What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 342 added, 675 removed, 403 unchanged (72% of the section changed)

Financial Statements

Interim Consolidated Balance Sheets

in US Dollars)

June 30 December 31,

ASSETS (Unaudited)

Versus Systems Inc.

Condensed Consolidated Balance Sheets

September 30, December 31,

Current assets

Cash 471,248 4,689,007

Receivables, net of allowance (Note 4) 10,250 18,222

Receivables, net of allowance 754 18,222

Prepaids 770,935 160,474

Total current assets 1,242,937 4,867,703

Restricted deposit (Note 5) - 8,679

Property and equipment, net (Note 6) 878 1,935

Restricted deposit -

Property and equipment, net -

Total assets 1,242,937 4,878,317

1 unchanged sentence

Current liabilities

Accounts payable and accrued liabilities (Note 9, Note 10 and Note 12) 23,606 286,427

Accounts payable and accrued liabilities 25,783 286,427

Deferred revenue 1,164 35,049

Total liabilities 26,947 321,476

Commitments and contingencies (Note 12)

Stockholders’ equity

Share capital (Note 11)

Share capital

Common stock and additional paid in capital, no par value.

authorized shares;

2,506,015 common shares and no Class A shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively 147,290,988 147,130,123

Unlimited authorized shares;

2,506,015 common shares and no Class A shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 147,290,988 147,130,123

Accumulated other comprehensive income 276,947 248,287

1 unchanged sentence

8,901,106 11,944,388

Non-controlling interest (Note 7) ( 7,717,036 ) ( 7,387,547 )

Non-controlling interest ( 7,685,116 ) ( 7,387,547 )

Total stockholders’ equity 1,215,990 4,556,841

Total liabilities and stockholders’ equity 1,242,937 4,878,317

accompanying notes are an integral part of these condensed interim consolidated financial statements.

Statements of Operations and Comprehensive Loss (Unaudited)

in US Dollars, except share and per share amounts)

The accompanying notes are an integral part of

these condensed interim consolidated financial statements.

Versus Systems Inc.

Condensed Consolidated Statements of

Operations and Comprehensive Loss (Unaudited)

September 30,

Cost of revenues

3 unchanged sentences

Operating loss

( 1,499,668 )

( 2,310,655 )

( 3,001,104 )

( 3,637,544 )

Other income (expense):

Employee retention credit refund

Other income (expense)

Other income/(expense), net

Loss before provision

( 1,499,742 )

( 2,310,655 )

( 3,001,425 )

( 3,637,544 )

Provision for income taxes

( 1,499,742 )

( 2,310,655 )

( 3,001,425 )

( 3,637,544 )

Other total comprehensive income (loss):

2 unchanged sentences

Total comprehensive loss

( 1,378,568 )

( 2,291,806 )

( 2,840,560 )

( 3,609,347 )

comprehensive income attributable to non-controlling interest

comprehensive income (loss) attributable to non-controlling interest

Comprehensive loss attributable to shareholders

( 1,222,371 )

( 2,022,912 )

( 2,511,071 )

( 3,207,759 )

Basic and diluted earnings per share to shareholders

Weighted average shares - basic and diluted

accompanying notes are an integral part of these condensed interim consolidated financial statements.

Interim Consolidated Statements of Changes in Equity (Deficit) (Unaudited)

in US Dollars)

The accompanying notes are an integral part of

these condensed interim consolidated financial statements.

Versus Systems Inc.

Condensed Consolidated Statements of Changes

in Equity (Deficit) (Unaudited)

comprehensive

Stockholders’

2 unchanged sentences

( 135,434,022

( 7,387,547 )

translation adjustment

and comprehensive loss

( 136,762,413

( 1,328,391 )

( 1,501,683 )

( 136,762,413 )

( 7,560,839 )

translation adjustment

and comprehensive loss

( 1,343,545 )

( 1,499,742 )

at June 30, 2024

( 138,105,958

translation adjustment

at September 30, 2024

( 138,666,829

comprehensive

income (loss)

Stockholders’

2 unchanged sentences

( 125,907,025

( 6,402,387 )

issued in public offering

issuance costs

( 1,247,113 )

translation adjustment

and comprehensive loss

( 127,101,220

( 1,194,195 )

( 1,326,889 )

( 127,101,220 )

( 6,535,081 )

translation adjustment

and comprehensive loss

( 2,041,761 )

( 2,310,655 )

at June 30, 2023

( 129,142,981

translation adjustment

at September 30, 2023

( 130,322,821

accompanying notes are an integral part of these condensed interim consolidated financial statements.

Interim Consolidated Statements of Cash Flows (unaudited)

in US Dollars)

The accompanying notes are an integral part of

these condensed interim consolidated financial statements.

Versus Systems Inc.

Condensed Consolidated Statements of Cash Flows

September 30,

Cash flows from operating activities

OPERATING ACTIVITIES

( 3,001,425 )

( 3,637,544 )

Adjustments to reconcile net loss to net cash:

Amortization (Note 8)

Adjustments to reconcile net loss to cash used in operating activities:

Amortization of intangible assets

1 unchanged sentence

Accrued interest

Effect of foreign exchange

Share-based compensation

( 1,156,217 )

Changes in operating assets and liabilities:

Proceeds from office security deposit

Deferred revenue

1 unchanged sentence

Cash flows used in operating activities

( 3,783,092 )

( 3,514,003 )

INVESTING ACTIVITIES

Proceeds from sale of equipment

Purchase of intangible assets

Cash flows used in investing activities

FINANCING ACTIVITIES

2 unchanged sentences

Proceeds from share issuances

Payments for lease liabilities

Payments for finance lease liabilities

Payments of share issuance costs

Cash flows provided by financing activities

INVESTING ACTIVITIES

Proceeds from sale of equipment

Purchase of intangible assets

Cash flows used in investing activities

Effect of exchange rates on cash and cash equivalents

Change in cash during the period

( 3,783,092 )

Cash - Beginning of period

Cash - End of period

accompanying notes are an integral part of these condensed interim consolidated financial statements.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

NATURE OF OPERATIONS

23 unchanged sentences

(MLB), National Hockey League (NHL), National Basketball Association (NBA) and the National Football League (NFL) to drive audience engagement.

