[10-Q] Versus Systems Inc. Class A Warrants Quarterly Earnings Report
Versus Systems reported results for the quarter ended June 30, 2025. The company recognized a related-party functional license to ASPIS Cyber Technologies totaling $1,980,000 (monthly fees of $165,000), recording $1,650,000 as a contract asset and $330,000 as accounts receivable. That license produced a Q2 net income of $942,461 and net income attributable to shareholders of $672,335 (basic and diluted EPS $0.14).
For the six months ended June 30, 2025 the company reported a net loss of $214,016 (EPS ($0.06)), cash of $1.68 million and working capital of $3.81 million. Management discloses substantial doubt about the company’s ability to continue as a going concern, notes reduced headcount and expense-reduction measures, intends to seek additional funding, and is not in compliance with certain Nasdaq listing standards.
Versus Systems ha comunicato i risultati per il trimestre chiuso il 30 giugno 2025. La società ha rilevato una licenza funzionale con parte correlata a favore di ASPIS Cyber Technologies per un totale di $1,980,000 (canoni mensili di $165,000), contabilizzando $1,650,000 come contratto-asset e $330,000 come crediti verso clienti. Tale licenza ha generato un utile netto del 2° trimestre di $942,461 e un utile netto attribuibile agli azionisti di $672,335 (utile per azione di base e diluito $0.14).
Per i sei mesi chiusi il 30 giugno 2025 la società ha riportato una perdita netta di $214,016 (EPS ($0.06)), liquidità di $1.68 million e capitale circolante di $3.81 million. La direzione dichiara significativi dubbi sulla capacità della società di continuare come azienda in funzionamento, segnala una riduzione del personale e misure di contenimento dei costi, intende cercare finanziamenti aggiuntivi e non è conforme ad alcuni requisiti di quotazione del Nasdaq.
Versus Systems informó resultados para el trimestre terminado el 30 de junio de 2025. La compañía reconoció una licencia funcional con parte vinculada a ASPIS Cyber Technologies por un total de $1,980,000 (cuotas mensuales de $165,000), registrando $1,650,000 como activo por contrato y $330,000 como cuentas por cobrar. Esa licencia generó un resultado neto del 2T de $942,461 y un resultado neto atribuible a los accionistas de $672,335 (beneficio básico y diluido por acción $0.14).
Para los seis meses terminados el 30 de junio de 2025 la compañía informó una pérdida neta de $214,016 (EPS ($0.06)), efectivo de $1.68 million y capital de trabajo de $3.81 million. La gerencia declara dudas sustanciales sobre la capacidad de la empresa para continuar como negocio en marcha, menciona reducción de plantilla y medidas de recorte de gastos, planea buscar financiamiento adicional y no cumple con ciertos estándares de cotización del Nasdaq.
Versus Systems는 2025년 6월 30일로 마감된 분기 실적을 발표했습니다. 회사는 ASPIS Cyber Technologies에 대한 특수관계자 기능성 라이선스 총액 $1,980,000(월 사용료 $165,000)을 인식하고, 그중 $1,650,000을 계약자산으로, $330,000을 매출채권으로 계상했습니다. 해당 라이선스로 인해 2분기 순이익 $942,461를 기록했으며 주주 귀속 순이익은 $672,335(기본·희석 주당순이익 $0.14)입니다.
2025년 6월 30일로 마감된 6개월 동안 회사는 $214,016의 순손실(주당순이익 ($0.06))을 보고했으며, 현금은 $1.68 million, 운전자본은 $3.81 million입니다. 경영진은 기업 계속성에 대한 중대한 의문을 표명하고 인원 감축 및 비용 절감 조치를 언급했으며 추가 자금 조달을 모색할 계획이고 Nasdaq 상장기준 일부를 충족하지 못하고 있다고 밝혔습니다.
Versus Systems a publié ses résultats pour le trimestre clos le 30 juin 2025. La société a comptabilisé une licence fonctionnelle avec une partie liée accordée à ASPIS Cyber Technologies pour un montant total de $1,980,000 (redevances mensuelles de $165,000), enregistrant $1,650,000 en actif contractuel et $330,000 en comptes clients. Cette licence a généré un résultat net du 2e trimestre de $942,461 et un résultat net attribuable aux actionnaires de $672,335 (bénéfice par action de base et dilué $0.14).
Pour les six mois clos le 30 juin 2025, la société a déclaré une perte nette de $214,016 (BPA ($0.06)), des liquidités de $1.68 million et un fonds de roulement de $3.81 million. La direction fait état de doutes substantiels quant à la capacité de la société à poursuivre son exploitation, mentionne une réduction des effectifs et des mesures de réduction des dépenses, prévoit de rechercher des financements supplémentaires et n'est pas en conformité avec certaines normes de cotation du Nasdaq.
Versus Systems meldete die Ergebnisse für das Quartal zum 30. Juni 2025. Das Unternehmen erkannte eine konzernnahe funktionale Lizenz an ASPIS Cyber Technologies in Höhe von $1,980,000 (monatliche Gebühren von $165,000) an und verbuchte $1,650,000 als Vertragsvermögenswert und $330,000 als Forderungen. Diese Lizenz führte zu einem Quartalsnettoergebnis für Q2 von $942,461 und einem den Aktionären zurechenbaren Nettoergebnis von $672,335 (Basis- und verwässertes Ergebnis je Aktie $0.14).
Für die sechs Monate zum 30. Juni 2025 meldete das Unternehmen einen Nettverlust von $214,016 (EPS ($0.06)), einen Kassenbestand von $1.68 million und ein Betriebskapital von $3.81 million. Das Management äußert
- None.
