UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (604) 639-4457 (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 whi ...

Revenue Performance - Revenue for the year ended December 31, 2024, was $57,288, a decrease of $213,881, or 79%, from $271,169 in 2023, primarily due to a reduction in active clients from 16 to 2[177]. - The net loss for the year ended December 31, 2024, was $4,574,836, compared to a net loss of $10,512,157 in 2023, representing a decrease of $5,937,321, or 56%[176]. - Revenue from custom-built software development and maintenance is recognized upon satisfaction of performance obligations, either at a single point in time or over time[200]. - For the year ended December 31, 2024, no revenue was recognized on functional IP as the license agreement with ASPIS had not been delivered during the year[203]. Expenses and Cost Management - Cost of revenues decreased to $40,277 in 2024, down $62,790, or 61%, from $103,067 in 2023, mainly due to staff reductions[178]. - Research and development expenses were $246,019 for 2024, a decrease of $861,216, or 78%, from $1,107,235 in 2023, attributed to reduced staffing and software costs[179]. - Selling, general and administrative expenses were $4,310,218 in 2024, down $1,634,691, or 27%, from $5,944,909 in 2023, reflecting a decrease in employee count from 16 to 6[180]. Cash Flow and Liquidity - Net cash used in operating activities was $4,971,948 for 2024, a decrease from $5,582,139 in 2023, primarily due to a reduction in net loss[191]. - Net cash provided by financing activities was $3,278,235 in 2024, compared to $9,045,578 in 2023, reflecting a decrease in proceeds from common shares and warrants[193]. - The company had cash and cash equivalents of $3.1 million as of December 31, 2024, indicating ongoing liquidity concerns[187]. - The company plans to increase cash flow from operations and is evaluating strategic alternatives to address liquidity issues[189]. Impairment and Intangible Assets - The impairment of goodwill and other intangible assets was $0 for 2024, a decrease of $3,968,332, or 100%, from the previous year[181]. - The company impaired the remaining carrying value of intangible assets by $3,968,332 during the year ended December 31, 2023[195]. Revenue Recognition Policies - The company recognizes revenue from software-as-a-service (SAAS) over the life of the contract, with payment terms varying by contract[198]. - Cash received in advance for services is recorded as deferred revenue based on the proportion of time remaining under the service arrangement[204]. - The company recognizes advertising revenue on a net basis, acting as an agent in the transaction, and only upon achieving agreed-upon performance criteria[201]. - The company may enter into short-term convertible debt agreements to provide bridge capital, which includes a debt discount and a common stock conversion feature[205].

Core Points - Versus Systems Inc. has renewed its partnership with the Texas Rangers for the 2025 MLB season, marking the fourth consecutive year of collaboration [1][3] - The Filter Fan Cam, a significant part of the Texas Rangers' in-game entertainment, was utilized during their 2023 and 2024 World Series appearances, including their championship win in 2023 [2] - The partnership emphasizes Versus Systems' leadership in interactive sports entertainment, combining real-time fan engagement with augmented reality [3] Company Overview - Versus Systems is a leading provider of gamification and audience engagement technology, enabling brands to create rewarding, interactive experiences [5] - The company focuses on innovation and continues to expand globally, empowering organizations to enhance their engagement strategies [5]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Summary: Versus Systems Inc. (VS) - Versus Systems Inc. currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy), indicating a favorable outlook for the stock [2][3] - Over the past week, VS shares have increased by 36.3%, significantly outperforming the Zacks Internet - Software industry, which rose by 2.3% [5] - In a longer time frame, VS shares have gained 17.45% over the past quarter and 31.43% over the last year, while the S&P 500 has only moved 2.54% and 25.42%, respectively [6] - The average 20-day trading volume for VS is 3,480,361 shares, which is considered a bullish sign when combined with rising stock prices [7] Earnings Outlook - In the past two months, one earnings estimate for VS has moved higher, while none have moved lower, resulting in an increase in the consensus estimate from -$2.17 to -$1.65 [9] - For the next fiscal year, one estimate has also moved upwards with no downward revisions during the same period, indicating positive sentiment [9] Conclusion - Considering the positive momentum indicators and earnings outlook, VS is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a potential candidate for near-term investment [11]