The Company is actively pursuing a

range of strategic alternatives aimed at maximizing shareholder value and strengthening its market position.

We are in the process

of evaluating and implementing commercial agreements to expand the distribution of applications that leverage our proprietary

These arrangements are intended to enhance market reach, drive user growth, and establish relationships with

distribution partners.

These collaborations may support technology and development, integrate complementary technologies, and

improve our competitive edge.

In parallel, we are exploring various

strategic options, including potential acquisitions, mergers, reverse mergers, and the sale of non-core assets.

These alternatives would

be designed to create synergies, streamline operations, and generate revenue.

We are also seeking strategic partnerships and evaluating

opportunities for capital raises to support our growth initiatives.

Furthermore, the Company is focused on enhancing operational efficiency

by optimizing processes and upgrading technology systems to reduce costs and improve profitability.

Strengthening our financial health

through better cash flow management and prudent financial practices is also a key priority.

These comprehensive efforts are aimed at positioning

the Company for long-term success and delivering sustainable value to our shareholders.

The Company is undertaking a strategic

transition by shifting its governing jurisdiction from British Columbia to Delaware.

This change is expected to better align with our

evolving business strategy and deliver several key benefits.

Firstly, the transition to Delaware is anticipated to enhance our access

to investors and financial institutions within the United States.

Delaware’s renowned business-friendly legal environment and proximity

Northeast’s economic and financial centers is expected to facilitate easier access to funding, increase our strategic

flexibility, and reduce the overall cost of capital.

This improved access to funding would be crucial in supporting our future growth

initiatives and financing our strategic plans.

Secondly, the move is expected to bolster

our ability to execute an acquisitive growth strategy.

By operating under Delaware’s well-established corporate laws, we believe

that we will be better positioned to use our capital stock as consideration for acquisitions and be able to structure transactions with

more legal certainty.

This capability will allow us to pursue strategic opportunities more effectively, expand our business portfolio,

and achieve our growth objectives through well-structured transactions.

Additionally, the change in jurisdiction

will enable us to more effectively focus management efforts on our U.S.

and international operations.

This realignment would help streamline

our governance and operational strategies across different regions, thereby enhancing our ability to manage and optimize each market effectively.

Furthermore, the enhanced profile of companies incorporated in Delaware with operations in the U.S.

is likely to make the Company more

attractive to key employees and executives, aiding in the recruitment and retention of top talent critical for driving innovation and

In conjunction with these changes, the

Company is also exploring opportunities to raise capital through its shareholders.

Engaging with our shareholder base could provide an

additional source of funding that aligns with our strategic goals.

Accretive capital raises would support our expansion plans, enable

us to capitalize on growth opportunities, and strengthen our financial position.

Overall, the shift to Delaware, combined with the exploration of acquisition

opportunities and investor engagement, is part of our broader strategy to enhance operational effectiveness, execute our growth strategy,

and maximize shareholder value.

In September 2024 the Company closed

down its operations within the United Kingdom, Versus Systems UK, Ltd.

The United Kingdom had limited activity for the nine months ended

September 30, 2024 and 2023, respectively.

On August 22, 2024, the Company received

a letter from The Nasdaq Capital Market (“Nasdaq”), notifying the Company that it is no longer in compliance with the minimum

stockholders’ equity requirement for continued listing on the Nasdaq Capital Market.

Nasdaq Listing Rule 5550(b)(1) requires listed

companies to maintain stockholders’ equity of at least $ 2.5 million.

In addition, as of August 22, 2024, the Company did not meet

the alternative compliance standards relating to the market value of listed securities or net income from continuing operations.

In October 2024, the Company entered into a $ 2,500,000

funding agreement with ASPIS Cyber Technologies (“ASPIS”).

At that time, ASPIS delivered to the Company $ 500,000 and agreed

to, on or before November 15, 2024, deliver to the Company an additional $ 2,000,000 .

However, the Company has informally agreed to defer

the $ 2,000,000 until Nasdaq has progressed further with its review of the Company’s plan.

Pursuant to that agreement, the Company

issued to ASPIS a senior convertible promissory note in the principal amount of the total amount funded.

The note provides that upon approval

by the Company’s shareholders and the Company’s redomiciling to Delaware the amount funded to date plus, at ASPIS’s

option, any accrued and unpaid interest thereon, will be converted into units of the Company, each equal to (a) one common share of the

Company and (b) a warrant to purchase one-half of one Common Share at a purchase price of $ 4.00 per one whole share, exercisable for five

Under the terms of the agreement, upon the Company’s shareholders’

approval and the Company’s redomiciling to Delaware, assuming only $ 2,500,000 is funded, ASPIS will receive upon the Conversion

2,155,172 Common Shares and warrants to purchase an additional 1,077,586 shares.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

NATURE OF OPERATIONS (CONTINUED)

Additionally,

the Company entered into a Technology License and Software Development Agreement (the “License Agreement”) in October 2024

which provides for the Company to license its gamification, engagement and QR code technology to ASPIS for use in ASPIS’s website

business and for development of additional functionality for Versus’ technology.

to the License Agreement, the Company granted ASPIS a license to use Versus’ technology in ASPIS’s website business that

provides cybersecurity technology.

ASPIS will pay for any required technology modifications, improvements and developments to Versus’

technology in addition to a license fee of $ 165,000 per month beginning in January 2025.

The Company will retain ownership of Versus’

technology and ASPIS will hold an exclusive license to use Versus’ technology in the cybersecurity industry so long as ASPIS continues

to pay the monthly license fee.