- None.
Insights
TL;DR: A one-time related-party license created a profitable quarter, materially changing near-term results, but sustainability is uncertain.
The April 30, 2025 functional license to ASPIS generated $1.98M of revenue recognized in Q2, producing $942K net income and EPS of $0.14. The license terms (monthly fees of $165K for a non-cancellable 12-month initial term) produced significant unbilled contract assets of $1.65M and receivables of $330K. While Q2 profitability improved materially versus prior-year periods, the six-month results remain a loss and operating cash is limited at $1.68M. The quarter’s performance is impactful but appears driven by a single related-party arrangement rather than diversified recurring contracts.
TL;DR: Material risks: concentration of revenue with an affiliate, limited cash, and an explicit going-concern disclosure.
The filing highlights concentration risk: ASPIS is an affiliate of the company’s largest shareholder and was the primary revenue source in Q2, creating related-party exposure. Management explicitly states substantial doubt about continuing as a going concern and notes non-compliance with Nasdaq listing standards. Cash of $1.68M and a six-month net loss of $214K underscore liquidity pressure and the need for external financing. These governance and liquidity factors pose material downside risks to equity holders absent successful capital raises or strategic transactions.
Versus Systems ha comunicato i risultati per il trimestre chiuso il 30 giugno 2025. La società ha rilevato una licenza funzionale con parte correlata a favore di ASPIS Cyber Technologies per un totale di $1,980,000 (canoni mensili di $165,000), contabilizzando $1,650,000 come contratto-asset e $330,000 come crediti verso clienti. Tale licenza ha generato un utile netto del 2° trimestre di $942,461 e un utile netto attribuibile agli azionisti di $672,335 (utile per azione di base e diluito $0.14).
Per i sei mesi chiusi il 30 giugno 2025 la società ha riportato una perdita netta di $214,016 (EPS ($0.06)), liquidità di $1.68 million e capitale circolante di $3.81 million. La direzione dichiara significativi dubbi sulla capacità della società di continuare come azienda in funzionamento, segnala una riduzione del personale e misure di contenimento dei costi, intende cercare finanziamenti aggiuntivi e non è conforme ad alcuni requisiti di quotazione del Nasdaq.
Versus Systems informó resultados para el trimestre terminado el 30 de junio de 2025. La compañía reconoció una licencia funcional con parte vinculada a ASPIS Cyber Technologies por un total de $1,980,000 (cuotas mensuales de $165,000), registrando $1,650,000 como activo por contrato y $330,000 como cuentas por cobrar. Esa licencia generó un resultado neto del 2T de $942,461 y un resultado neto atribuible a los accionistas de $672,335 (beneficio básico y diluido por acción $0.14).
Para los seis meses terminados el 30 de junio de 2025 la compañía informó una pérdida neta de $214,016 (EPS ($0.06)), efectivo de $1.68 million y capital de trabajo de $3.81 million. La gerencia declara dudas sustanciales sobre la capacidad de la empresa para continuar como negocio en marcha, menciona reducción de plantilla y medidas de recorte de gastos, planea buscar financiamiento adicional y no cumple con ciertos estándares de cotización del Nasdaq.
Versus Systems는 2025년 6월 30일로 마감된 분기 실적을 발표했습니다. 회사는 ASPIS Cyber Technologies에 대한 특수관계자 기능성 라이선스 총액 $1,980,000(월 사용료 $165,000)을 인식하고, 그중 $1,650,000을 계약자산으로, $330,000을 매출채권으로 계상했습니다. 해당 라이선스로 인해 2분기 순이익 $942,461를 기록했으며 주주 귀속 순이익은 $672,335(기본·희석 주당순이익 $0.14)입니다.
2025년 6월 30일로 마감된 6개월 동안 회사는 $214,016의 순손실(주당순이익 ($0.06))을 보고했으며, 현금은 $1.68 million, 운전자본은 $3.81 million입니다. 경영진은 기업 계속성에 대한 중대한 의문을 표명하고 인원 감축 및 비용 절감 조치를 언급했으며 추가 자금 조달을 모색할 계획이고 Nasdaq 상장기준 일부를 충족하지 못하고 있다고 밝혔습니다.
Versus Systems a publié ses résultats pour le trimestre clos le 30 juin 2025. La société a comptabilisé une licence fonctionnelle avec une partie liée accordée à ASPIS Cyber Technologies pour un montant total de $1,980,000 (redevances mensuelles de $165,000), enregistrant $1,650,000 en actif contractuel et $330,000 en comptes clients. Cette licence a généré un résultat net du 2e trimestre de $942,461 et un résultat net attribuable aux actionnaires de $672,335 (bénéfice par action de base et dilué $0.14).
Pour les six mois clos le 30 juin 2025, la société a déclaré une perte nette de $214,016 (BPA ($0.06)), des liquidités de $1.68 million et un fonds de roulement de $3.81 million. La direction fait état de doutes substantiels quant à la capacité de la société à poursuivre son exploitation, mentionne une réduction des effectifs et des mesures de réduction des dépenses, prévoit de rechercher des financements supplémentaires et n'est pas en conformité avec certaines normes de cotation du Nasdaq.
Versus Systems meldete die Ergebnisse für das Quartal zum 30. Juni 2025. Das Unternehmen erkannte eine konzernnahe funktionale Lizenz an ASPIS Cyber Technologies in Höhe von $1,980,000 (monatliche Gebühren von $165,000) an und verbuchte $1,650,000 als Vertragsvermögenswert und $330,000 als Forderungen. Diese Lizenz führte zu einem Quartalsnettoergebnis für Q2 von $942,461 und einem den Aktionären zurechenbaren Nettoergebnis von $672,335 (Basis- und verwässertes Ergebnis je Aktie $0.14).
