to $103,067 in 2023, down $513,982 or 83% from $617,049 in 2022, attributed to significant staff reductions[188]. - Research and development expenses were $1,107,235 for 2023, a decrease of $1,298,771 or 54% from $2,406,006 in 2022, mainly due to reduced staffing and software costs[189]. - Selling, general and administrative expenses were $5,944,909 in 2023, down $5,893,219 or 50% from $11,838,128 in 2022, reflecting a reduction in staff from 39 to 8 employees[191]. Impairment and Losses - Impairment of goodwill and other intangible assets was $3,968,332 in 2023, a decrease of $4,950,670 or 56% from $8,919,002 in 2022, influenced by reduced revenue projections and competitive landscape[192]. - Net loss for the year ended December 31, 2023, was $10,512,157, a decrease of $11,961,035 or 53% from $22,473,192 in 2022[186]. Cash Flow and Liquidity - Cash and cash equivalents as of December 31, 2023, were $4.7 million, with net cash used in operating activities amounting to $5,471,406[196][200]. - The company completed a registered direct offering in February 2023, raising gross proceeds of $2.25 million, and a public direct offering in October 2023, raising approximately $3 million[196]. - The company plans to increase cash flow from operations and is evaluating strategic alternatives to address liquidity concerns[198]. - The company incurred net cash used in investing activities of $14,514 in 2023, significantly lower than $2,536,832 in 2022, due to reduced payroll capitalized for intangible asset development[201]. Debt and Financing - The company issued $4,750,818 in promissory notes from 2017 to December 31, 2022, with interest rates ranging from 2.45% to 3.95% per annum, all loans have been repaid as of December 31, 2023[203]. - Deferred financing costs primarily relate to direct incremental costs from the public offerings of common stock completed in February 2023[206]. Asset Management - Property and equipment are stated at cost, net of accumulated depreciation, with depreciation calculated over the depreciable amount starting from the date the asset is available for intended use[207]. - Intangible assets acquired through business combinations are initially recognized at fair value as of the acquisition date and carried at cost less accumulated amortization[209]. Financial Reporting and Compliance - A $9,743,659 warrant derivative loss was recorded beginning February 1, 2021, when the company changed its functional currency[211]. - The company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon audit, with no accruals for interest and penalties recorded as of December 31, 2023[214]. - The estimation of share-based payments utilizes the Black-Scholes valuation model, with inputs based on historical data and market conditions[215]. - Revenue recognition occurs monthly upon delivery or as services are provided, with cash received in advance recorded as deferred revenue[216]. - The functional currency for each subsidiary is determined based on the primary economic environment, with reassessment occurring if conditions change[217].