The License Agreement has an initial term of one year with successive renewal terms of one year each

upon ASPIS’s written approval, subject to earlier termination by the Company or ASPIS.

In October 2024, the Company warrant holders exercised

240,490 warrants issued in December 2023 offering upon such exercise, the Company issued 240,490 common shares at a price of $ 3.68 per

share, for $ 885,003 proceeds.

Going Concern

These condensed interim consolidated

2 unchanged sentences

Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future.

of June 30, 2024, 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.

of September 30, 2024, 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

5 unchanged sentences

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.

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

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.

(See Note 11 for additional information).

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Statement of compliance

These condensed interim consolidated

financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (U.S.

Basis of measurement

These condensed interim consolidated

financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments

at fair value.

In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting.

Functional and presentation

These condensed interim consolidated

financial statements are presented in United States dollars, unless otherwise noted, which is the functional currency of the Company and

its subsidiaries.

The accompanying unaudited interim condensed consolidated financial

statements have been prepared in accordance with U.S.

generally accepted accounting principles for interim financial information and with

the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”).

Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (including

normal recurring adjustments and the elimination of intercompany accounts) considered necessary for a fair statement of all periods presented.

The results of operations of the Company for any interim periods are not necessarily indicative of the results of operations for any other

interim periods or for a full fiscal year.

These unaudited interim condensed consolidated financial statements should be read in conjunction

with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for

the year ended December 31, 2023.

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.

For partially owned subsidiaries, the interest attributable to non-controlling

shareholders is reflected in non-controlling interest.

Adjustments to non-controlling interest are accounted for as transactions with

owners and adjustments that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

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.

Non-controlling

Non-controlling interest in the Company’s

less than wholly owned subsidiaries are classified as a separate component of equity.

On initial recognition, non-controlling interest

is measured at the fair value of the non-controlling entity’s contribution into the related subsidiary.

Subsequent to the original

transaction date, adjustments are made to the carrying amount of non-controlling interest for the non-controlling interest’s share

of changes to the subsidiary’s equity.

in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions.

The carrying amount of non-controlling interest is adjusted to reflect the change in the non-controlling interest’s relative interest

in the subsidiary, and the difference between the adjustment to the carrying amount of non-controlling interests and the Company’s

share of proceeds received and/or consideration paid is recognized directly in equity and attributed to owners of the Company.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Name of Subsidiary Place of Incorporation Proportion of

2 unchanged sentences

United States of America 81.9 % Holding Company

Versus Systems UK, Ltd.

United Kingdom 81.9 % Sales Company

Versus LLC United States of America 81.9 % Technology Company

13 unchanged sentences

but are not limited to, the following:

Deferred income taxes

Deferred tax assets, including those

arising from un-utilized tax losses, require management to assess the likelihood that the Company will generate sufficient taxable earnings

in future periods in order to utilize recognized deferred tax assets.

Assumptions about the generation of future taxable profits depend

on management’s estimates of future cash flows.

In addition, future changes in tax laws could limit the ability of the Company to

obtain tax deductions in future periods.

To the extent that future cash flows and taxable income differ significantly from estimates,

the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

BASIS OF PRESENTATION (continued)

Valuation of share-based compensation

The Company uses the Black-Scholes Option

Pricing Model for valuation of share-based compensation.

Option pricing models require the input of subjective assumptions including expected

price volatility, interest rate, and forfeiture rate.

Input assumptions changes can materially affect the fair value estimate and the

Company’s earnings (losses).

Depreciation and Amortization

The Company’s intangible assets

and equipment are depreciated and amortized on a straight-line basis, taking into account the estimated useful lives of the assets and

residual values.

Changes to these estimates may affect the carrying value of these assets, net loss, and comprehensive income (loss) in

future periods.

Determination of functional currency

The functional currency of the Company

and its subsidiaries is the currency of the primary economic environment in which each entity operates.

Determination of the functional

currency may involve certain judgments to determine the primary economic environment.

The functional currency may change if there is a

change in events and conditions which determines the primary economic environment.

Revenue Recognition

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.

SIGNIFICANT ACCOUNTING POLICIES

Basic and diluted loss per share

6 unchanged sentences

Potentially dilutive options and

warrants excluded from diluted loss per share as of June 30, 2024 totaled 911,775 (June 30, 2023 – 127,041 ).

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

warrants excluded from diluted loss per share as of September 30, 2024 totaled 911,775 (September 30, 2023 – 127,041 ).

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and equipment

Property and equipment is recorded at

cost less accumulated amortization and any impairments.

Amortization is calculated based on the estimated residual value and estimated

economic life of the specific assets using the straight-line method over the period indicated below:

Property and equipment is recorded at cost less

accumulated amortization and any impairments.

Depreciation is calculated based on the estimated residual value and estimated economic

life of the specific assets using the straight-line method over the period indicated below:

Computers Straight line, 3 years

Right of use assets Shorter of useful life or lease term

Financial instruments

Classification

The Company classifies its financial

instruments into the following categories:

at fair value through profit and loss (FVTPL), at fair value through other comprehensive income

(loss) (FVTOCI), or at amortized cost.

The classification of financial assets and liabilities is determined at initial recognition.

equity instruments, the Company generally classifies them at FVTPL.

However, certain equity investments that are not held for trading

may be measured at cost minus impairment if they do not have readily determinable fair values.

Debt instruments are classified based on

the Company’s business model for managing the financial assets and their contractual cash flow characteristics.

Financial liabilities

are measured at amortized cost, unless they are required to be measured at FVTPL, such as instruments held for trading or derivatives,

or if the Company opts to measure them at FVTPL.

Fair Value Measurements and Financial

The Company applies Accounting Standards

16 unchanged sentences

and liabilities approximate their fair values due to their short-term maturities.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

For fair value measurements categorized

within Level 3 of the fair value hierarchy, the Company uses its valuation processes to decide its valuation policies and procedures

and analyze changes in fair value measurements from period to period.