Für die sechs Monate zum 30. Juni 2025 meldete das Unternehmen einen Nettverlust von $214,016 (EPS ($0.06)), einen Kassenbestand von $1.68 million und ein Betriebskapital von $3.81 million. Das Management äußert
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ______________ to ______________
Commission File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive office) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 12, 2025, there were
TABLE OF CONTENTS
| PAGE | ||
| PART I | FINANCIAL INFORMATION | 1 |
| Item 1. | Financial Statements (Unaudited) | 1 |
| Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 | 1 | |
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2025 and 2024. | 2 | |
| Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2025 and 2024. | 3 | |
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024. | 4 | |
| Notes to the Condensed Unaudited Consolidated Financial Statements | 5 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II | OTHER INFORMATION | 21 |
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 21 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3. | Default Upon Senior Securities | 21 |
| Item 4. | Mine Safety Disclosures | 21 |
| Item 5. | Other Information | 21 |
| Item 6. | Exhibits | 22 |
| Signatures | 23 |
i
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
Versus Systems Inc.
Condensed Consolidated Balance Sheets (Unaudited)
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ($) | ($) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | ||||||||
| Contract asset, net – related party | ||||||||
| Accounts receivable, net – related party | ||||||||
| Prepaids | ||||||||
| Total current assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ equity | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, non-controlling interest and stockholders’ equity | ||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
1
Versus Systems Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | |||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||
| REVENUES | ||||||||||||||||
| Revenues | ||||||||||||||||
| Revenues – related party | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| EXPENSES | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net income (loss) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributed to Versus Systems, Inc. Shareholders | ( | ) | ( | ) | ( | ) | ||||||||||
| Per Share Data: | ||||||||||||||||
| Basic and diluted earnings (loss) per share to shareholders | ( | ) | ( | ) | ( | ) | ||||||||||
| Weighted average shares - basic | ||||||||||||||||
| Diluted earnings (loss) per share to shareholders | ( | ) | ( | ) | ( | ) | ||||||||||
| Weighted average shares - diluted | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other comprehensive (loss) income, net of tax | ||||||||||||||||
| Change in foreign currency translation, net of tax | ( | ) | ( | ) | ||||||||||||
| Total comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: comprehensive loss (income) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) attributable to shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
2
Versus Systems Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
| Number of Common Shares | Number of Class “A” Shares | Common Shares | Class “A” Shares | Additional paid in Capital | Currency translation adjustment | Accumulated deficit | Stockholders’ equity | Non- controlling Interest | Total stockholders’ equity | |||||||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Net Income | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Number of Common Shares | Number of Class “A” Shares | Common Shares | Class “A” Shares | Additional paid in Capital | Currency translation adjustment | Accumulated deficit | Stockholders’ equity | Non- controlling Interest | Total stockholders’ equity | |||||||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
3
Versus Systems Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended | Six Months Ended | |||||||
| June 30, 2025 | June 30, 2024 | |||||||
| ($) | ($) | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables – related party | ( | ) | ||||||
| Contract asset – related party | ( | ) | ||||||
| Prepaids | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Effect of foreign exchange on cash | ||||||||
| Change in cash during the period | ( | ) | ( | ) | ||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | ||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
4
|
VERSUS SYSTEMS INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
 |
| 1. | NATURE OF OPERATIONS AND GOING CONCERN |
Versus Systems Inc. (the Company) was continued under the Business Corporations Act (British Columbia) effective January 2, 2007. On December 24, 2024 a special resolution authorizing and approving the continuance of the Company from the Province of British Columbia in accordance with the Business Corporations Act (British Columbia) into the State of Delaware in accordance with the Delaware General Corporation Law. The Company’s head office and registered and records office is located at 3500 South DuPont Highway Dover, DE 19901. The Company’s common stock is traded on the NASDAQ under the symbol “VS”. The Company’s Unit A warrants are traded on NASDAQ under “VSSYW”. All share and per share data are presented to reflect the reverse share splits on a retroactive basis.
The Company is engaged in the technology sector and has developed a proprietary prizing and promotions tool allowing game developers and creators of streaming media, live events, broadcast TV, games, apps, and other content to offer real world prizes inside their content. The ability to win prizes drives increased levels of consumer engagement creating an attractive platform for advertisers.
In June 2021, the Company completed its acquisition of multimedia, production, and interactive gaming company Xcite Interactive, a provider of online audience engagement through its owned and operated XEO technology platform. The Company partners with professional sports franchises across Major League Baseball (“MLB”), National Hockey League (“NHL”), National Basketball Association (“NBA”) and the National Football League (“NFL”) to drive audience engagement.
In September 2024 the Company closed down its operations within the United Kingdom, Versus Systems UK, Ltd.
Going Concern
These unaudited condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As of June 30, 2025, the Company has not achieved positive cash flow from operations and is not able to finance day to day activities through operations and as such, there is substantial doubt as to the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds therefrom and/or raise equity capital or borrowings sufficient to meet current and future obligations. These condensed interim consolidated financial statements do not include any adjustments as to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.
