Versus Systems (VS) - 2024 Q1 - Quarterly Report

Revenue and Financial Performance - Revenue for the three-month period ended March 31, 2024, was $26,503, representing a decrease of $131,447, or 83%, from $157,950 for the same period in 2023 due to a reduction in active clients from 16 to 5 [145]. - The operating loss for the three-month period ended March 31, 2024, was $1,503,893, an increase of $51,411, or 4%, from $1,452,482 in the same period in 2023, driven by increased professional fees [149]. - The company incurred net losses of approximately $10.5 million and $22.4 million for the years ended December 31, 2023, and 2022, respectively [153]. Expenses - Cost of revenues decreased to $24,046 for the three-month period ended March 31, 2024, down $8,311, or 26%, from $32,357 in the same period in 2023, primarily due to staff reductions [146]. - Research and development expenses were $39,412 for the three-month period ended March 31, 2024, a decrease of $27,728, or 41%, from $67,140 in the same period in 2023, attributed to staffing cuts [147]. - Selling, general and administrative expenses increased to $1,464,481 for the three-month period ended March 31, 2024, up $79,139, or 6%, from $1,385,341 in the same period in 2023, mainly due to higher professional fees [148]. Cash Flow and Liquidity - Cash position decreased to $2,892,356 as of March 31, 2024, down from $4,689,007 as of December 31, 2023, due to cash used for operations and ongoing losses [151]. - Net cash used in operating activities for the three-month period ended March 31, 2024, was $1,796,651, a decrease from $2,257,959 in the same period in 2023, primarily due to a reduction in net loss [157]. - The company plans to evaluate strategic alternatives to address liquidity concerns, including potential additional financing through public or private equity or debt [155]. Financial Reporting and Accounting Policies - The company applies the Current Expected Credit Loss (CECL) model under ASC 326 for impairment of financial assets, which requires recognizing an allowance for credit losses based on expected losses over the life of the asset [162]. - Deferred financing costs primarily consist of direct incremental costs related to the public offerings of common stock completed in February 2023, offset against the proceeds upon completion [163]. - Property and equipment is 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 [164]. - Intangible assets acquired through business combinations or asset acquisitions are initially recognized at fair value and carried at cost less accumulated amortization and impairment charges [165]. - The company accounts for income taxes using the assets and liability method, with deferred tax assets and liabilities determined based on differences between financial statement carrying amounts and tax basis [166]. - A valuation allowance is recorded against deferred tax assets when realization is not more likely than not, which may materially affect future financial results [167]. - The company recognizes uncertain income tax positions at the largest amount likely to be sustained upon audit, with no accruals for interest and penalties recorded as of March 31, 2024 and 2023 [168]. - Share-based payments estimation involves using the Black-Scholes valuation model, with estimates based on historical data and average volatility of similar companies [169]. - Revenue recognition is recorded monthly upon delivery or as services are provided, with cash received in advance recorded as deferred revenue [170]. - The functional currency for each subsidiary is determined based on the primary economic environment, with reconsideration if there are changes in relevant events or conditions [171]. Debt and Interest - The company has recorded $0 in accrued interest on promissory notes as of December 31, 2023, following the repayment of all loans [160].