For assets and liabilities that are recognized in the financial

statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy

by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole)

at the end of each reporting.

Financial assets and liabilities

at amortized cost

Financial assets and liabilities at

amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized

cost less any impairment.

Financial assets and liabilities

Financial assets and liabilities carried

at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss.

Realized and unrealized gains and

losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in profit or loss in

the period in which they arise.

Impairment of financial assets at

amortized cost

The Company applies the Current Expected

Credit Loss (CECL) model under ASC 326 for impairment of financial assets.

This model requires the recognition of an allowance for credit

losses based on expected losses over the life of the asset.

If the credit risk of a financial asset decreases in a subsequent period,

any previously recognized impairment loss is reversed through profit or loss, limited to the extent that the carrying amount does not

exceed what the amortized cost would have been had the impairment not been recognized.

Intangible assets excluding goodwill

Derecognition of financial assets

The Company derecognizes financial assets

only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially

all of the associated risks and rewards of ownership to another entity.

Gains and losses on derecognition are generally recognized in

profit or loss.

As at June 30, 2024, the Company does

not have any derivative financial assets and liabilities.

Intangible assets acquired separately

were carried at cost at the time of initial recognition.

Intangible assets acquired in a business combination and recognized separately

from goodwill were initially recognized at their fair value at the acquisition date.

Expenditure on research activities is recognized

as an expense in the period in which it is incurred.

Intangibles with a finite useful life

were amortized and those with an indefinite useful life are not amortized.

The useful life is the best estimate of the period over which

the asset is expected to contribute directly or indirectly to the future cash flows of the Company.

The useful life is based on the duration

of the expected use of the asset by the Company and the legal, regulatory or contractual provisions that constrain the useful life and

future cash flows of the asset, including regulatory acceptance and approval, obsolescence, demand, competition and other economic factors.

If an income approach is used to measure the fair value of an intangible asset, the Company considers the period of expected cash flows

used to measure the fair value of the intangible asset, adjusted as appropriate for Company-specific factors discussed above, to determine

the useful life for amortization purposes.

If no regulatory, contractual, competitive, economic or other factors limit the useful life

of the intangible to the Company, the useful life is considered indefinite.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangibles with a finite useful life were amortized on the straight-line

method unless the pattern in which the economic benefits of the intangible asset are consumed or used up are reliably determinable.

Company evaluates the remaining useful life of intangible assets each reporting period to determine whether any revision to the remaining

useful life is required.

If the remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized

prospectively over the revised remaining useful life.

The Company’s intangible assets were amortized on a straight-line basis over

In the year development costs are incurred, amortization is based on a half year.

The Company allocates goodwill arising

from business combinations to reporting units that are expected to receive the benefits from the synergies of the business combination.

The carrying amount reporting units to which goodwill has been allocated was tested annually for impairment or when there is an indication

that the goodwill may be impaired.

Any impairment is recognized as an expense immediately.

Deferred financing costs

Deferred financing costs consist primarily

of direct incremental costs related to the Company’s public offering of its common stock.

Upon completion of the Company’s

financings any deferred costs were offset against the proceeds.

Impairment of intangible assets excluding

There are special requirements for the

development of software to be sold.

The costs incurred to establish the technological feasibility of the software that will be sold are

expensed as research and development when incurred.

Once technological feasibility has been achieved, the Company capitalizes the remaining

costs incurred to develop the software for sale.

Costs were capitalized until the product is ready to be sold or marketed to customers,

at which time, amortization of the capitalized costs begins.

At the end of each reporting period,

the Company reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have

suffered impairment losses.

If any such indication exists, fair value of the reporting unit or an asset group to which the asset belongs

is estimated in order to determine the extent of the impairment losses (if any).

If the fair value of an asset (or an

asset group/reporting unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or an asset group/reporting

unit ) is reduced to fair value.

Deferred financing costs consist primarily of

direct incremental costs related to the Company’s public offering of its common stock.

Upon completion of the Company’s financings

any deferred costs were offset against the proceeds in the condensed consolidated statement changes in shareholders’ equity.

The Company accounts for income taxes

3 unchanged sentences

loss and tax credit carry forwards, using enacted tax rates and laws that are expected to be in effect when the differences reverse.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A valuation allowance is recorded against

8 unchanged sentences

interest and/or penalties related to income tax matters in income tax expense.

As of June 30, 2024 and December 31, 2023, the Company

As of September 30, 2024 and December 31, 2023, the Company

did not record any accruals for interest and penalties.

4 unchanged sentences

for 2019 and forward for state tax purposes.

The Company early adopted ASC 842, Leases,

as of January 1, 2019 using the modified retrospective application.

The Company assesses at contract inception

24 unchanged sentences

future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the

Non-controlling interest

Non-controlling interest in the Company’s

less than wholly owned subsidiaries are classified as a separate component of equity.

On initial recognition, non-controlling interest

is measured at the fair value of the non-controlling entity’s contribution into the related subsidiary.

Subsequent to the original

transaction date, adjustments are made to the carrying amount of non-controlling interest for the non-controlling interest’s share

of changes to the subsidiary’s equity.

Changes in the Company’s ownership

interest in a subsidiary that do not result in a loss of control are recorded as equity transactions.

The carrying amount of non-controlling

interest is adjusted to reflect the change in the non-controlling interest’s relative interest in the subsidiary, and the difference

between the adjustment to the carrying amount of non-controlling interests and the Company’s share of proceeds received and/or consideration

paid is recognized directly in equity and attributed to owners of the Company.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Valuation of Equity Units Issued

20 unchanged sentences

ensures compliance with the fair value measurement and equity classification requirements of U.S.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

Share-based compensation

12 unchanged sentences

services received.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition

35 unchanged sentences

the stand-alone selling price, for each distinct performance obligation.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred revenue

14 unchanged sentences

gains and losses are generally recognized in profit or loss and presented within gain (loss) on foreign exchange.