Management’s plans include attempting to secure additional required funding through equity or debt financing, if available, seeking to enter into a partnership or other strategic agreement regarding, or sales or out-licensing of, its technology. There can be no assurance that we will be able to obtain required funding in the future. If the Company does not obtain required funding, the Company’s cash resources will be depleted in the near term and the Company would be required to materially reduce or suspend operations, which would likely have a material adverse effect on the Company’s business, stock price and our relationships with third parties with whom the Company have business relationships. If the Company does not have sufficient funds to continue operations, the Company could be required to seek bankruptcy protection, dissolution or liquidation, or other alternatives that could result in the Company’s stockholders losing some or all of their investment in us. The Company has implemented expense reduction measures including, without limitation, employee headcount reductions and the reduction or discontinuation of certain product development programs. Additionally, the Company is not in compliance with certain listing standards of the Nasdaq National Market and there can be no assurance that the Company will be successful in curing the deficiencies and regaining compliance by the applicable cure dates.
5
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VERSUS SYSTEMS INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
| 2. | BASIS OF PRESENTATION |
Basis of presentation
These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and the requirements of the Securities Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed interim consolidated financial statements have been prepared on the same basis as the annual condensed consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 31, 2025.
In the opinion of our management, the information in these condensed interim consolidated financial statements reflects all adjustments, all of which are of a normal and recurring nature necessary for a fair statement of the financial position and results of operations for the reported interim periods. We consider events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.
Significant Accounting Policies
There have been no material changes to the accounting policies discussed in Note 2 to the condensed consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 31, 2025.
Basis of consolidation
These condensed interim consolidated financial statements include the accounts of Versus Systems Inc. and its subsidiaries, from the date control was acquired. Control exists when the Company possesses power over an investee, has exposure to variable returns from the investee and has the ability to use its power over the investee to affect its returns. All inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.
Use of estimates
The preparation of these condensed consolidated statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements. Estimates and assumptions are continually evaluated and are based on historical experience and management’s assessment of current events and other facts and circumstances that are considered to be relevant. Actual results could differ from these estimates.
Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made. These estimates and assumptions include valuing equity securities in share-based payments and warrants.
6
VERSUS SYSTEMS INC.
|
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| 3. | SIGNIFICANT ACCOUNTING POLICIES |
Basic and diluted loss per share
Basic earnings (loss) per share is computed by dividing net earnings
(loss) available to common shareholders by the weighted average number of shares outstanding during the reporting periods. Diluted earnings
(loss) per share is computed similar to basic earnings (loss) per share, except that the weighted average shares outstanding are increased
to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated
by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire
common stock at the average market price during the reporting periods. Potentially dilutive options as of June 30, 2025 totaled
Share-based compensation
The Company grants stock options to acquire common shares of the Company to directors, officers, employees and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes, or provides services similar to those performed by an employee.
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 on a straight-line basis. The Black-Scholes pricing model requires the use of subjective assumptions including the option’s expected term, the volatility of the underlying stock, the fair value of the stock and the expected forfeiture rate. Consideration paid for the shares on the exercise of stock options is credited to capital stock.
In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the Company as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.
7
VERSUS SYSTEMS INC.
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| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Revenue recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification ASC 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue from contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company earns revenue in two primary ways: 1) the sales of software-as-a-service (SAAS) from its interactive production software platform or 2) development and maintenance of custom-built software or other professional services.
The Company recognizes SAAS revenues from its interactive production sales over the life of the contract as its performance obligations are satisfied. Payment terms vary by contract and can be periodic or one-time payments. The Company determines that the customer receives and consumes the benefits of the service simultaneously as the service is provided. The transaction price is allocated to the contractual performance obligations and recognized ratably over the contract term.
The Company recognizes revenues received from the development and maintenance of custom-built software and other professional services provided upon the satisfaction of its performance obligation in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Performance obligations can be satisfied either at a single point in time or over time. For those performance obligations that are satisfied at a single point in time, the revenue is recognized at that time. For each performance obligation satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of that performance obligation. The Company generally measures progress comparing hours incurred to total estimated hours.
For revenues received from the sales of advertising, the Company is deemed the agent in its revenue agreements. The Company does not own or obtain control of the digital advertising inventory. The Company recognizes revenues upon the achievement of agreed-upon performance criteria for the advertising inventory, such as a number of views, or clicks. As the Company is acting as an agent in the transaction, the Company recognizes revenue from sales of advertising on a net basis, which excludes amounts payable to partners under the Company’s revenue sharing agreements.
The Company’s contracts with customers may include promises to transfer multiple products and services. For these contracts, the Company accounts for individual performance obligations separately if they are capable of being distinct and distinct within the context of the contract. Determining whether products and services are considered distinct performance obligations may require significant judgment. Judgment is also required to determine the stand-alone selling price, for each distinct performance obligation.
During the six months ended June 30, 2025 the Company recognized $
8
VERSUS SYSTEMS INC.
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| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Revenue recognition
License Revenue – Related Party
On April 30, 2025, pursuant to the Technology
License and Software Development Agreement (the “License Agreement”) with ASPIS Cyber Technologies, Inc. (“ASPIS”),
the Company delivered a functional license for its gamification, engagement, and QR code technology. ASPIS is an affiliate of the Company’s
largest shareholder—Cronus Equity Capital Group, LLC (“CECG”)—which holds approximately
Under the License Agreement, as amended
by the first amendment executed on January 15, 2025, the monthly license fees of $
Under the License Agreement, as amended
by a side letter executed on August 11, 2025, the Initial Term is non-cancellable for
twelve (12) months commencing April 30, 2025, with monthly license fees of $
Since the license is a functional license
and the performance obligation was satisfied upon delivery on April 30, 2025, the Company recognized the entire transaction price of $
Accounts Receivable, net – Related Party
Accounts receivable are typically unsecured
and are derived from revenue earned from customers. They are stated at invoice value less estimated allowances for credit losses. The
Company performs ongoing credit evaluations of its customers to determine allowances for potential credit losses and doubtful accounts.