Core Insights - Versus Systems is expanding into Brazil, targeting a market with over 100 million gamers and a strong inclination towards innovative technologies [1] - The company aims to leverage its gamification platform to enhance audience engagement across various industries in Brazil [1][5] Group 1: Company Expansion - Versus Systems has appointed Flavio Maria as the Country Manager for Brazil, who has extensive experience in leadership, marketing, and gaming [2][3] - Mr. Maria's background includes senior roles at PSN Network and Pepsi International, making him well-suited to lead the company's expansion in Latin America [3] Group 2: Market Potential - Brazil is recognized as a dynamic gaming market with a diverse consumer base, including casual mobile players and esports enthusiasts [4] - The increasing gaming revenues and digital engagement in Brazil present significant opportunities for innovation and audience connection [4][6] Group 3: Engagement Platform - The gamification platform of Versus Systems allows brands to create rewards-based interactive experiences, enhancing consumer engagement [5] - The platform can be integrated into various digital content, providing unique opportunities for brands to connect with consumers and drive loyalty [5] Group 4: Local Adaptation - Versus Systems plans to customize its offerings to align with local trends, focusing on Brazil's esports scene, mobile gaming growth, and interactive experiences [6]

Core Insights - Versus Systems is expanding into Brazil, a major global gaming market with over 100 million users, aiming to enhance audience engagement through its gamification platform [1][4] - The appointment of Flavio Maria as Country Manager is a strategic move to leverage his extensive experience in marketing and gaming to drive growth in the Brazilian market [2][3] Company Expansion - The expansion into Brazil is a significant milestone for Versus Systems as it seeks to grow its international presence [1] - Flavio Maria's background includes leadership roles in gaming and marketing, making him well-suited to lead the company's efforts in Brazil [2][3] Market Opportunity - Brazil's gaming market is characterized by a diverse consumer base, including casual mobile players and esports enthusiasts, presenting substantial opportunities for innovation and engagement [4][5] - The rise in gaming revenues and digital engagement in Brazil indicates a favorable environment for companies looking to connect with engaged audiences [4] Engagement Platform - Versus Systems' platform offers rewards-based interactive experiences, enhancing consumer engagement and loyalty [5][7] - The platform can be integrated into various digital content, providing unique opportunities for brands to connect with consumers during major sports and cultural events [5][6] Local Adaptation - The company plans to tailor its offerings to align with local trends, including the growth of mobile gaming and the vibrant esports scene in Brazil [6]

Revenue Performance - Revenue for the three months ended September 30, 2024, was $3,848, representing a decrease of $19,102, or 83%, from $22,950 for the same period in 2023[120] - Revenue for the nine months ended September 30, 2024, was $57,288, a decrease of $179,665, or 76%, from $236,953 for the same period in 2023[126] Expenses - Research and development expenses for the three months ended September 30, 2024, were $11,462, a decrease of $260,649, or 96%, from $272,111 for the same period in 2023[121] - Selling, general and administrative expenses for the three months ended September 30, 2024, were $521,410, a decrease of $1,095,751, or 68%, from $1,617,161 for the same period in 2023[122] - Operating loss for the three months ended September 30, 2024, was $529,024, a decrease of $1,360,868, or 72%, from $1,889,892 for the same period in 2023[123] Cash Position - Cash position as of September 30, 2024, was $471,248, down from $4,689,007 as of December 31, 2023[131] - Net cash used in operating activities for the nine-month period ended September 30, 2024, was $4,255,345, a slight improvement from $4,355,723 in the same period of 2023, indicating a decrease in cash outflow[138] - There was no cash used in investing activities for the nine-month period ended September 30, 2024, compared to $14,106 in the same period of 2023, reflecting a significant reduction in payroll capitalized for intangible asset development[139] - Net cash provided by financing activities was none for the nine-month period ended September 30, 2024, down from $5,362,978 in the same period of 2023, primarily due to the absence of proceeds from common share issuance[140] - The net increase (decrease) in cash for the nine-month period ended September 30, 2024, was $(4,217,759), compared to an increase of $989,951 in the same period of 2023[136] Financial Health and Future Outlook - The company incurred a net loss of approximately $3.5 million for the nine months ended September 30, 2024, compared to a net loss of $5,019,067 for the same period in 2023[133] - The company anticipates needing additional financing to execute its business plan, which may involve public or private equity or debt financings, raising concerns about potential dilution of current shareholders[135] - The company is experiencing declining revenues and is evaluating strategic alternatives to address liquidity concerns[135] - The company may be forced to make substantial reductions in operating expenses, including research and development, if additional funds cannot be raised[135] Customer Base - The company has five active customers as of December 31, 2023, down from one customer as of September 30, 2024, due to a decrease in the sales force[110] Debt and Financing - As of December 31, 2023, all promissory notes totaling $4,750,818 have been repaid, with no accrued interest recorded[141] Revenue Recognition - The company recognizes revenue on a monthly basis upon delivery or as services are provided, with cash received in advance recorded as deferred revenue[152]