At the end of each reporting period, the monetary assets and liabilities

of the Company and its subsidiaries that are denominated in foreign currencies are translated at the rate of exchange at the date of the

condensed interim consolidated balance sheets.

Non-monetary assets and liabilities that are denominated in foreign currencies are translated

at historical rates.

Revenues and expenses that are denominated in foreign currencies are translated at the exchange rates approximating

those in effect on the date of the transactions.

Foreign currency translation gains and losses are recognized in other comprehensive income

and accumulated in equity on the condensed interim consolidated statements of stockholders’ equity.

At the end of each reporting period,

the monetary assets and liabilities of the Company and its subsidiaries that are denominated in foreign currencies are translated at the

rate of exchange at the date of the condensed interim consolidated balance sheets.

Non-monetary assets and liabilities that are denominated

in foreign currencies are translated at historical rates.

Revenues and expenses that are denominated in foreign currencies are translated

at the exchange rates approximating those in effect on the date of the transactions.

Foreign currency translation gains and losses are

recognized in other comprehensive income and accumulated in equity on the condensed interim consolidated statements of stockholders’

Comprehensive income (loss)

3 unchanged sentences

Comprehensive loss differs from net loss for the

periods ended June 30, 2024 and 2023, due to the effects of foreign translation gains and losses.

periods ended September 30, 2024 and 2023, due to the effects of foreign translation gains and losses.

Recent accounting pronouncements

1 unchanged sentence

New accounting pronouncements

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint

Venture Formations (Subtopic 805-60):

In August 2023, the FASB issued ASU 2023-05, Business

Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement.

This ASU addresses accounting for assets and liabilities contributed

to a joint venture.

It requires entities to recognize and measure these contributions at fair value as of the joint venture formation

This ASU is applicable to all entities involved in forming joint ventures and is effective for joint ventures formed on or after

January 1, 2025.

The Company is currently evaluating how this ASU will impact its condensed interim consolidated financial statements

and disclosures.

This ASU addresses accounting for

assets and liabilities contributed to a joint venture.

It requires entities to recognize and measure these contributions at fair value

as of the joint venture formation date.

This ASU is applicable to all entities involved in forming joint ventures and is effective for

joint ventures formed on or after January 1, 2025.

The Company is currently evaluating how this ASU will impact its condensed consolidated

financial statements and disclosures.

In November 2023, the FASB issued ASU

13 unchanged sentences

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 Company is currently evaluating how this ASU will impact its condensed interim consolidated financial statements and disclosures.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

is currently evaluating how this ASU will impact its condensed consolidated financial statements and disclosures.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent adopted accounting pronouncements

In March 2023, the FASB issued ASU 2023-01,

Leases (Topic 842):

In March 2023, the FASB issued ASU 2023-01, Leases

Common Control Arrangements.

This ASU clarifies leasing transactions among entities under common control, emphasizing

the use of written terms for lease existence and classification.

It is effective for public business entities for fiscal years beginning

after December 15, 2023, including interim periods within those fiscal years.

The Company adopted the amendments in this update during

the current year and the adoption did not have a material impact on its condensed interim consolidated financial statements and disclosures.

In March 2023, the FASB issued ASU 2023-02,

Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional

Amortization Method.

This ASU clarifies leasing transactions among entities under common control, emphasizing the

use of written terms for lease existence and classification.

It is effective for public business entities for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years.

The Company adopted the amendments in this update during the current

year and the adoption did not have a material impact on its condensed consolidated financial statements and disclosures.

In March 2023, the FASB issued ASU 2023-02, Investments—Equity

Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.

This ASU expands the proportional amortization method to additional types of tax equity investments.

It allows entities

to apply this method to a broader range of investments that generate tax credits, providing greater flexibility in accounting for these

ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal

The Company adopted the amendments in this update during the current year and the adoption did not have a material impact on its

condensed interim consolidated financial statements and disclosures.

In March 2023, the FASB issued ASU 2023-03,

which amends various SEC paragraphs in the Accounting Standards Codification.

It allows entities to apply this

method to a broader range of investments that generate tax credits, providing greater flexibility in accounting for these investments.

ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Company adopted the amendments in this update during the current year and the adoption did not have a material impact on its condensed

consolidated financial statements and disclosures.

In March 2023, the FASB issued ASU 2023-03, which

amends various SEC paragraphs in the Accounting Standards Codification.

This includes amendments to Presentation of Financial Statements

7 unchanged sentences

The Company adopted the amendments in this update during the current year and the adoption did not have a material impact on its condensed

interim consolidated financial statements and disclosures.

consolidated financial statements and disclosures.

In October 2023, the FASB issued ASU 2023-06,

1 unchanged sentence

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

This ASU introduces changes to the disclosure requirements, aligning them more closely with the SEC’s initiatives for simplification

ASU introduces changes to the disclosure requirements, aligning them more closely with the SEC’s initiatives for simplification

It specifically addresses various amendments in the FASB Accounting Standards Codification in response to the SEC’s

3 unchanged sentences

The Company adopted the amendments in this update during the current year

and the adoption did not have a material impact on its condensed interim consolidated financial statements and disclosures.

and the adoption did not have a material impact on its condensed consolidated financial statements and disclosures.

Management does not believe any other

1 unchanged sentence

or future consolidated financial statements.

As of June 30, 2024, accounts receivable

consists of customer receivables of none and Goods and Services Tax (GST) receivable of $ 10,250 As of December 31, 2023, accounts receivable

consists of customer receivables of $ 8,680 (net an allowance for credit losses of $ 2,700 ) and GST receivable of $ 9,542 .