As of June 30, 2025, the Company’s receivable balance of $
Contract Assets – Related Party
Contract assets arise when the Company has earned revenue on a contract
with a customer prior to billing. As of June 30, 2025, contract assets related to ASPIS totaled $
9
VERSUS SYSTEMS INC.
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| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Recent accounting pronouncements not yet adopted
New accounting pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (“Subtopic 220-40”). This ASU improves financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to the condensed consolidated financial statements at interim and annual reporting periods. This ASU will be effective for annual periods beginning after December 15, 2026, for interim reporting periods beginning after December 15, 2027, with early adoption is permitted. We are evaluating the potential impact of this guidance on our condensed consolidated financial statements and related disclosures.
Recent adopted accounting pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (“Topic 740”): Improvements to Income Tax Disclosures. This ASU enhances the transparency and decision usefulness of income tax disclosures. It is designed to provide more detailed information about an entity’s income tax expenses, liabilities, and deferred tax items, potentially affecting how companies report and disclose their income tax-related information. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those fiscal years. The adoption of the guidance in the second quarter of 2025 did not have a material impact on our condensed consolidated financial statements and related disclosures.
Management does not believe any other recently issued but not yet effective accounting pronouncement, if adopted, would have a material effect on the Company’s present or future condensed consolidated financial statements.
10
VERSUS SYSTEMS INC.
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| 4. | NON-CONTROLLING INTEREST IN VERSUS LLC |
The Company holds an
The net income (loss) for Versus, LLC for the three-month periods ended June
30, 2025 and 2024 was $
The following table presents summarized financial information before intragroup eliminations for the non-wholly owned subsidiary as of June 30, 2025 and December 31, 2024, respectively.
| June 30, 2025 | December 31, 2024 | |||||||
| Non-controlling interest percentage | ||||||||
| ($) | ($) | |||||||
| Assets | ||||||||
| Current | ||||||||
| Non-current | ||||||||
| Liabilities | ||||||||
| Current | ||||||||
| Non-current | ||||||||
| Net liabilities | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
11
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VERSUS SYSTEMS INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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| 5. | SHARE CAPITAL |
| a) | Authorized share capital |
The Company is authorized to issue an unlimited number of common stock.
The Company had
| b) | Issued share capital |
During the six month periods ended June 30, 2025 and 2024, the Company did not issue share capital.
| c) | Stock options |
The Company may grant incentive stock
options to its officers, directors, employees, and consultants. The Company has implemented a rolling Stock Option Plan (the “Plan”)
whereby the Company can issue up to
A continuity schedule of outstanding stock options is as follows:
| Number Outstanding | Weighted Average Exercise Price | |||||||
| ($) | ||||||||
| Balance – December 31, 2024 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Balance – June 30, 2025 | ||||||||
| Vested and exercisable | ||||||||
For the three months ended June 30,
2025 and 2024 the Company recorded share-based compensation of $
The fair value of the options granted
during the six months ended June 30, 2025 was $
The intrinsic value represents the difference
between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option. Based
on the fair market value of the Company’s common stock at June 30, 2025 the total intrinsic value of all outstanding options was
$
The Company used the following assumptions in calculating the fair value of stock options for the period ended:
| June 30, 2025 | June 30, 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life of options | ||||||||
| Expected dividend yield | ||||||||
| Volatility | % | % | ||||||
12
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VERSUS SYSTEMS INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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| 5. | SHARE CAPITAL (continued) |
| d) | Share purchase warrants |
During the year ended December 31, 2024, the Company:
| i) | Issued |
At June 30, 2025, the Company had share purchase warrants outstanding as follows:
| Expiration Date | Warrants Outstanding | Exercise Price | Weighted Average Remaining Life | |||||||||
| ($) | (years) | |||||||||||
| January 20, 2026(1) | ||||||||||||
| February 28, 2027 | ||||||||||||
| December 6, 2027 | ||||||||||||
| December 9, 2027 | ||||||||||||
| January 18, 2028 | ||||||||||||
| February 2, 2028 | ||||||||||||
| October 17, 2028 | ||||||||||||
| October 17, 2028 | ||||||||||||
| December 24, 2029 | ||||||||||||
| (1) |
| 6. | SEGMENT REPORTING |
Our chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net loss to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes functional expenses (cost of revenues, research and development, and general and administrative) at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net loss are interest income, other expense, net and the provision for income taxes, which are reflected in the consolidated statements of operations and comprehensive loss. The measure of segment assets is reported on the consolidated balance sheet as total assets.
| 7. | COMMITMENTS AND CONTINGENCIES |
From time to time the Company may become involved in other legal proceedings or be subject to claims arising in the ordinary course of business. Although the results of ordinary course litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, financial condition, results of operations or cash flows. Regardless of the outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources and other factors.
| 8. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events after the balance sheet date of June 30, 2025 through August 14, 2025, the date the condensed consolidated financial statements were issued. Based upon its evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying condensed consolidated financial statements or disclosure in the notes thereto.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2024 and 2023 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.
Overview
We offer a suite of proprietary business-to-business software tools that are meant to drive user engagement through gamification and rewards. These tools allow our partners to offer in-game prizing and rewards, including merchandise, coupons, digital goods, and sweepstakes entries — inside their websites, their venues, or their streaming media content.
Our customers mostly sports teams (Professional and Collegiate), venues (Arenas, Football Stadiums, Baseball Stadiums), and advertising agencies, which 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 June 30, 2025 and December 31, 2024, we had three active customers.