Company Overview - Versus Systems Inc. has appointed Luis Goldner as Chief Executive Officer, effective immediately, succeeding Curtis Wolfe who served as interim CEO [1] - Luis Goldner is a member of the Board of Directors of Versus Systems and has extensive experience in executive management, including previous roles as CEO of Intralot do Brazil and Trust Impressores [1][2] - Versus Systems has developed a proprietary in-game prizing and promotions engine that allows game developers to offer real-world rewards to players [2] Leadership Experience - Luis Goldner has over 16 years of executive management experience in both private and public sectors, playing a key role in establishing Smart Card technology in Brazil and growing Intralot do Brazil into a leading lottery operator [2] - Goldner has also served as Chief Operating Officer and Board Member of ICARO Media Group, which provides AI-powered media technology [2] Strategic Vision - Goldner expressed excitement about his new role and aims to collaborate with the team to drive innovation and create value for stakeholders [2]

Core Viewpoint - Versus Systems, Inc. has been notified by NASDAQ that its stockholders' equity of $1,797,764 is below the required minimum of $2,500,000 for continued listing on the NASDAQ Capital Market [1] Group 1 - The company has until October 7, 2024, to submit a plan to regain compliance with the minimum stockholders' equity standard [2] - If the plan is accepted, NASDAQ may grant an extension of up to 180 calendar days to demonstrate compliance [2] - The company is developing options to increase stockholder equity and aims to file the plan by the deadline [3] Group 2 - Versus Systems has developed a proprietary in-game prizing and promotions engine that allows game developers to offer real-world rewards to players [4] - The company is headquartered in Los Angeles, California [4]

Revenue Performance - Revenue for the three months ended June 30, 2024, was $26,937, a decrease of $29,116, or 52%, from $56,053 for the same period in 2023[126] - Revenue for the six months ended June 30, 2024, was $53,440, representing a decrease of $160,563, or 75%, from $214,003 for the same period in 2023[131] Cost and Expenses - Cost of revenues for the three months ended June 30, 2024, was $16,231, a decrease of $7,339, or 31%, from $23,570 for the same period in 2023[127] - Research and development expenses for the three months ended June 30, 2024, were $67,203, a decrease of $650,464, or 91%, from $717,667 for the same period in 2023[127] - Selling, general and administrative expenses for the three months ended June 30, 2024, were $1,443,171, a decrease of $182,300, or 11%, from $1,625,471 for the same period in 2023[128] Net Loss - The net loss for the three months ended June 30, 2024, was $1,499,742, a decrease of $810,913, or 35%, from $2,310,655 for the same period in 2023[129] - The company incurred net losses of approximately $10.5 million and $22.4 million for the years ended December 31, 2023, and 2022, respectively[139] Cash Position - Cash position as of June 30, 2024, was $905,915, down from $4,689,007 as of December 31, 2023[137] - Net cash used in operating activities for the six months ended June 30, 2024, was $3,783,092, an increase from $3,514,003 in the same period of 2023[142] - The company reported a net cash decrease of $3,783,092 for the six months ended June 30, 2024, compared to an increase of $2,014,982 in the prior year[142] - There was no net cash provided by financing activities in the six months ended June 30, 2024, down from $5,538,655 in the same period of 2023[146] - The cash flow used in investing activities was $0 for the six months ended June 30, 2024, compared to $9,670 in the same period of 2023[145] Financing and Strategic Alternatives - The company completed a public direct offering in October 2023, receiving gross proceeds of approximately $3 million[139] - The company believes current resources and expected revenues will be insufficient to fund planned operations for the next twelve months[140] - The company has evaluated strategic alternatives due to declining revenues and liquidity concerns, indicating a need for additional financing[141] - The company may consider raising funds through public or private equity or debt financings, which could dilute current shareholders' ownership[141] - The company anticipates that any additional capital raised may come with restrictive covenants and significant interest costs[141] - All promissory notes totaling $4,750,818 issued from 2017 to December 31, 2022, have been repaid as of December 31, 2023[147] Tax Matters - The company has not recorded any accruals for interest and penalties related to income tax matters as of June 30, 2024, and 2023[154]