RESTRICTED DEPOSIT

As at June 30, 2024, restricted deposits

consisted of none (December 31, 2023 - $ 8,679 ) held in a guaranteed investment certificate as collateral for a corporate credit card.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT

At December 31, 2023

At June 30, 2024

At September 30, 2024

Accumulated amortization

1 unchanged sentence

Amortization for the period

At December 31, 2023

Amortization for the period

At June 30, 2024

At September 30, 2024

Carrying amounts

At December 31, 2023

At June 30, 2024

At September 30, 2024

The Company recorded depreciation expense of $ 878 and $ 8,444 for the

three months ended September 30, 2024 and 2023, respectively.

The Company recorded depreciation expense of $ 1,688 and $ 22,344 for the

nine months ended September 30, 2024 and 2023, respectively.

NON-CONTROLLING INTEREST IN VERSUS LLC

As of December 31, 2018, the Company

held a 41.3 % ownership interest in Versus LLC, a privately held limited liability company organized under the laws of the state of Nevada.

The Company consolidates Versus LLC as a result of having full control over the voting shares.

Versus LLC is a technology company that

is developing a business-to-business software platform that allows video game publishers and developers to offer prize-based matches of

their games to their players.

During 2019, the Company increased its ownership by 25.2 %

in a series of transactions through the issuance of common shares and warrants.

On March 1, 2022, the Company acquired

an additional 15.1 % interest in Versus LLC in exchange for 715 common shares of the Company.

The common shares were determined to have

a fair value of $ 186,294 .

As a result, the Company increased its ownership interest to 81.9 % and recorded the excess purchase price over

net identifiable assets of $ 4,562,631 against additional-paid-in-capital.

The effect on non-controlling interest was a reduction of $ 4,376,337 .

The following table presents summarized

financial information before intragroup eliminations for the non-wholly owned subsidiary as of and for the six months ended June 30, 2024

The Company holds a 81.9 % ownership interest in

Versus LLC, a privately held limited liability company organized under the laws of the state of Nevada.

The Company consolidates Versus

LLC as a result of having full control over the voting shares.

Versus LLC is a technology company that is developing a business-to-business

software platform that allows video game publishers and developers to offer prize-based matches of their games to their players.

The net loss for Versus, LLC for the three month and nine month periods

ended September 30, 2024 was $ 543,107 and $ 3,448,893 , respectively.

The net loss for Versus, LLC for the three month and nine month periods

ended September 30, 2023 was $ 2,363,489 and $ 4,995,685 , respectively.

The net income (loss) attributable to the non-controlling interest

for the three month and nine month periods ended September 30, 2024 was $( 31,920 ) and $ 297,569 , respectively The net income (loss) attributable

to the non-controlling interest for the three month and nine month periods ended September 30, 2023 was $ 215,958 and $ 603,271 , respectively

The following table presents summarized financial information before intragroup eliminations for the non-wholly owned subsidiary as of

September 30, 2024 and 2023.

September 30,

Non-controlling interest percentage

5 unchanged sentences

( 7,387,547 )

( 3,001,425 )

( 2,218,719 )

Net loss attributed to non-controlling interest

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS

Intangible assets were comprised of

a business-to-business software platform that allows video game publishers and developers to offer prize-based matches of their games

to their players.

The Company continued to develop new apps, therefore additional costs were capitalized during the years ended December

31, 2023 and 2022.

During the year ended December 31, 2023, the Company completed an impairment analysis of its intangible assets and

concluded the assets were impaired.

As a result, they recorded an impairment change in the amount of $ 3,968,332 during the year ended

December 31,2023.

Relationships

At December 31, 2022

( 1,656,691 )

( 1,745,854 )

( 3,968,332 )

At December 31, 2023

At June 30, 2024

Accumulated amortization

At December 31, 2022

At December 31, 2023

At June 30, 2024

Carrying amounts

At December 31, 2022

At December 31, 2023

At June 30, 2024

Intangible assets were comprised of a business-to-business

software platform that allows video game publishers and developers to offer prize-based matches of their games to their players.

continued to develop new apps, therefore additional costs were capitalized during the years ended December 31, 2023 and 2022.

year ended December 31, 2023, the Company completed an impairment analysis of its intangible assets and concluded the assets were impaired.

As a result, the Company impaired the remaining carrying value of the intangible assets.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

1 unchanged sentence

and accrued liabilities are comprised of the following:

September 30,

Accounts payable

1 unchanged sentence

Accrued liabilities

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

NOTES PAYABLE – RELATED PARTY

During the year ended December 31, 2023,

the Company repaid $ 2,519,835 of principal on its outstanding note payable – related party balances.

As at December 31, 2023, the

Company had recorded $0 in accrued interest.

During the three and six months ended

June 30, 2023 the Company recorded finance expense of $ 0 (December 31, 2023 - $ 60,770 ), related to bringing the notes to their present

Balance, December 31, 2022

Foreign currency adjustment

( 2,519,835 )

Cancellation of remaining debt

Balance, December 31, 2023

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES PAYABLE –

RELATED PARTY

the year ended December 31, 2023, the Company repaid $ 2,519,835 of principal on its outstanding note payable – related party balances.

As at December 31, 2023, the Company had recorded $0 in accrued interest.

the three and nine months ended September 30, 2024 and 2023 the Company recorded interest expense of $0 .

SHARE CAPITAL

Authorized share capital

The Company is authorized to issue

an unlimited number of Class A Shares and an unlimited number of common shares.

The Class A Shares and common shares do not have any

special rights or restrictions attached, respectively.

The Class A shares were converted to common shares on December 22, 2023, and as of December

31, 2023, there were no Class A Shares issued and outstanding and only common shares outstanding.

Company is authorized to issue an unlimited number of Class A Shares and an unlimited number of common shares.

Issued share capital

During the year ended December 31, 2023, the Company:

the year ended December 31, 2023, the Company:

i) Issued 156,250 shares at a price of $ 14.40 per share for total proceeds of $ 2,250,000 in a registered direct offering.