Our products and games are designed so that end users of our products can earn prizes by registering on our system and completing in-content challenges like trivia, polls, or casual mobile games. Players could use our system to play a variety of games and earn a wide range of prize types, provided by advertisers and sponsors. Our products, include our in-venue XEO and Filter Fan Cam products for live events, and our new stand-alone “Winfinite” product line that can be used by brands, advertising agencies, and content partners to reach potential customers outside of sports venues, on mobile devices. We also have an IP portfolio that could create future licensing and product development opportunities including our recently allowed Artificial Intelligence (“AI”) and Machine Learning (“ML”) series of patent claims.
With the acquisition of Xcite Interactive in June 2021, we acquired a number of key pieces of technology and relationships that have helped to drive our engagement and rewards business, including a live events fan engagement business that has partnered with professional sports franchises in the National Football League (“NFL”), the National Basketball Association (“NBA”), the National Hockey League (“NHL”) and others to increase audience engagement using interactive gaming functions like trivia, polling, and casual games that can be played alongside live experiences whether a player is at-home, in a restaurant, or in-venue at the event itself. Our largest customers in 2024 were the Texas Rangers and San Jose Sharks. For the six months ended June 30, 3025 our largest customer is ASPIS, a significant shareholder of the Company.
We now have three principal software products. Our eXtreme Engagement Online or “XEO” platform is designed primarily for in-venue main-board work in stadiums and arenas. Our Filter Fan Cam (FFC) platform is an Augmented Reality filtering tool that can be used for mobile and in-venue applications. In addition, we have a stand-alone gaming and prizing product that we call “Winfinite,” which allows brands, media companies, and advertising agencies to reach out to customers directly on their mobile devices. We license these three software products to teams, ad agencies, and other content creators.
During the period, we have now made some major headway in our new market of Brazil, which we expect to come online and be revenue generating within Q3. Including and not limited to discussions with major soccer franchises, leagues, festival promoters and tennis tournaments. Additionally, we now are using Aspis Cyber Technologies, Inc products to secure the company’s websites and all technology offerings. We have now also embarked upon a project of creating new and more current IP, which will be an ongoing project and bolster our company’s position.
14
Significant Components of Our Results of Operations
Revenue. In general, we recognize revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to us, where there is evidence of an arrangement, when the selling price is fixed or determinable, and when specific criteria have been met or there are no significant remaining performance obligations for each of our activities as described below. Foreseeable losses, if any, are recognized in the year or period in which the loss is determined.
We earn revenue through the development and maintenance of custom-built software.
We recognize revenues received from the development and maintenance of custom-built software and other professional services provided upon the satisfaction of our performance obligation in an amount that reflects the consideration to which we expect to be entitled in exchange for those services. Performance obligations can be satisfied either at a single point in time or over time. For those performance obligations that are satisfied at a single point in time, the revenue is recognized at that time. For each performance obligation satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation.
Our contracts with customers may include multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are capable of being distinct within the context of the contract. Determining which performance obligations are considered distinct may require significant judgment. Judgment is also required to determine the amount of revenue associated with each distinct performance obligation.
Operating Expenses. We classify our operating expense as research and development, and selling, general and administrative. Personnel costs are the primary component of each of these operating expense categories, which consist of cash-based personnel costs, such as salaries, benefits and bonuses. Additionally, these categories include intangible amortization, amortization expense, interest expense, software costs, professional fees and share-based compensation.
Operating Results
Comparison of Results of Operations for the three months ended June 30, 2025 and June 30, 2024
The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024:
| For the Three Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Consolidated Statement of Operations and Comprehensive Income (Loss) Data: | ||||||||
| Revenue | $ | - | $ | 26,937 | ||||
| Revenues – related party | 1,980,000 | - | ||||||
| Cost of revenues | 8,222 | 16,231 | ||||||
| Gross margin | 1,971,778 | 10,706 | ||||||
| Expenses | ||||||||
| Research and development | 6,219 | 67,203 | ||||||
| Selling, general and administrative | 1,026,758 | 1,443,171 | ||||||
| Total operating expenses | 1,032,977 | 1,510,374 | ||||||
| Operating income (loss) | 938,801 | (1,499,668 | ) | |||||
| Other income (expense), net | 3,660 | (74 | ) | |||||
| Net income (loss) | 942,461 | (1,499,742 | ) | |||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Change in foreign currency translation, net of tax | (117,564 | ) | 121,174 | |||||
| Total comprehensive income (loss) | $ | 824,897 | (1,378,568 | ) | ||||
| Basic and diluted earnings (loss) per share to shareholders | $ | 0.14 | $ | (0.54 | ) | |||
15
Revenue
Our revenues are derived primarily from our license with ASPIS and related professional services. Revenue was $1,980,000 for the three month period ended June 30, 2025, representing a increase of $1,953,063, or 7,250%, from $26,937 for the three month period ended June 30, 2024. The increase can be attributed to the recognition of the ASPIS license revenue of $1,980,000.
Cost of revenues
Cost of revenues was $8,222 for the three month period ended June 30, 2025, representing a decrease of $8,222, or 49%, from $16,231 for the three month period ended June 30, 2024. The decrease was due to the decrease in infrastructure needed for the Xcite Interactive.
Research and development
Research and development was $6,219 for the three month period ended June 30, 2025, representing a decrease of $60,984, or 91%, from $67,203 for the three month period ended June 30, 2024. The decrease was primarily due to significant reductions in staff related to our company restructuring in the prior year.
Selling, general and administrative
Selling, general and administrative was $1,026,758 for the three month period ended June 30, 2025, representing a decrease of $416,413, or 29%, from $1,443,171 for the three month period ended June 30, 2024. The decrease was primarily due to a decrease in payroll as the Company reduced head count and a decrease in professional fees. In addition, there was a reduction in expense due to a one-time severance payment of $305,000 during the three months ended June 30, 2024.
Operating Results
Comparison of Results of Operations for the six month period ended June 30, 2025 and June 30, 2024
The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024:
| For the Six Months Ended June 30, |
||||||||
| 2025 | 2024 | |||||||
| Consolidated Statement of Operations and Comprehensive Income (Loss) Data: | ||||||||
| Revenues | $ | 23,348 | $ | 53,440 | ||||
| Revenues – related party | 2,156,000 | - | ||||||
| Cost of revenues | 16,446 | 40,277 | ||||||
| Gross margin | 2,162,902 | 13,163 | ||||||
| Expenses | ||||||||
| Research and development | 12,368 | 106,615 | ||||||
| Selling, general and administrative | 2,384,494 | 2,907,652 | ||||||
| Total operating expenses | 2,396,862 | 3,014,267 | ||||||
| Operating loss | (233,960 | ) | (3,001,104 | ) | ||||
| Other income (expense), net | 19,944 | (321 | ) | |||||
| Net loss | (214,016 | ) | (3,001,425 | ) | ||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Change in foreign currency translation, net of tax | (125,314 | ) | 160,865 | |||||
| Total comprehensive loss | $ | (339,330 | ) | (2,840,560 | ) | |||
| Basic and diluted loss per share to shareholders | $ | (0.06 | ) | $ | (1.07 | ) | ||
16
Revenue
Our revenues are derived primarily from our license with ASPIS and related professional services. Revenue was $2,179,348 for the six month period ended June 30, 2025, representing an increase of $2,125,908, or 3,978%, from $53,440 for the six month period ended June 30, 2024. The increase can be attributed to the recognition of the ASPIS license revenue and professional services.
Cost of revenues
Cost of revenues was $16,446 for the six month period ended June 30, 2025, representing a decrease of $23,831, or 59%, from $40,277 for the six month period ended June 30, 2024. The decrease was due to the decrease in infrastructure needed for the Xcite Interactive.
Research and development
Research and development was $12,368 for the six month period ended June 30, 2025, representing a decrease of $94,247, or 88%, from $106,615 for the six month period ended June 30, 2024. The decrease was primarily due to significant reductions in staff related to our company restructuring in the prior year.
Selling, general and administrative
Selling, general and administrative was $2,384,494 for the six month period ended June 30, 2025, representing a decrease of $523,158, or 18%, from $2,907,652 for the six month period ended June 30, 2024. The decrease was primarily due to a decrease in payroll as the Company reduced head count and a decrease in professional fees, offset by a one-time severance payment of $305,000 during the six months ended June 30, 2024.
Inflation
The effect of inflation on our revenue and operating results was not significant.
Liquidity and Capital Resources
We have cash of $1,682,256 and a working capital balance of $3,808,046 as at June 30, 2025, compared to a cash position of $3,065,914 and working capital balance of $3,509,272 as at December 31, 2024. The decrease in our cash related to using cash to fund operations and ongoing losses for the six months ended June 30, 2025 and an increase in working capital balance was due to the account receivable’s owed from ASPIS.
Our financial condition and liquidity is and will continue to be influenced by a variety of factors, including:
| ● | our ability to generate cash flows from our operations; |
| ● | future indebtedness and the interest we are obligated to pay on this indebtedness; |
| ● | the availability of public and private debt and equity financing; |
| ● | our capital expenditure requirements. |
17
Overview
Since inception, we have incurred significant operating losses. For the six months ended June 30, 2025 and 2024, we incurred net losses of approximately $0.2 million and $3.0 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, convertible debt, warrant exercises and private placements. In October 2024 warrant holders exercised $0.9 million of warrants into common stock. Also, in November and December 2024 the Company raised $2.5 million of convertible debt. Our cash and cash equivalents as of June 30, 2025 was $1.7 million. Our primary cash needs are for working capital requirements, capital expenditures and to fund our operations.
We are subject to the risks and uncertainties associated with a new business. We believe that our current resources and the expected revenues from operations will be insufficient to fund our planned operations for the next twelve months. The report of our independent registered public accounting firm on our condensed consolidated financial statements for the year ended December 31, 2024 stated that our recurring losses from operations, accumulated deficit as of December 31, 2024, inability to achieve positive cash flows from operations and inability to fund day to day activities through operations indicates that a material uncertainty exists that may cast significant doubt on our ability to continue as a going concern.
We plan to increase our cash flow from our operations to address some of our liquidity concerns and are evaluating other strategic alternatives. However, to execute our business plan and implement our business strategy, we anticipate that we will need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute our current shareholders’ ownership in us and could also result in a decrease in the market price of our common shares. The terms of those securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. Furthermore, any debt financing, if available, may subject us to restrictive covenants and significant interest costs. There can be no assurance that we will be able to raise additional capital, when needed, to continue operations in their current form. If we cannot raise needed funds, we might be forced to make substantial reductions in our operating expenses, including reductions in our research and development expenses or headcount reductions, which could adversely affect our ability to implement our business plan and ultimately our viability as a company.
Cash Flows
The following summarizes the key components of our cash flows for the six month period ended June 30, 2025 and 2024:
| Six Month Period Ended June 30, 2025 | Six Month Period Ended June 30, 2024 | |||||||
| Net cash used in operating activities | $ | (1,508,972 | ) | $ | (3,874,311 | ) | ||
| Net cash used in investing activities | - | - | ||||||
| Net cash provided by financing activities | - | - | ||||||
| Effect of foreign exchange | 125,314 | 91,219 | ||||||
| Net decrease in cash and cash equivalents | $ | (1,383,658 | ) | $ | (3,783,092 | ) | ||
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2025 was $1,508,972 as compared to $3,874,311 for the six months ended June 30, 2024. The decrease in cash used in operating activities was primarily attributable to a decrease in the net loss of $2,787,409 and prepaids of $1,042,853 off set by an increase of stock-based compensation of $226,611 and an increase in accounts receivable of $1,987,972.
Investing Activities
No cash was used in or provided by investing activities for the six months ended June 30, 2025 and 2024, respectively.
Financing Activities
No cash was used in or provided by financing activities for the six months ended June 30, 2025 and 2024, respectively.
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Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Estimates and assumptions are continually evaluated and are based on historical experience and management’s assessment of current events and other facts and circumstances that are considered to be relevant. Actual results could differ from these estimates.
Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting year, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:
Revenue recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue from contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company earns revenue in two primary ways: 1) the sales of software-as-a-service (SAAS) from its interactive production software platform or 2) development and maintenance of custom-built software or other professional services.
The Company recognizes SAAS revenues from its interactive production sales over the life of the contract as its performance obligations are satisfied. Payment terms vary by contract and can be periodic or one-time payments. The Company determines that the customer receives and consumes the benefits of the service simultaneously as the service is provided. The transaction price is allocated to the contractual performance obligations and recognized ratably over the contract term.
The Company recognizes revenues received from the development and maintenance of custom-built software and other professional services provided upon the satisfaction of its performance obligation in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Performance obligations can be satisfied either at a single point in time or over time. For those performance obligations that are satisfied at a single point in time, the revenue is recognized at that time. For each performance obligation satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of that performance obligation. The Company generally measures progress comparing hours incurred to total estimated hours.
For revenues received from the sales of advertising, the Company is deemed the agent in its revenue agreements. The Company does not own or obtain control of the digital advertising inventory. The Company recognizes revenues upon the achievement of agreed-upon performance criteria for the advertising inventory, such as a number of views, or clicks. As the Company is acting as an agent in the transaction, the Company recognizes revenue from sales of advertising on a net basis, which excludes amounts payable to partners under the Company’s revenue sharing agreements.
The Company’s contracts with customers may include promises to transfer multiple products and services. For these contracts, the Company accounts for individual performance obligations separately if they are capable of being distinct and distinct within the context of the contract. Determining whether products and services are considered distinct performance obligations may require significant judgment. Judgment is also required to determine the stand-alone selling price, for each distinct performance obligation.
During the three and six months ended June 30, 2025, the Company recognized $176,000 attributed to professional services, respectively.
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License Revenue
We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the grant of use is recognized in the first period of the contract term in which the license agreement is in force. For the three and six month periods ended June 30, 2025, $1,980,000 of revenue was recognized on our functional IP as the Technology Agreement with ASPIS as the license had been delivered to ASPIS during the quarter.
Stock-based compensation
The estimation of share-based payments (including warrants and stock options) requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. We use the Black-Scholes valuation model at the date of the grant. We make estimates as to the volatility, the expected life, dividend yield and the time of exercise, as applicable. The expected volatility is based on the average volatility of share prices of similar companies over the period of the expected life of the applicable warrants and stock options. The expected life is based on historical data. These estimates may not necessarily be indicative of future actual patterns.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for smaller reporting companies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management, with the participation of our chief executive officer and chief financial officer, has concluded that, as of June 30, 2025, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
None.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Other than as set for below, there have been no material changes to the risk factors set forth in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025 (our “Annual Report”). Our business involves significant risks. You should carefully consider the risks and uncertainties described in our Annual Report, together with all of the other information in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report. The risks and uncertainties described in our Annual Report are not the only ones we face, and additional risk and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives. In that event, the market price of our common shares could decline and you could lose part or all of your investment.
If we do not successfully raise additional capital, improve our operating cash flow, or complete a strategic transaction, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that must be reserved for commitments and contingent liabilities, as to which we can give you no assurance.
There can be no assurance that we will successfully raise additional capital, that we will improve our operating cash flow, or that we will be able to complete a strategic transaction. If none of those occur, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our operations while pursuing a financing, improved operations, or a strategic transaction. In addition, if our board of directors were to approve and recommend a dissolution and liquidation of our company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Our commitments and contingent liabilities may include obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of our company, litigation against us, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of our assets would need to be reserved pending the resolution of such obligations.
In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our company. If a dissolution and liquidation were to be pursued, our board of directors, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of our company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to our stockholders.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
The following documents are filed as a part of this report or incorporated herein by reference:
| Exhibit Number |
Description | |
| 31.1 | Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VERSUS SYSTEMS INC. | |
| Date: August 14, 2025 | /s/ Luis Goldner |
| Luis Goldner | |
| Chief Executive Officer (Principal Executive Officer) | |
| Date: August 14, 2025 | /s/ Geoff Deller |
| Geoff Deller | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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FAQ
What drove Versus Systems (VSSYW) to report net income in Q2 2025?
How much of the ASPIS license is billed versus unbilled on the balance sheet?
What is Versus Systems' cash, working capital and six-month profitability position?
Does the company identify any material financial risks in the filing?
How many shares and dilutive instruments are outstanding for Versus Systems?