1 unchanged sentence

ii) Issued 283,875 common shares pursuant to exercise of 283,875 warrants at a price of $ 17.37 per share for total proceeds of $ 4,561,200 .

iii) Issued 815,217 shares at a price of $ 3.68 per share for total proceeds of $ 3,000,000 in a registered direct offering.

In connection with the offering, the Company incurred $ 453,345 in issuance costs as part of the transaction.

iv) Issued 989,903 shares at a price of $ 2.59 per share for total proceeds of $ 2,562,660 in a private placement.

v) Issued 21 shares upon the conversion of Class A shares.

During the six months ended June 30, 2024, the Company:

Did not enter into any capital transactions.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

the nine months ended September 30, 2024, the Company:

Did not enter into any

capital transactions.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHARE CAPITAL (continued)

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 10 % of the issued and outstanding common shares of the Company.

Options have a maximum term of ten

years and vesting is determined by the Board of Directors.

A continuity schedule of outstanding stock options is as

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 10 % of the issued and outstanding common shares of the

Options have a maximum term of ten years and vesting is determined by the Board of Directors.

continuity schedule of outstanding stock options is as follows:

Weighted Average

Exercise Price

Balance – December 31, 2022

Balance – December 31, 2023

Balance – June 30, 2024

During the three months ended June 30, 2024 and 2023 the Company recorded

share-based compensation of none and $ 90,896 , respectively, relating to options vested during the period.

During the six months ended

June 30, 2024 and 2023 the Company recorded share-based compensation of $ 160,865 and $( 1,156,217 ), respectively, relating to options vested

during the period.

The Company used the following assumptions in calculating

the fair value of stock options for the period ended:

2024 June 30,

– December 31, 2023

Outstanding –

September 30, 2024

the three months ended September 30, 2024 and 2023 the Company recorded share-based compensation of none and $ 1,909 , respectively, relating

to options vested during the period.

During the nine months ended September 30, 2024 and 2023 the Company recorded share-based compensation

of $ 160,865 and $( 1,154,308 ), respectively.

were no grants in the three-month and nine-month period ended September 30, 2024.

There were no grants in the three-month period ended

September 30, 2023.

The Company used the following assumptions in calculating the grant date fair value of stock options granted for

the nine-month period ended September 30, 2023:

September 30,

Risk-free interest rate 3.93 %

Expected life of options 3.38 years 5.0 years

Expected dividend yield Nil Nil

Expected life of options 5.0 years

Expected dividend yield Nil

Volatility 132.65 %

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHARE CAPITAL (continued)

At June 30, 2024, the Company had incentive

stock options outstanding as follows:

Expiry Date Options Outstanding Exercise

Price Weighted

Remaining Life

September 27, 2024 572 1,087.20 0.24

July 24, 2025 287 715.20 1.07

July 31, 2025 276 715.20 1.08

June 1, 2026 59 1,689.60 1.92

August 19, 2026 761 1,008.00 2.14

August 17, 2027 1,504 96.00 3.13

September 20, 2027 140 55.20 3.22

February 13, 2028 11,531 14.40 3.62

15,130 146.03 3.27

Share purchase warrants

A continuity schedule of outstanding share purchase warrants

is as follows:

continuity schedule of outstanding share purchase warrants is as follows:

Balance –December

Balance – December

– June 30, 2024

During the year ended December 31, 2023, the Company:

Balance – September

the year ended December 31, 2023, the Company:

i) Issued 10,938 placement agent warrants in conjunction with a registered direct offering on February 2, 2023, with an exercise price of $ 14.40 per share.

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

SHARE CAPITAL (continued)

ii) Issued 815,217 warrants in conjunction with a public offering on October 17, 2023, with an exercise price of $ 3.68 per share.

iii) Issued 24,457 placement agent warrants in conjunction with a public offering on October 17, 2023, with an exercise price of $ 4.05 per share.

The Company used the following assumptions

in calculating the fair value of the warrants for the period ended:

Company used the following assumptions in calculating the fair value of the warrants for the period ended:

Risk-free interest rate

4.13 % – 4.49 %

Expected life of warrants

2.06 – 4.80 years

Expected dividend yield

Weighted average fair value per warrant

At June 30, 2024, the Company had share

purchase warrants outstanding as follows:

September 30, 2024, the Company had share purchase warrants outstanding as follows:

Expiration Date Warrants

8 unchanged sentences

896,645 32.36 3.94

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

RELATED PARTY TRANSACTIONS

The following summarizes the Company’s

related party transactions, not disclosed elsewhere in these condensed interim consolidated financial statements, during the six months

ended June 30, 2024 and 2023.

Key management personnel includes the Chief Executive Officer (CEO), Chief Financial Officer (CFO) and certain

directors and officers and companies controlled or significantly influenced by them.

Key Management Personnel

Short-term employee benefits paid or accrued to the CEO of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to the CFO of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to a member of the advisory board of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to the Chief Technology Officer of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to a Director of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to the Chief People Officer of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Short-term employee benefits paid or accrued to other directors and officers of the Company, including share-based compensation vested for incentive stock options and performance warrants.

Other Related Party Payments

Office sharing and occupancy costs of

$ 0 (December 31, 2023 - $ 64,741 ) were paid or accrued to a corporation that shares management in common with the Company.

Amounts Outstanding

a) At June 30, 2024, a total of $ 0 (December 31, 2023 - $ 177,500 ) was included in accounts payable and accrued liabilities owing to officers, directors, or companies controlled by them.

These amounts are unsecured and non-interest bearing (Note 9).

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONCENTRATION OF RISK

Credit risk is the risk of financial

loss to the Company if a counterparty to a financial instrument fails to meet its payment obligations.

The Company has no material counterparties

to its financial instruments with the exception of the financial institutions which hold its cash.

The Company manages its credit risk

by ensuring that its cash is placed with a major financial institution with strong investment grade ratings by a primary ratings agency.

The Company’s receivables consist of goods and services due from customers and tax due from the Canadian government.

Financial instrument risk exposure

The Company is exposed in varying degrees

to a variety of financial instrument related risks.

The Board approves and monitors the risk management processes.

Liquidity risk

The Company’s cash is invested

in business accounts which are available on demand.

The Company has not raised additional capital during the three and six months ended

June 30, 2024.

Interest rate risk

The Company’s bank account earns

interest income at variable rates.

The fair value of its portfolio is relatively unaffected by changes in short-term interest rates.

1% change in interest rates would have no significant impact on profit or loss for the six months ended June 30, 2024.

Foreign exchange risk

Foreign currency exchange rate risk

is the risk that the fair value of financial instruments or future cash flows will fluctuate because of changes in foreign exchange rates.

The Company operates in Canada and the United States.

The Company was exposed to the following

foreign currency risk as at June 30, 2024 and December 31, 2023:

Accounts payable and accrued liabilities

As at June 30, 2024, with other variables

unchanged, a +/- 10 % change in the United States dollar to Canadian dollar exchange rate would impact the Company’s net loss by

$ 25,000 (December 31, 2023 - $ 152,500 ).

VERSUS SYSTEMS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2024

(Expressed in United States dollars)

Management of Capital

The Company manages its capital structure

and makes adjustments to it, based on the funds available to the Company.

Capital consists of items within equity (deficit).

of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s

management to sustain future development of the business.

The Company is not subject to any externally imposed capital requirements.

The Company remains dependent on external

financing to fund its activities.

In order to sustain its operations, the Company will spend its existing cash on hand and raise additional

amounts as needed until the business generates sufficient revenues to be self-sustaining.

Management reviews its capital management approach

on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

In order to maximize ongoing corporate

development efforts, the Company does not pay out dividends.

The Company’s investment policy is to keep its cash treasury invested

in certificates of deposit with major financial institutions.

There have been no changes to the Company’s

approach to capital management during the six months ended June 30, 2024.

GEOGRAPHICAL SEGMENTED INFORMATION

The Company is engaged in three business

activities, the live events business, which includes partnering with multiple professional sports franchises to drive in-stadium audience

a software licensing business creating a recurring revenue stream;

and a business-to-business software platform that allows

video game publishers and developers to offer prize-based matches of their games to their players.

Details of identifiable assets by geographic

segments are as follows:

June 30, 2024

June 30, 2023

risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its payment obligations.

The Company has no material counterparties to its financial instruments with the exception of the financial institutions which hold its

The Company manages its credit risk by ensuring that its cash is placed with a major financial institution with strong investment

grade ratings by a primary ratings agency.

The Company’s receivables consist of goods and services due from customers and tax due

from the Canadian government.

and CONTINGENCIES

time to time, the Company is involved in legal proceedings and other matters arising in connection with the conduct of its business activities.

Many of these proceedings may be at the preliminary stages and/or seek an indeterminate amount of damages.

In the opinion of management,

after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not currently expect them to have

a material adverse effect on our business, financial condition, results of operations, or liquidity.

SUBSEQUENT EVENTS

The Company has evaluated subsequent

events after the balance sheet date of June 30, 2024 through August 14, 2024, the date the 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 interim consolidated financial statements or disclosure in the notes thereto.

ASPIS Agreements

On October 7, 2024, the Company entered into two

agreements with ASPIS.ASPIS, an affiliate of the Company’s largest shareholder—Cronus Equity Capital Group, LLC (“CECG”)—is

a cloud-based mobile endpoint cyber security technology company for anti-tapping and anti-hacking within the government, finance, gaming

and social media sectors.

CEGC holds approximately 39.5 % of the outstanding common shares of the Company.

The first agreement was a $ 2,500,000 funding agreement

At that time, ASPIS delivered to the Company $ 500,000 and agreed to, on or before November 15, 2024, deliver to the Company

an additional $ 2,000,000 .

However, the Company has informally agreed to defer the $ 2,000,000 until Nasdaq has progressed further with

its review of the Company’s plan.

Pursuant to that agreement, the Company issued to ASPIS a senior convertible promissory note in

the principal amount of the total amount funded.

The note provides that upon approval by the Company’s shareholders and the Company’s

redomiciling to Delaware the amount funded to date plus, at ASPIS’s option, any accrued and unpaid interest thereon, will be converted

into units of the Company, each equal to (a) one common share of the Company and (b) a warrant to purchase one-half of one Common Share

at a purchase price of $ 4.00 per one whole share, exercisable for five years.

Under the terms of the agreement, upon the Company’s

shareholders’ approval and the Company’s redomiciling to Delaware, assuming only $2,500,000 is funded, ASPIS will receive

upon the Conversion 2,155,172 Common Shares and warrants to purchase an additional 1,077,586 shares.

Additionally, the Company entered into a Technology

License and Software Development Agreement (the “License Agreement”) in October 2024 which provides for the Company to license

its gamification, engagement and QR code technology to ASPIS for use in ASPIS’s website business and for development of additional

functionality for Versus’ technology.

Pursuant to the License Agreement, the Company

granted ASPIS a license to use Versus’ technology in ASPIS’s website business that provides cybersecurity technology.

will pay for any required technology modifications, improvements and developments to Versus’ technology in addition to a license

fee of $ 165,000 per month beginning in January 2025.

The Company will retain ownership of Versus’ technology and ASPIS will hold

an exclusive license to use Versus’ technology in the cybersecurity industry so long as ASPIS continues to pay the monthly license

The License Agreement has an initial term of one year with successive renewal terms of one year each upon ASPIS’s written approval,

subject to earlier termination by the Company or ASPIS.

In October 2024, the Company warrant holders

exercised 240,490 warrants issued in December 2023 offering upon such exercise, the Company issued 240,490 common shares at a price of

$ 3.68 per share, for $ 885,003 proceeds.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements