What changed in this filing

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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-04-01 · 1252 added, 1806 removed, 364 unchanged (89% of the section changed)

3 unchanged sentences

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.

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

4 unchanged sentences

our chief executive officer, as appropriate, to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control

Over Financial Reporting.

is responsible for establishing and maintaining adequate internal control over our financial reporting.

In order to evaluate the effectiveness

of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment

using the criteria in the updated Internal Control-Integrated Framework, issued in 2013 by the Committee of Sponsoring Organizations of

the Treadway Commission (“COSO”).

Our system of internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance

with generally accepted accounting principles.

on our evaluation under the framework in Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officer

concluded that our internal control over financial reporting was effective as of December 31, 2023.

Because of its inherent limitations,

internal control over financial reporting may not prevent or detect misstatements.

In addition, projections of any evaluation of effectiveness

to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of

compliance with the policies or procedures may deteriorate.

This Annual Report does not include an attestation report of our independent

registered public accounting firm regarding internal control over financial reporting.

Management's report on internal control over financial

reporting was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit

us to provide only management's report in this Annual Report.

Management’s Annual Report on Internal

Control Over Financial Reporting.

Management is responsible

for establishing and maintaining adequate internal control over our financial reporting.

In order to evaluate the effectiveness of internal

control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment using

the criteria in the updated Internal Control-Integrated Framework, issued in 2013 by the Committee of Sponsoring Organizations of the

Treadway Commission (“COSO”).

Our system of internal control over financial reporting is designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles.

Based on our evaluation under

the framework in Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officer concluded that our internal

control over financial reporting was effective as of December 31, 2024.

Because of its inherent limitations, internal control over financial

reporting may not prevent or detect misstatements.

In addition, projections of any evaluation of effectiveness to future periods are

subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies

or procedures may deteriorate.

This Annual Report does not

include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Management’s report on internal control over financial reporting was not subject to attestation by our independent registered public

accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial

4 unchanged sentences

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

and Senior Management

following table sets forth the names and ages of the members of our board of directors and our executive officers and the positions held

Our board of directors elects our executive officers annually by majority vote.

Each director’s term continues until his

or her successor is elected or qualified at the next annual meeting, unless such director earlier resigns or is removed.

Positions and Offices

Matthew Pierce

Directors and Senior Management

The following table sets forth

the names and ages of the members of our board of directors and our executive officers and the positions held by each.

Our board of directors

elects our executive officers annually by majority vote.

Each director’s term continues until his or her successor is elected or

qualified at the next annual meeting, unless such director earlier resigns or is removed.

Director and Chief Executive Officer

Craig Finster

President and Chief Financial Officer

Chief Financial Officer

Chief Technology Officer

Keyvan Peymani

Executive Chairman of the Board of Directors

Michelle Gahagan

Independent Director

Shannon Pruitt

Independent Director

Aric Spitulink

Independent Director

2 unchanged sentences

Independent Director

following is information about the experience and attributes of the members of our board of directors and senior executive officers as

of the date of this Annual Report.

The experience and attributes of our directors discussed below provide the reasons that these individuals

were selected for board membership, as well as why they continue to serve in such positions.

Pierce , 46, was the Founder of Versus LLC and joined our company as Chief Executive Officer and a director in 2016.

over 20 years of experience working in entertainment and technology.

Prior to founding Versus Systems, Mr.

Pierce founded in June 2014

and was until June 2016 the chief executive officer of OLabs, LLC, a technology incubator that founded Versus.

From April 2011 to June

Pierce was Vice President of Strategy at Originate Inc., a business incubator where he worked with early-stage technology companies.

Since 2014, Mr.

Pierce has been a Lecturer at the University of California, Los Angeles, or UCLA, Anderson School of Management and in

the Economics department at UCLA, where he teaches entrepreneurship.

Pierce is a graduate of Stanford University and earned his MBA

from the UCLA Anderson School of Management.

Finster , 47, joined our company as Chief Financial Officer in 2016 and additionally as President in 2019.

Finster has over 20

years of experience in finance, accounting, and corporate development for technology companies.

Between April 2010 and March 2019, Mr.

Finster worked at Originate, Inc.

in a variety of roles, including Sr.

Vice President of Corporate Partnerships and Managing Director

of Originate’s Strategic Advisory Group, which focused on capital advisory for early and growth stage companies.

He received his

bachelor’s degrees in economics and finance from the University of Arizona and his MBA from the UCLA Anderson School of Management.

Peachey , 49, joined our company as Chief Technology Officer in May 2016.

Peachey leads the architecture efforts for our Elixir-based

Winfinite challenge platform.

The following is information

about the experience and attributes of the members of our board of directors and senior executive officers as of the date of this Annual

The experience and attributes of our directors discussed below provide the reasons that these individuals were selected for board

membership, as well as why they continue to serve in such positions.

Luis Goldner ,

56, joined our company as a director in December 2023 and became our Chief Executive Office in August 2024.

Goldner is a senior corporate

executive, having managed and operated fortune 500 companies in LATAM and North America.

Goldner has served as Chief Operating Officer

of Icaro Media Group Inc.

since 2019, and is responsible for global partnerships, consumer trends and operational best practices.

2018 to 2019, Mr.

Goldner was the VP of Business at Skyy Digital Media Group.

Previously, Mr.

Goldner served as Chief Executive Officer

of Intralot do Brazil and Chief Executive Officer for Trust Impressores, a subsidiary of Oberthur Group and has also served as head of

business development and Managing director of Estrategia Investimentos SA / Citibank in asset management.

Goldner holds a degree

in Economics from Universidade Gama Filho RJ–Brazil.

Geoff Deller , 43, joined our company as

a Chief Financial Officer in July 2024.

Prior to joining the Company, Mr.

Deller was the President and Chief Investment Officer of Orinoco

Capital LLC, a private investment company, in Boca Raton, Florida and prior to that, he was a member of the advisory board and Chief

Operating Officer of Stardom Chance Productions & Companies, an entertainment and content production company in Hialeah, Florida.

Prior to that, he was the Chief Financial Officer and Co-COO, of a consumer products company in the oral healthcare industry in Ft.

Alex Peachey , 50, joined

our company as Chief Technology Officer in May 2016.

Peachey leads the architecture efforts for our Elixir-based Winfinite challenge

Prior to joining us, Mr.

Peachey founded Threadbias LLC in January 2011, an online community for people

who love to sew and wish to exchange ideas, share projects and join or create groups.

Peachey founded Threadbias LLC in January 2011, an online community for people who love to sew and

wish to exchange ideas, share projects and join or create groups.

He continues to serve as their CEO.

From February

2012 to May 2016, Mr.

From February 2012 to May 2016,

Peachey served the Director of Engineering at Originate, Inc., where he managed a team of software engineers.

holds a BS in Computer Science from Western Washington University and an MBA from the University of Washington.

Keyvan Peymani , 47,

joined our company as a director in 2016 and became Executive Chairman of the Board of Directors in April 2020.

veteran senior executive and leader working at the intersection of technology, media, and venture capital.

Since April 2021 Mr.

has been the Chief Marketing Officer of Cirque du Soleil.

From March 2017 to January 2019, Mr.

Peymani served as the Head

of Startup Marketing for Amazon Web Services where he was responsible for the global marketing strategy.

Since January 2016, he

has been serving as a Venture Partner and Senior Advisor to Touchdown Ventures, a venture capital firm pairing with several leading corporations

to establish and manage their platforms.

From June 2012 to February 2016, Mr.

Peymani served as the Managing Director,

Digital Strategy Division at ICM Partners, one of the world’s largest talent and literary agencies, and was the firm’s chief

digital executive, reporting to the Executive Board.

Peymani has a BA in Religious Studies and a BA in Neurobiology with concentrations

in Neuroscience from Northwestern University.

He holds an MBA from the UCLA Anderson School of Management.

Gahagan , 65, joined our company as a director in 2016.

Since May 2006, Ms.

Gahagan has been serving as the Managing Director of Intrepid

Financial, a privately-held merchant bank based in Vancouver, British Columbia and London, England.

In August 2014, Ms.

Gahagan founded

and has since been serving as a director of France Bike Rentals, a large bike rental business with over 500 rental bikes and over 2,500

annual reservations.

Since January 2018, Ms.

Gahagan has been serving as the Board Chair of Canadian Palladium Resources, an exploration

company specializing in palladium and cobalt projects.

From February 2016 to June 2018, she also served as a director at US Cobalt Inc.,

a Canadian-based company focused on the exploration of cobalt assets in the Idaho cobalt belt.

Gahagan graduated from Queens University

Law School and practiced corporate law for 20 years.

Gahagan has extensive experience advising companies with respect to international

tax-driven structures, mergers and acquisitions.

Shannon Pruitt , 49, joined

our company as a director in September 2022.

Pruitt has served as the Global Chief Content Officer of Stagwell Media Network since

September 2021, where she is responsible for global content-related agency and client partnerships, products and solutions.

the Stagwell acquisition of MDC Media Partners, where she was President of Content, Managing Director, from August 2020 to December

Pruitt was promoted into her global role within the Stagwell Media Network.

From July 2019 to August 2020, she was the Managing

Partner, EVP:

Walt Disney Television Networks Portfolio.

Pruitt has extensive consumer engagement and marketing experience from her

prior roles as Chief Marketing Officer of The Honest Company (2018-2019), Co-founder and President of Dentsu’s The Story Lab (2014-2017),

and Chief Content Officer at Carat (2017-2018).

She has also previously built and led integrated marketing and sales teams at global

production powerhouses Fremantle Media, Mark Burnett Productions, Warner Bros, 19 Entertainment, and Octagon, where she was responsible

for the strategy and activation of MasterCard’s FIFA World Cup, Major League Baseball and the NFL sponsorships.

Luis Goldner , 55,

joined our company as a director in December 2023.

Goldner is a senior corporate executive, having managed and operated fortune 500

companies in LATAM and North America.

Goldner has served as Chief Operating Officer of Icaro Media Group Inc.

since 2019, and

is responsible for global partnerships, consumer trends and operational best practices.

From 2018 to 2019, Mr.

Goldner was the

VP of Business at Skyy Digital Media Group.

Previously, Mr.

Goldner served as Chief Executive Officer of Intralot do Brazil and Chief

Executive Officer for Trust Impressores, a subsidiary of Oberthur Group and has also served as head of business development and Managing

director of Estrategia Investimentos SA / Citibank in asset management.

Goldner holds a degree in Economics from Universidade Gama

Filho RJ–Brazil.

David Catzel , 70,

joined our company as a director in December 2023.

Catzel is an accomplished business and technology

executive with an extensive history of strategic alliances in media content, licensing, marketing and technology.

He holds a BS in Computer

Science from Western Washington University and an MBA from the University of Washington.

David Catzel , 71, joined

our company as a director in December 2023.

Catzel is an accomplished business and technology executive with an extensive history

of strategic alliances in media content, licensing, marketing and technology.

Since 2020, Mr.

has served as a consultant to the Holistyx Group and a Senior 5G Connectivity Solutions Specialist to T-Mobile.

From 2017 to 2020, he

was the VP Digital Transformation at FuseConnections.

From 2020 to 2023 he was also

a Senior Industry Digital Strategist:

Catzel has served as a consultant to the

Holistyx Group and a Senior 5G Connectivity Solutions Specialist at T-Mobile.

From 2017 to 2020, he was the VP Digital Transformation

at FuseConnections.

From 2020 to 2023 he was also a Senior Industry Digital Strategist:

Automotive, Mobility, and Transportation at Microsoft.

Aric Spitulnik , 54,

joined our company as a director in November 2024.

Mr, Spitulnik is a distinguished business leader with over 32 years of professional

A veteran C-suite executive, Mr.

Spitulnik has collaborated with multiple Boards of Directors frequently assuming Chairmanship

roles and has provided governance and strategic leadership across various entities.

As CEO of a privately-owned company for 9 years, he

consistently delivered positive revenue growth.

His leadership roles also include serving as Senior Vice President, overseeing the budget

for $1.2 billion in revenue and 7,000 employees, and as President, managing $100 million in revenue and 1,200 employees.

holds an MBA and a BS in Business from York College of Pennsylvania.

Juan Carlos Barrera ,

61, joined our company as a director in December 2023.

Barrera is a senior corporate executive

with extensive experience in finance, international investments, acquisitions and global partnerships.

Barrera is a senior corporate executive with extensive experience in finance,

international investments, acquisitions and global partnerships.

Since 2020, Mr.

Barrera has served

as Chief Commercial Officer of Icaro Media Group Inc., responsible for strategic partnerships and global strategy.

From 2015 to 2019,

Barrera served as President of SKYY Digital Media.

He was also previously the CEO of Global Select Wealth Management, and for over

twenty years Mr.

Barrera worked at Prudential Financial where he served both as Director of Institutional Wealth Management at Prudential

International Investments and Director of Institutional Investments at Dryden Wealth Management.

Barrera holds degrees in Economics

and Business Administration from Coe College.

Barrera has served as Chief Commercial Officer of Icaro

Media Group Inc., responsible for strategic partnerships and global strategy.

From 2015 to 2019, Mr.

Barrera served as President of SKYY

Digital Media.

He was also previously the CEO of Global Select Wealth Management, and for over twenty years Mr.

Barrera worked at Prudential

Financial where he served both as Director of Institutional Wealth Management at Prudential International Investments and Director of

Institutional Investments at Dryden Wealth Management.

Barrera holds degrees in Economics and Business Administration from Coe College.

Board Practices

Composition and Structure;

Board Composition and Structure;

Director Independence

business and affairs are managed under the direction of our board of directors.

Our business and affairs are

managed under the direction of our board of directors.

Our board of directors currently consists of seven members.

The term of office for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation

or removal, whichever is earliest to occur.

we do not have a stand-alone diversity policy, in considering whether to recommend any director nominee, including candidates recommended

by shareholders, we believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant

mix of experience, knowledge and abilities that will allow our board of directors to fulfill its responsibilities.

As set forth in our

corporate governance guidelines, when considering whether directors and nominees have the experience, qualifications, attributes or skills,

taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and

structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information

discussed in each of the directors’ individual biographies set forth above.

We believe that our directors and director nominees

will provide an appropriate mix of experience and skills relevant to the size and nature of our business.

board of directors expects a culture of ethical business conduct.

Our board of directors encourages each member to conduct a self-review

to determine if he or she is providing effective service with respect to both our company and our shareholders.

Should it be determined

that a member of our board of directors is unable to effectively act in the best interests of our shareholders, such member would be

encouraged to resign.

Leadership Structure

Our articles and our corporate governance guidelines provide our board

of directors with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance

with its determination that utilizing one or the other structure is in the best interests of our company.

Matthew Pierce currently serves

as our Chief Executive Officer and Keyvan Peymani serves as Executive Chairman of the Board.

As Executive Chairman of the Board, Mr.

Peymani’s key responsibilities

will include facilitating communication between our board of directors and management, assessing management’s performance, managing

board members, preparation of the agenda for each board meeting, acting as chair of board meetings and meetings of our company’s

shareholders and managing relations with shareholders, other stakeholders and the public.

will take steps to ensure that adequate structures and processes are in place to permit our board of directors to function independently

of management.

The directors will be able to request at any time a meeting restricted to independent directors for the purposes of discussing

matters independently of management and are encouraged to do so should they feel that such a meeting is required.

Private Issuer Status

In our annual assessment of our foreign private issuer status on June 30,

2023, we determined that we no longer meet the requirements of a foreign private issuer.

As a result, as of January 1, 2024, we are

no longer permitted to follow the corporate governance practices of our home country (Canada) and to avail ourself of the reduced disclosure

requirements and applicable exemptions from U.S.

securities rules and regulations.

Effective on January 1, 2024, we transitioned

domestic reporting status and became subject to the reporting requirements of domestic U.S.

of our Board of Directors

standing committees of our board of directors consist of an audit committee, a compensation committee and a nominating and corporate

governance committee.

Each of the committees reports to our board of directors as they deem appropriate and as our board may request.

Each committee of our board of directors has a committee charter that will set out the mandate of such committee, including the responsibilities

of the chair of such committee.

composition, duties and responsibilities of these committees are set forth below.

audit committee is responsible for, among other matters:

● appointing,

retaining and evaluating our independent registered public accounting firm and approving all services to be performed by them;

our independent registered public accounting firm’s qualifications, independence and performance;

the financial reporting process and discussing with management and our independent registered public accounting firm the interim and

annual financial statements that we file with the SEC;

and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory

requirements;

● establishing

procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters;

and approving related person transactions.

Our audit committee consists of three of our directors, Michelle Gahagan,

Shannon Pruitt, and Juan Carlos Barrera, each of whom meets the definition of “independent director” for purposes of serving

on an audit committee under Rule 10A-3 under the Exchange Act and Nasdaq listing rules.

Gahagan serves as chairman of our audit committee.

Our board of directors has determined that Ms.

Gahagan qualifies as an “audit committee financial expert,” as such term is

defined in Item 407(d)(5) of Regulation S-K under the Securities Act.

The written charter for our audit committee is available on our

corporate website at www.versussystems.com .

The information on our website is not part of this Annual Report.

compensation committee is responsible for, among other matters:

key employee compensation goals, policies, plans and programs;

and approving the compensation of our directors, chief executive officer and other executive officers;

an annual report on executive compensation in accordance with the rules and regulations promulgated by the SEC;

and approving employment agreements and other similar arrangements between us and our executive officers;

● administering

our stock plans and other incentive compensation plans.

Our compensation committee consists of three of our directors, Michelle

Gahagan, Shannon Pruitt, and David Catzel, each of whom meets the definition of “independent director” under the Nasdaq rules

and the definition of non-employee director under Rule 16b-3 promulgated under the Exchange Act.

Gahagan serves as chairman of our

The term of office

for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation or removal, whichever

is earliest to occur.

While we do not have a stand-alone

diversity policy, in considering whether to recommend any director nominee, including candidates recommended by shareholders, we believe

that the backgrounds and qualifications of the directors, considered as a group, should provide a significant mix of experience, knowledge

and abilities that will allow our board of directors to fulfill its responsibilities.

As set forth in our corporate governance guidelines,

when considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable

our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors

focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’

individual biographies set forth above.

We believe that our directors and director nominees will provide an appropriate mix of experience

and skills relevant to the size and nature of our business.

Our board of directors expects

a culture of ethical business conduct.

Our board of directors encourages each member to conduct a self-review to determine if he or she

is providing effective service with respect to both our company and our shareholders.

Should it be determined that a member of our board

of directors is unable to effectively act in the best interests of our shareholders, such a member would be encouraged to resign.

Board Leadership Structure

Our articles and our corporate

governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the Board and

Chief Executive Officer in accordance with its determination that utilizing one or the other structure is in the best interests of our

Luis Goldner currently serves as our Chief Executive Officer and Juan Carlos Barrera serves as Chairman of the Board.

As Chairman of the

Barrera’s key responsibilities will include facilitating communication between our board of directors and management,

assessing management’s performance, managing board members, preparation of the agenda for each board meeting, acting as chair of

board meetings and meetings of our company’s shareholders and managing relations with shareholders, other stakeholders and the

We will take steps to ensure

that adequate structures and processes are in place to permit our board of directors to function independently of management.

The directors

will be able to request at any time a meeting restricted to independent directors for the purpose of discussing matters independently

of management and are encouraged to do so should they feel that such a meeting is required.

Committees of our Board of Directors

The standing committees of

our board of directors consist of an audit committee, a compensation committee and a nominating and corporate governance committee.

of the committees reports to our board of directors as they deem appropriate and as our board may request.

Each committee of our board

of directors has a committee charter that will set out the mandate of such committee, including the responsibilities of the chair of

such committee.

The composition, duties and

responsibilities of these committees are set forth below.

Audit Committee

The audit committee is responsible

for, among other matters:

appointing, retaining and

evaluating our independent registered public accounting firm and approving all services to be performed by them;

overseeing our independent

registered public accounting firm’s qualifications, independence and performance;

overseeing the financial

reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial

statements that we file with the SEC;

reviewing and monitoring

our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements;

establishing procedures

for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters;

reviewing and approving

related person transactions.

Our audit committee consists

of three of our directors, Aric Spitulnik, David Catzel and Juan Carlos Barrera, each of whom meets the definition of “independent

director” for purposes of serving on an audit committee under Rule 10A-3 under the Exchange Act and Nasdaq listing rules.

serves as chairman of our audit committee.

Our board of directors has determined that Mr.

Spitulnik qualifies as an “audit committee

financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K under the Securities Act.

The written charter for

our audit committee is available on our corporate website at www.versussystems.com .

The information on our website is not part

of this Annual Report.

Compensation Committee

Our board of directors has adopted a written charter for the compensation committee, which is available on our

corporate website at www.versussystems.com .

The information on our website is not part of this Annual Report.

and Corporate Governance Committee

nominating and corporate governance committee will be responsible for, among other matters:

● determining

the qualifications, qualities, skills and other expertise required to be a director and developing and recommending to the board for

its approval criteria to be considered in selecting nominees for director;

● identifying

and screening individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;

the organization of our board of directors to discharge our board’s duties and responsibilities properly and efficiently;

the committee structure of the board of directors and the composition of such committees and recommending directors to be appointed to

each committee and committee chairmen;

● identifying

best practices and recommending corporate governance principles;

and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.

nominating and corporate governance committee consists of three of our directors, Michelle Gahagan, Shannon Pruitt, and Luis Goldner,

each of whom meets the definition of “independent director” under the Nasdaq rules.

Gahagan serves as chairman of our

The compensation committee

is responsible for, among other matters:

reviewing key employee

compensation goals, policies, plans and programs;

reviewing and approving

the compensation of our directors, chief executive officer and other executive officers;

producing an annual report

on executive compensation in accordance with the rules and regulations promulgated by the SEC;

reviewing and approving

employment agreements and other similar arrangements between us and our executive officers;

administering our stock

plans and other incentive compensation plans.

Our compensation committee

consists of three of our directors, Aric Spitulnik, David Catzel, and Juan Carlos Barrera, each of whom meets the definition of “independent

director” under the Nasdaq rules and the definition of non-employee director under Rule 16b-3 promulgated under the Exchange Act.

Barrera serves as chairman of our compensation committee.

Our board of directors has adopted a written charter for the compensation

committee, which is available on our corporate website at www.versussystems.com .

The information on our website is not part of

this Annual Report.

Nominating and Corporate Governance Committee

Our board of directors has adopted a written charter for the nominating and corporate

governance committee, which is available on our corporate website at www.versussystems.com .

The information on our website is

not part of this Annual Report.

Committee Interlocks and Insider Participation

of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation

committee of another entity that had one or more of its executive officers serving as a member of our board of directors or compensation

None of the members of our compensation committee, when appointed, will have at any time been one of our officers or employees.

board of directors may establish other committees as it deems necessary or appropriate from time to time.

board of directors has not adopted policies imposing an arbitrary term or retirement age limit in connection with individuals serving

as directors as it does not believe that such a limit is in the best interests of our company.

Our nominating and corporate governance

committee will annually review the composition of our board of directors, including the age and tenure of individual directors.

of directors will strive to achieve a balance between the desirability of its members having a depth of relevant experience, on the one

hand, and the need for renewal and new perspectives, on the other hand.

board of directors oversees the risk management activities designed and implemented by our management.

Our board of directors executes

its oversight responsibility for risk management both directly and through its committees.

The full board of directors also considers

specific risk topics, including risks associated with our strategic plan, business operations and capital structure.

In addition, our

board of directors regularly receives detailed reports from members of our senior management and other personnel that include assessments

and potential mitigation of the risks and exposures involved with their respective areas of responsibility.

board of directors has delegated to the audit committee oversight of our risk management process.

Our other board committees also consider

and address risk as they perform their respective committee responsibilities.

All committees report to the full board of directors as

appropriate, including when a matter rises to the level of a material or enterprise level risk.

board of directors has adopted a Code of Ethics that applies to all of our employees, including our chief executive officer, chief financial

officer and principal accounting officer.

Our Code of Ethics is available on our website at www.versussystems.com by clicking

on “Investors.” If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy

the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics

that apply to our principal executive officer, financial and accounting officers by posting the required information on our website at

the above address within four business days of such amendment or waiver.

Our nominating and corporate

governance committee will be responsible for, among other matters:

determining the qualifications,

qualities, skills and other expertise required to be a director and developing and recommending to the board for its approval criteria

to be considered in selecting nominees for director;

identifying and screening

individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;

overseeing the organization

of our board of directors to discharge our board’s duties and responsibilities properly and efficiently;

reviewing the committee

structure of the board of directors and the composition of such committees and recommending directors to be appointed to each committee

and committee chairmen;

identifying best practices

and recommending corporate governance principles;

developing and recommending

to our board of directors a set of corporate governance guidelines and principles applicable to us.

Our nominating and corporate

governance committee consists of three of our directors, Aric Spitulnik, David Catzel, and Juan Carlos Barrera, each of whom meets the

definition of “independent director” under the Nasdaq rules.

Catzel serves as chairman of our nominating and corporate

governance committee.

Our board of directors has adopted a written charter for the nominating and corporate governance committee, which

is available on our corporate website at www.versussystems.com .

The information on our website is not part of this Annual Report.

board of directors, management and all employees of our company are committed to implementing and adhering to the Code of Ethics.

it is up to each individual to comply with the Code of Ethics and to be in compliance of the Code of Ethics.

If an individual is concerned

that there has been a violation of the Code of Ethics, he or she will be able to report in good faith to his or her superior.

record of such reports will be kept confidential by our company for the purposes of investigation, the report may be made anonymously

and no individual making such a report will be subject to any form of retribution.

Compensation Committee Interlocks and Insider Participation

None of our executive officers

currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of another entity

that had one or more of its executive officers serving as a member of our board of directors or compensation committee.

None of the members

of our compensation committee, when appointed, will have at any time been one of our officers or employees.

Other Committees

Our board of directors may

establish other committees as it deems necessary or appropriate from time to time.

Director Term Limits

Our board of directors has

not adopted policies imposing an arbitrary term or retirement age limit in connection with individuals serving as directors as it does

not believe that such a limit is in the best interests of our company.

Our nominating and corporate governance committee will annually

review the composition of our board of directors, including the age and tenure of individual directors.

Our board of directors will strive

to achieve a balance between the desirability of its members having a depth of relevant experience, on the one hand, and the need for

renewal and new perspectives, on the other hand.

Risk Oversight

Our board of directors oversees

the risk management activities designed and implemented by our management.

Our board of directors executes its oversight responsibility

for risk management both directly and through its committees.

The full board of directors also considers specific risk topics, including

risks associated with our strategic plan, business operations and capital structure.

In addition, our board of directors regularly receives

detailed reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks

and exposures involved with their respective areas of responsibility.

Our board of directors has

delegated to the audit committee oversight of our risk management process.

Our other board committees also consider and address risk as

they perform their respective committee responsibilities.

All committees report to the full board of directors as appropriate, including

when a matter rises to the level of a material or enterprise level risk.

Code of Ethics

Our board of directors has

adopted a Code of Ethics that applies to all of our employees, including our chief executive officer, chief financial officer and principal

accounting officer.

Our Code of Ethics is available on our website at www.versussystems.com by clicking on “Investors.”

If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item

5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal

executive officer, financial and accounting officers by posting the required information on our website at the above address within four

business days of such amendment or waiver.

The information on our website is not part of this Annual Report.

Our board of directors, management

and all employees of our company are committed to implementing and adhering to the Code of Ethics.

Therefore, it is up to each individual

to comply with the Code of Ethics and to be in compliance of the Code of Ethics.

If an individual is concerned that there has been a violation

of the Code of Ethics, he or she will be able to report in good faith to his or her superior.

While a record of such reports will be kept

confidential by our company for the purposes of investigation, the report may be made anonymously and no individual making such a report

will be subject to any form of retribution.

EXECUTIVE COMPENSATION

Compensation Table

following table provides certain summary information concerning compensation awarded to, earned by or paid to the individuals who served

as our principal executive officer at any time during fiscal 2023 and 2022, and our two other most highly compensated officers in fiscal

2023 and 2022.

These individuals are referred to in this Annual Report as the “named executive officers.”

Compensation Table

Summary Compensation Table

The following table provides

certain summary information concerning compensation awarded to, earned by or paid to the individuals who served as our principal executive

officer at any time during fiscal 2024 and 2023, and our two other most highly compensated officers in fiscal 2024 and 2023.

These individuals

are referred to in this Annual Report as the “named executive officers.”

Summary Compensation Table

Name and Principal Position

Matthew Pierce

Chief Executive Officer

Craig Finster

President and Chief Financial Officer

Chief Technology Officer

The amounts reported in the “Option Awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC 718.

See Note 3 to our consolidated financial statements for the year ended December 31, 2023 including elsewhere in this annual report regarding assumptions underlying the valuation of equity awards.

These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options.

Contracts and Potential Payments Upon Termination or Change in Control

June 30, 2016, we entered into employment agreement with Matthew Pierce, our Chief Executive Officer, on May 1, 2019, we entered into

an employment agreement with Craig Finster, our President and Chief Financial Officer, and on April 20, 2020, we entered into an employment

agreement with Keyvan Peymani, our Executive Chairman of the Board.

The original terms of the employment agreements are two years, which

shall be automatically renewed for one year upon expiration of the prior term unless either party provides at least six-month notice

to the other party that it does not wish to renew the agreement.

following is a summary of the compensation arrangements set forth in each employment agreement described above:

Matthew Pierce

Chief Executive Officer

Craig Finster

Chief Financial Officer

Keyvan Peymani

Executive Chairman of the Board

of the executive officers receives an annual cash bonus of twenty-five percent (25%) of his base salary, and an annual performance cash

bonus in accordance with EBITDA achievement in the relevant fiscal year.

In particular, each executive officer receives a bonus equal

to 50%, 100% or 200% of his base salary if we generate EBITDA of at least $1 million, $2 million or $4 million, respectively, within

the then current fiscal year.

Each executive officer is also eligible for a discretionary cash bonus determined by our board of directors.

(2) Representing

warrants to purchase our common shares at $741.60 per share, which shall vest in accordance with the achievements of certain performance

milestones or service date.

The options vest in three installments with one-third vesting immediately and one-third vesting on each of the first and second anniversaries of the date of the employment agreement and have an exercise price of $508.80-$604.80 per share.

the employment agreement is terminated for “good reason” as defined therein and we receive proper notice or if the employment

agreement is involuntarily terminated other than for “just cause” as defined therein, then we shall pay the executive officer

(i) any accrued benefits and (ii) a severance amount equal to the sum of (w) 12 months of his then-current base salary;

(x) his maximum

discretionary bonus for the then-current fiscal year;

(y) his annual bonus for the prior fiscal year;

and (z) his maximum performance

cash bonus provided in the employment agreement for the then-current fiscal year.

In addition, in this circumstance, the executive’s

equity compensation shall be fully and immediately vested and exercisable, as applicable.

If the employment agreement is terminated without

good cause, then the executive officer shall receive his accrued benefits, the prorate bonus and the performance cash bonus, if any,

as of the termination date.

Upon termination of this agreement, we will pay the executive officer any lump sum payment due to him under

his agreement within ten business days of the date of termination.

The following table summarizes

the “good reason” payments:

Good Reason Payment

Matthew Pierce

Option Awards

All Other Compensation

Chief Executive Officer

Craig Finster

Chief Financial Officer

Keyvan Peymani

Executive Chairman of the Board

Pursuant to the terms of our

employment agreements entered into with certain of our executive officers, in the event of a Change of Control, immediately effective

as of the date of such Change of Control, unvested Stock Options, Performance Warrants and any other options or equity awards previously

granted by us to the executive officers shall fully and immediately vest, and shall be fully and immediately exercisable by the executive

In addition, upon a Change of Control, we are obligated to pay the executive officers immediately upon the date of the Change

of Control a Performance Bonus of 200% of the base salary of the executive officer for the then-current fiscal year, in addition to any

amounts that the executive officer is entitled to receive as a result of such executive officer’s termination of employment or any

The following table summarizes

the executive change of control bonuses:

Change of Control Bonus

Matthew Pierce

Chief Executive Officer

Former Chief Executive Officer

Craig Finster

Former President and Chief Financial Officer

Chief Financial Officer

Keyvan Peymani

Executive Chairman of the Board

In the context of our employment

agreements with certain of our executive officers, Change of Control means the occurrence of any of the following events:

(i) the receipt by us of an insider report or other statement

filed in accordance with the applicable securities legislation of a relevant jurisdiction indicating that any person:

(a) has become

the beneficial owner, directly or indirectly, of our securities representing more than 50% of our common shares;

or (b) has sole

and/or shared voting, or dispositive, power over more than 50% of our common shares;

(ii) a change in the composition of our board of directors occurring

within a two-year period prior to such change, as a result of which fewer than a majority of our directors are Incumbent Directors.

Directors” shall mean directors who are either:

(a) our directors as of the effective date of the applicable executive officer’s

employment agreement (the “Effective Date”);

or (b) elected, or nominated for election, to our board of directors with

the affirmative votes of at least a majority of the directors on our board of directors who had been directors at the Effective Date

or two years prior to such change and who were still in office at the time of such election or nomination;

(iii) the solicitation of a dissident proxy, or any proxy not approved

by the Incumbent Directors, the purpose of which is to change the composition of our board of directors with the result, or potential

result, that fewer than a majority of our directors will be Incumbent Directors;

(iv) the consummation of our merger, amalgamation or consolidation

of with or into another entity or any other corporate reorganization, if more than fifty percent (50%) of the combined voting power of

the continuing or surviving entity’s securities outstanding immediately after such merger, amalgamation, consolidation or reorganization

are owned by persons who were not our shareholders immediately prior to such merger, amalgamation, consolidation or reorganization;

(v) the commencement by an entity, person or group (other than

us or any of our wholly owned subsidiaries) of a tender offer, an exchange offer or any other offer or bid for more than 50% of our common

(vi) the consummation of a sale, transfer or disposition by us

of all or substantially all of our assets;

(vii) the commencement of any proceeding by or against us seeking

to adjudicate us as bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief

or composition of us or our debts, under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking

the entry of an order for relief or for the appointment of a receiver, trustee, custodian or other similar official for it or for any

substantial part of its property;

(viii) the approval by our shareholders of a plan of our complete

liquidation or dissolution.

In the case of the occurrence

of any of the events set forth above, a Change of Control shall be deemed to occur immediately prior to the occurrence of any such events.

An event does not constitute a Change of Control if its sole purpose is to change the jurisdiction of our organization or to create a

holding company, partnership or trust that will be owned in substantially the same proportions by the persons who held our securities

immediately before such event.

Additionally, a Change of Control is not deemed to have occurred, with respect to an executive officer

if such executive officer is part of a purchasing group that consummates the Change of Control event.

On September 28, 2019, our board of directors approved a cash

distribution upon a Change of Control, defined as the acquisition by a purchaser, directly or indirectly, of our shares, which, assuming

the conversion, exchange or exercise of any of our convertible or exchangeable shares beneficially owned by the purchaser, results in

the purchaser beneficially owning shares that would entitle the purchaser for the first time to cast more than 50% of the votes attaching

to all shares in our capital that may be cast to elect directors;

the sale, lease, exchange or other disposition of all or substantially

all of our assets to a purchaser;

or an amalgamation, merger, arrangement or other business combination involving us and a purchaser that

results in the purchaser or security holders of the purchaser owning, directly or indirectly, shares of the continuing entity that entitle

the purchaser or such security holders of the purchaser, as the case may be, to cast more than 50% of the votes attaching to all shares

in the capital of the continuing entity that may be cast to elect directors, whereby 5% of the Purchase Premium, defined as the difference

between the average of our market capitalization based on the closing price of our common shares over 60 days prior to the announcement

of any change of control event, and our final purchase price, if positive, be distributed to our employees and key consultants, subject

to the discretion of our board of directors at the recommendation of our compensation committee.

Incentive Plans

May 17, 2017, our board of directors adopted our 2017 Stock Option Plan, or the 2017 Plan, to provide an additional means to attract,

motivate, retain and reward selected employees and other eligible persons.

Former Executive Chairman of the Board

Former Chief Technology Officer

See Note 3 to our consolidated financial statements for the year ended December 31, 2024 including elsewhere in this annual report regarding assumptions underlying the valuation of equity awards.

The amounts reported in the “All other Compensation” column

reflect $91,666 in board compensation for Luis Goldner and Severance payments for Mathew Pierce, Craig Finster and Keyvan Peymani of $112,500,

$112,500 and $80,000.

Equity Incentive Plans

On May 17, 2017, our board

of directors adopted our 2017 Stock Option Plan, or the 2017 Plan, to provide an additional means to attract, motivate, retain and reward

selected employees and other eligible persons.

Our stockholders approved the 2017 Plan on or about June 29, 2017.

Employees, officers, directors, advisors and consultants that provided services to us or one of our subsidiaries are eligible to

receive awards under the 2017 Plan.

The total number of common shares that are at any time reserved for issuance under the 2017 Plan

and under all other management option plans and employee stock purchase plans, if any, cannot exceed in the aggregate a number of common

shares equal to 15% of the number of common shares issued and outstanding at that time.

Options have a maximum term of ten years and

vesting is determined by our board of directors.

May 15, 2021, our board of directors adopted a US sub plan as part of our 2017 Stock Option Plan.

The US sub plan allows for the

explicit grant of incentive stock options (“ISOs”) to US resident non-officer employees.

The provision for the sub plan was

subject to a confirming shareholder vote within 12 months of its adoption, which vote was taken on November 17, 2021.

of December 31, 2023, stock option grants for the purchase of an aggregate of 30,263 common shares had been made under the 2017 Plan,

and 1,273 of those stock options had been cancelled or exercised.

As of that date, there remained 346,912 common shares authorized under

the 2017 Plan remained available for award purposes.

board of directors may amend or terminate the 2017 Plan at any time, but no such action will affect any outstanding award in any manner

materially adverse to a participant without the consent of the participant.

following information is a brief description of the 2017 Plan, which is filed as an exhibit to this Annual Report:

At no time shall the number of common shares reserved for issuance to any one person pursuant to stock options granted

under the 2017 Plan or otherwise, unless permitted by regulatory authorities and by a vote of shareholders, exceed five (5%) percent

of the outstanding common shares in any 12-month period.

The option price of a stock option granted under the 2017 Plan shall be fixed

by our board of directors but shall be not less than the Market Price of our common shares

at the time the stock option is granted, or such lesser price as may be permitted pursuant

to the rules of any regulatory authority having jurisdiction over our common shares issued,

which rules may include provisions for certain discounts in respect to the option price.

For the purpose of the 2017 Plan, the “Market Price” at any date in respect of

our common shares shall mean, subject to a minimum exercise price of $0.10 per option, the

closing price of our common shares on a stock exchange on which our common shares are listed and posted for trading or a quotation system

for a published market upon which the price of our common shares is quoted, as may be selected for such purpose by our board of directors

(the “Market”), on the last trading day prior to the date the stock option is granted;

closing price of our common shares on the Market on the date on which the stock option is granted.

In the event that such shares did

not trade on such trading day, the Market Price shall be the average of the bid and ask prices in respect of such shares at the close

of trading on such trading day as reported thereof.

In the event that our common shares are not listed and posted for trading or quoted

on any Market, the Market Price shall be the fair market value of such shares as determined by our board of directors in its sole discretion.

in Option Price :

The option price of a stock option granted under the 2017 Plan to an insider of our company (as that term is defined

in the Securities Act (British Columbia)) shall not be reduced without prior approval from the disinterested shareholders of our company.

Employees, officers,

directors, advisors and consultants that provided services to us or one of our subsidiaries are eligible to receive awards under the 2017

The total number of common shares that are at any time reserved for issuance under the 2017 Plan and under all other management

option plans and employee stock purchase plans, if any, cannot exceed in the aggregate a number of common shares equal to 15% of the number

of common shares issued and outstanding at that time.

Options have a maximum term of ten years and vesting is determined by our board

of directors.

On May 15, 2021, our board

of directors adopted a US sub plan as part of our 2017 Stock Option Plan.

The US sub plan allows for the explicit grant of incentive stock

options (“ISOs”) to US resident non-officer employees.

The provision for the sub plan was subject to a confirming shareholder

vote within 12 months of its adoption, which vote was taken on November 17, 2021.

As of December 31, 2024, stock option grants for the purchase of an

aggregate of 2,555 common shares had been made under the 2017 Plan, and none of those stock options had been cancelled or exercised.

of that date, there remained 373,347 common shares authorized under the 2017 Plan remained available for award purposes.

Our board of directors may

amend or terminate the 2017 Plan at any time, but no such action will affect any outstanding award in any manner materially adverse to

a participant without the consent of the participant.

The following information is

a brief description of the 2017 Plan, which is filed as an exhibit to this Annual Report:

Number of Shares :

At no time shall the number of common shares reserved for issuance to any one person pursuant to stock options granted under the 2017 Plan or otherwise, unless permitted by regulatory authorities and by a vote of shareholders, exceed five (5%) percent of the outstanding common shares in any 12-month period.

Option Price:

The option price of a stock option granted under the 2017 Plan shall be fixed by our board of directors but shall be not less than the Market Price of our common shares at the time the stock option is granted, or such lesser price as may be permitted pursuant to the rules of any regulatory authority having jurisdiction over our common shares issued, which rules may include provisions for certain discounts in respect to the option price.

For the purpose of the 2017 Plan, the “Market Price” at any date in respect of our common shares shall mean, subject to a minimum exercise price of $0.10 per option, the greater of:

the closing price of our common shares on a stock exchange on which our common shares are listed and posted for trading or a quotation system for a published market upon which the price of our common shares is quoted, as may be selected for such purpose by our board of directors (the “Market”), on the last trading day prior to the date the stock option is granted;

the closing price of our common shares on the Market on the date on which the stock option is granted.

In the event that such shares did not trade on such trading day, the Market Price shall be the average of the bid and ask prices in respect of such shares at the close of trading on such trading day as reported thereof.

In the event that our common shares are not listed and posted for trading or quoted on any Market, the Market Price shall be the fair market value of such shares as determined by our board of directors in its sole discretion.

Reduction in Option Price :

The option price of a stock option granted under the 2017 Plan to an insider of our company (as that term is defined in the Securities Act (British Columbia)) shall not be reduced without prior approval from the disinterested shareholders of our company.

The full purchase price payable for shares under a stock option shall be paid in cash or certified funds upon the exercise thereof.

holder of a stock option shall have none of the rights of a shareholder until the shares are paid for and issued.

A holder of a stock option shall have none of the rights of a shareholder until the shares are paid for and issued.

Term of Option :

Stock options may be granted under the 2017 Plan for a period not exceeding ten years.

Unless our board of directors determines otherwise at its discretion, a stock option shall vest immediately upon being granted.

Except as specifically provided for in the 2017 Plan, no stock option may be exercised unless the optionee is at the time

of exercise an Eligible Person (as defined by the 2017 Plan).

If the optionee is an employee or consultant, the optionee shall represent

to us that he or she is a bona fide employee or consultant of our company.

The 2017 Plan shall not confer upon the optionee any right

with respect to continuation of employment by our company.

Leave of absence approved by an officer of our company authorized to give

such approval shall not be considered an interruption of employment for any purpose of the 2017 Plan.

Subject to the provisions of the

2017 Plan, a stock option may be exercised from time to time by delivery to us of written notice of exercise specifying the number of

shares with respect to which the stock option is being exercised and accompanied by payment in full, by cash or certified check, of the

purchase price of the shares then being purchased.

h) Non-transferability

of Stock Option :

No stock option shall be assignable or transferable by the optionee, except to a personal holding corporation of

the optionee, other than by will or the laws of descent and distribution.

i) Applicable

Laws or Regulations :

Our obligation to sell and deliver shares under each stock option is subject to our compliance with any laws,

rules and regulations of Canada and any provinces and/or territories thereof applying to the authorization, issuance, listing or sale

of securities and is also subject to the acceptance for listing of the shares which may be issued upon the exercise thereof by each stock

exchange upon which our common shares are then listed for trading.

j) Termination

Exercise of Option :

Except as specifically provided for in the 2017 Plan, no stock option may be exercised unless the optionee is at the time of exercise an Eligible Person (as defined by the 2017 Plan).

If the optionee is an employee or consultant, the optionee shall represent to us that he or she is a bona fide employee or consultant of our company.

The 2017 Plan shall not confer upon the optionee any right with respect to continuation of employment by our company.

Leave of absence approved by an officer of our company authorized to give such approval shall not be considered an interruption of employment for any purpose of the 2017 Plan.

Subject to the provisions of the 2017 Plan, a stock option may be exercised from time to time by delivery to us of written notice of exercise specifying the number of shares with respect to which the stock option is being exercised and accompanied by payment in full, by cash or certified check, of the purchase price of the shares then being purchased.

Non-transferability of Stock Option :

No stock option shall be assignable or transferable by the optionee, except to a personal holding corporation of the optionee, other than by will or the laws of descent and distribution.

Applicable Laws or Regulations :

Our obligation to sell and deliver shares under each stock option is subject to our compliance with any laws, rules and regulations of Canada and any provinces and/or territories thereof applying to the authorization, issuance, listing or sale of securities and is also subject to the acceptance for listing of the shares which may be issued upon the exercise thereof by each stock exchange upon which our common shares are then listed for trading.

Termination of Options .

Unless the option agreement provides otherwise, all stock options will terminate:

the case of stock options granted to an employee or consultant employed or retained to provide investment relations services, 30 days

after the optionee ceases to be employed or retained to provide investment relations services;

the case of stock options granted to other employees, consultants, directors, officers or advisors, 90 days following

termination, with or without cause, of the optionee’s employment or other relationship with our company or an affiliate of our

termination by the optionee of any such relationship with our company or an affiliate of our company;

in the case of death or permanent and total disability of the optionee, all stock options will terminate 12 months following the death

or permanent and total disability of the optionee, and the deceased optionee’s heirs or administrators may exercise all or a portion

of the stock option during that period.

stock options granted under the 2017 Plan that are cancelled, terminated or expire will remain available for granting under the 2017

Plan at the current Market Price

k) Amendments .

Subject to the approval of regulatory authorities having jurisdiction, our board of directors may from time to time amend or revise the

terms of the 2017 Plan, or may terminate the 2017 Plan at any time;

provided, however, that no such action shall adversely affect the

rights of any optionee under any outstanding stock option without such optionee’s prior consent.

Upon the mutual consent of the

optionee and our board of directors, the terms of an option agreement may be amended, subject to regulatory approval and shareholder

approval as may be required from time to time.

Equity Awards at Fiscal Year-End

following table sets forth outstanding equity awards to our named executive officers as of December 31, 2023:

Option Awards

Exercise Price

Expiration Date

Units of Stock

Market Value of

Units of Stock that

have not Vested

Matthew Pierce

April 2, 2024

Matthew Pierce

Sept 27, 2024

Matthew Pierce

July 24, 2025

Matthew Pierce

July 31, 2025

Matthew Pierce

August 19, 2026

Matthew Pierce

August 19, 2027

Matthew Pierce

February 13, 2028

Craig Finster

April 2, 2024

Craig Finster

Sept 27, 2024

Craig Finster

July 24, 2025

Craig Finster

July 24, 2025

Craig Finster

July 31, 2025

Craig Finster

August 19, 2026

Craig Finster

August 19, 2027

Craig Finster

February 13, 2028

April 2, 2024

Sept 27, 2024

July 24, 2025

July 31, 2025

August 19, 2026

August 19, 2027

February 13, 2028

All directors hold office

until the next annual meeting of shareholders at which their respective class of directors is re-elected and until their successors have

been duly elected and qualified.

in the case of stock options granted to an employee or consultant employed or retained to provide investment relations services, 30 days after the optionee ceases to be employed or retained to provide investment relations services;

in the case of stock options granted to other employees, consultants, directors, officers or advisors, 90 days following

our termination, with or without cause, of the optionee’s employment or other relationship with our company or an affiliate of our company, or

the termination by the optionee of any such relationship with our company or an affiliate of our company;

or in the case of death or permanent and total disability of the optionee, all stock options will terminate 12 months following the death or permanent and total disability of the optionee, and the deceased optionee’s heirs or administrators may exercise all or a portion of the stock option during that period.

Any stock options granted under

the 2017 Plan that are cancelled, terminated or expire will remain available for granting under the 2017 Plan at the current Market Price

Subject to the approval of regulatory authorities having jurisdiction, our board of directors may from time to time amend or revise the terms of the 2017 Plan, or may terminate the 2017 Plan at any time;

provided, however, that no such action shall adversely affect the rights of any optionee under any outstanding stock option without such optionee’s prior consent.

Upon the mutual consent of the optionee and our board of directors, the terms of an option agreement may be amended, subject to regulatory approval and shareholder approval as may be required from time to time.

Outstanding Equity Awards at Fiscal Year-End

Director Compensation

All directors hold office until

the next annual meeting of shareholders at which their respective class of directors is re-elected and until their successors have been

duly elected and qualified.

There are no family relationships among our directors or executive officers.

Officers are elected by

and serve at the discretion of the Board of Directors.

The following table sets forth the information concerning all compensation we paid

during the year ended December 31, 2023 to our non-employee directors.

Officers are elected by and serve

at the discretion of the Board of Directors.

The following table sets forth the information concerning all compensation we paid during

the year ended December 31, 2024 to our non-employee directors.

Juan Carlos Barrera (1)

David Catzel (2)

Michelle Gahagan

Aric Spitulink (3)

Luis Goldner (4)

Keyvan Peymani

Jennifer Prince (4)

Shannon Pruitt

Brian Tingle (5)

Paul Vlasic (6)

Barrera was elected as a director of our company at the shareholder meeting held on December 29, 2023, and was appointed as a director of our company on the same date.

Barrera received no compensation in the year ended December 31, 2023.

Catzel was elected as a director of our company at the shareholder meeting held on December 29, 2023, and was appointed as a director of our company on the same date.

Catzel received no compensation in the year ended December 31, 2023.

Catzel was elected as a director of our company at the shareholder

meeting held on December 29, 2023, and was appointed as a director of our company on the same date.

Spitulink was elected as a director of our company at the shareholder meeting held on December 23, 2024, and was appointed as a director of our company on the same date.

Spitulink received no compensation in the year ended December 31, 2024.

Goldner was elected as a director of our company at the shareholder meeting held on December 29, 2023, and was appointed as a director of our company on the same date.

Goldner received no compensation in the year ended December 31, 2023.

Prince was not reelected as a director of our company at the shareholder meeting held on December 29, 2023.

Tingle was not reelected as a director of our company at the shareholder meeting held on December 29, 2023.

Vlasic was not reelected as a director of our company at the shareholder meeting held on December 29, 2023.

1 unchanged sentence

SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERSHIP AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets

forth information relating to the beneficial ownership of our common shares as of March 15, 2024 by:

person, or group of affiliated persons, known by us to beneficially own 5% or more of our outstanding common shares;

of our named executive officers and members of our board of directors;

executive officers and members of our board of directors as a group.

SECURITY OWNERSHIP OF CERTAIN BENEFICAL

OWNERSHIP AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth

information relating to the beneficial ownership of our common shares as of March 25, 2025 by:

each person, or group of affiliated persons, known by us to beneficially own 5% or more of our outstanding common shares;

each of our named executive officers and members of our board of directors;

all executive officers and members of our board of directors as a group.

The amounts and percentages

14 unchanged sentences

of beneficial ownership of our common shares is based on 4,901,677 shares of our common shares outstanding as of March 15, 2025.

otherwise noted below, the address of the persons listed on the table is c/o Versus Systems Inc., 1558 West Hastings Street, Vancouver

BC V6G 3J4 Canada.

otherwise noted below, the address of the persons listed on the table is c/o Versus Systems Inc., 3500 South DuPont Hwy.

Dover, DE 19901

Name of Beneficial Owner

Named Executive Officers and Directors

Matthew Pierce (1)

Craig Finster (2)

John Alex Peachey (3)

Keyvan Peymani (4)

Michelle Gahagan (5)

Kelsey Chin (6)

Shannon Pruitt (7)

Executive Officers and Directors as a Group (7 persons)

5% of Great Beneficial Owners

ASPIS Cyber Technologies, Inc.

Cronus Equity Capital Group, LLC (1)

beneficial ownership of less than 1% of the total outstanding common shares.

(1) Director/Named

Executive Officer;

includes (i) 1,931 common shares, (ii) 1,524 common shares issuable upon the exercise of outstanding share purchase

options, and (iii) 26 common shares issuable upon the exercise of outstanding warrants.

Executive Officer;

includes (i) 44 common shares, (ii) 1,614 common shares issuable upon the exercise of outstanding share purchase options,

and (iii) 13 common shares issuable upon the exercise of outstanding warrants.

Executive Officer;

includes (i) 60 common shares and (ii) 1,571 common shares issuable upon the exercise of outstanding share purchase

(4) Director;

includes (i) 592 common shares, (ii) 1,744 common shares issuable upon the exercise of outstanding share purchase options,

and (iii) 260 common shares issuable upon the exercise of outstanding warrants.

(5) Director;

includes (i) 52 common shares and (ii) 726 common shares issuable upon the exercise of outstanding share purchase options.

Executive Officer;

includes (i) 521 common shares and (ii) 678 common shares issuable upon the exercise of outstanding share

purchase options.

(7) Director;

includes 471 common shares issuable upon the exercise of outstanding share purchase options.

Does not include the 8,888,920 common shares that Cronus Equity Capital Group, LLC subscribed for, but has failed to fund.

Paul Feller, the managing member of Cronus Equity Capital Group, LLC, has discretionary authority to vote and dispose of the common shares held by Cronus Equity Capital Group, LLC and may be deemed to be the beneficial owner of these common shares.

The address of Cronus Equity Capital Group, LLC is 590 Madison Ave, 21 st Floor, New York, NY 10022.

Indicates beneficial ownership of less than 1% of the total outstanding common shares.

(1) The address of Cronus Equity Capital Group, LLC is 590 Madison

Ave, 21 st Floor, New York, NY 10022.

The percentage of our common

shares held by Canadian residents, based on securityholder addresses of record, is 2% as of March 25, 2025.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

“related party transaction” is any actual or proposed transaction, arrangement or relationship or series of similar transactions,

arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries

were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the

lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years and

in which any related party had or will have a direct or indirect material interest.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

A “related party transaction”

is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including

those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which

we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of (i) $120,000 or (ii)

one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related party had

or will have a direct or indirect material interest.

A “related party” includes:

person who is, or at any time during the applicable period was, one of our executive officers or one of our directors;

person who beneficially owns more than 5% of our common share;

immediate family member of any of the foregoing;

entity in which any of the foregoing is a partner or principal or in a similar position or in which such person has a 10% or greater

beneficial ownership interest.

any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors;

any person who beneficially owns more than 5% of our common share;

any immediate family member of any of the foregoing;

any entity in which any of the foregoing is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

Other than the transactions

1 unchanged sentence

transactions to which we were a party since the beginning of our last fiscal year, or any currently proposed related party transaction.

At December 31, 2023, a

total of $177,500 was included in accounts payable and accrued liabilities owing to our officers, directors, or companies controlled

by them in respect of accrued bonuses, expenses payable and other reimbursable expenses.

These amounts are unsecured and

non-interest bearing.

November 7, 2017 and December 31, 2023, we borrowed an aggregate of $4,787,307 in 29 separate loan transactions from Brian Tingle, a

former director of our company.

Each loan bears interest at the prime rate of the Bank of Canada, which was 2.45% per annum and 3.95%

per annum at December 31, 2020 and December 31, 2019, respectively, compounded annually and payable quarterly, and had a maturity date

of three years from the date of the respective loan.

At December 31, 2023 and December 31, 2022, the aggregate outstanding principal

amounts of such loans was $0 and $2,604,713, respectively.

During the year ended December 31, 2023 and the year ended December 31,

2022, we paid principal and interest in respect of such loans in the aggregate amounts of $2,519,835 and $47,550, respectively.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

2 unchanged sentences

fiscal 2024 and fiscal 2023, respectively.

For the year ended

Ramirez Jimenez International CPAs

2 unchanged sentences

All other fees (4)

For the year ended

Davidson & Company LLP

Audit fees (1)

Audit-related fees (2)

All other fees (4)

means the aggregate fees billed in each of the fiscal years for professional services rendered for the audit of our annual financial

statements and review of our interim financial statements.

“Audit-related fees”

includes assurance and related services reasonably related to the financial statement audit and not included in audit services.

means the aggregate fees billed in each of the fiscal years for professional services rendered for tax compliance and tax advice.

“All other fees”

includes the aggregate fees billed in each of the fiscal years for non-audit services rendered which were not listed above.

“Audit fees” means the aggregate fees billed in each of the fiscal years for professional services rendered for the audit of our annual financial statements and review of our interim financial statements.

“Audit-related fees” are the assurance and related services reasonably related to the financial statement audit and not included in audit services.

“Tax fees” means the aggregate fees billed in each of the fiscal years for professional services rendered for tax compliance and tax advice.

“All other fees” total the aggregate fees billed in each of the fiscal years for non-audit services rendered which were not listed above, which are primarily related to professional services rendered with our registration filings.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

4 unchanged sentences

Incorporation by Reference

Exhibit Description

Notice of Articles of Versus Systems Inc.

Articles of Versus Systems Inc.

Certificate of Corporate Domestication and Certificate of Incorporation

Specimen Stock Certificate evidencing common shares.

2 unchanged sentences

Representative Warrant Agreement dated January 20, 2021.

Description of Registered Securities

Form of Loan Agreement, including form of promissory note, between Versus Systems Inc.

and Brian Tingle.

Form of Loan Agreement, including form of promissory note, between Versus Systems Inc.

and The Sandoval Pierce Family Trust Established May 20, 2015.

Employment Agreement dated as of June 30, 2016 among Versus Systems Inc.

(formerly Opal Energy Corp.), Matthew D.

Pierce and Versus LLC.

Employment Agreement dated as of May 1, 2019 among Versus Systems Inc., Craig C.

Finster and Versus LLC.

Employment Agreement dated as of May 1, 2020 among Versus Systems Inc., Keyvan Peymani and Versus LLC.

Subscription Agreement and form of Warrant with ASPIS Cyber Technologies, Inc., dated as of October 16, 2024.

Technology License and Software Development Agreement with ASPIS Cyber Technologies, Inc., dated as of October 7, 2024.

Business Funding Agreement with ASPIS Cyber Technologies, Inc.

with ASPIS Cyber Technologies, Inc., dated as of October 7, 2024.

Form of Warrant of Versus Systems Inc.

Incorporation by Reference

Exhibit Description

Versus Systems Inc.

2017 Stock Option Plan.

Acquisition Agreement dated as of March 16, 2016 among Versus Systems Inc.

(formerly Opal Energy Corp.), Versus Systems (Holdco) Corp.

(formerly Opal Energy (Holdco) Corp.), Versus LLC and the selling members of Versus LLC

US Sub Plan of 2017 Stock Option Plan

Software License, Marketing and Linking Agreement dated as of March 6, 2019 between HP Inc.

and Versus LLC.

Amendment of 2017 Stock Option Plan

Code of Conduct and Ethics.

11 unchanged sentences

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Inline XBRL Taxonomy Extension

Schema Document.

Inline XBRL Taxonomy Extension

Calculation Linkbase Document.

Inline XBRL Taxonomy Extension

Definition Linkbase Document.

Inline XBRL Taxonomy Extension

Label Linkbase Document.

Inline XBRL Taxonomy Extension

Presentation Linkbase Document.

Cover Page Interactive

Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith.

Portions of this exhibit

have been redacted in compliance with Item 601(b)(10) of Regulation S-K.

Schedules, exhibits and similar supporting attachments to

this exhibit are omitted pursuant to Item 601(b)(2) of Regulation S-K.

The Registrant agrees to furnish a supplemental copy of any

omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

FORM 10-K SUMMARY

registrant hereby certifies that it meets all of the requirements for filing on annual report on Form 10-K and that it has duly caused

and authorized the undersigned to sign this annual report on its behalf.

The registrant hereby certifies that it meets

all of the requirements for filing on annual report on Form 10-K and that it has duly caused and authorized the undersigned to sign this

annual report on its behalf.

Versus Systems Inc.

Matthew Pierce

April 1, 2024

/s/ Luis Goldner

March 31, 2025

Chief Executive Officer

to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons

on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Matthew Pierce

Pursuant to the requirements

of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

/s/ Luis Goldner

Director and Chief Executive Officer

April 1, 2024

Matthew Pierce

March 31, 2025

(Principal Executive Officer)

/s/ Craig Finster

/s/ Geoff Deller

Chief Financial Officer

April 1, 2024

Craig Finster

March 31, 2025

(Principal Financial and Accounting Officer)

/s/ Keyvan Peymani

Executive Chairman of the Board

April 1, 2024

Keyvan Peymani

/s/ David Catzel

April 1, 2024

/s/ Michelle Gahagan

April 1, 2024

Michelle Gahagan

/s/ Juan Carlos Barrera

April 1, 2024

Chairman of the Board

March 31, 2025

Juan Carlos Barrera

/s/ David Catzel

March 31, 2025

/s/ Luis Goldner

April 1, 2024

/s/ Shannon Pruitt

April 1, 2024

Shannon Pruitt

March 31, 2025

/s/ Aric Spitulimk

March 31, 2025

Aric Spitulimk

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 820 ) F-3

Consolidated Balance Sheets F-5

Consolidated Statements of Operations and Comprehensive Loss F-6

Consolidated Statements of Changes in Stockholder’s Equity (Deficit) F-7

Consolidated Statements of Cash Flow F-8

Notes to the Consolidated Financial Statements F-9

FINANCIAL STATEMENTS

in United States dollars)

Report of Independent Registered Public Accounting Firm (PCAOB ID 820)

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Stockholder’s Equity

Consolidated Statements of Cash Flow

Notes to the Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

31, 2023 AND 2022

of Independent Registered Public Accounting Firm

DECEMBER 31, 2024 AND 2023

Report of Independent Registered Public Accounting

To the Versus Systems Inc.

Board of Directors and Shareholders:

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Versus Systems Inc.

and its subsidiaries (collectively, the Company) as

of December 31 , 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’

equity (deficit), and cashflows for the years then ended and the related notes to the consolidated financial statements (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the consolidated financial position of Versus Systems Inc.

as of December 31, 2023 and 2022, and the results

of their operations and their cash flows for the years ended December 31, 2023 and 2022, in conformity with accounting principles generally

accepted in the United States of America.

The accompanying consolidated financial statements have been prepared

assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company

has suffered recurring losses from operations.

In addition, the Company has not achieved positive cash flows from operations and is not

able to finance day to day activities through operations.

These events raise substantial doubt about its ability to continue as a going

Board of Directors

and Shareholders:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Versus Systems Inc.

and its subsidiaries (collectively, the Company) as of December 31, 2024 and 2023, and the related

consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cashflows for the years then

ended and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of

Versus Systems Inc.

as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years ended December

31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements,

the Company has suffered recurring losses from operations.

In addition, the Company has not achieved positive cash flows from operations

and is not able to finance day to day activities through operations.

These events raise substantial doubt about its ability to continue

as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to Versus Systems Inc.

in accordance with the

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements

based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to Versus Systems Inc.

in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

Versus Systems Inc.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose

of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

Critical audit matters are arising from the current period audit of

the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that:

to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

We determined that there are no critical audit matters.

Ramirez Jimenez International CPAs

have served as Versus Systems Inc.

and its subsidiaries auditors since 2021.

is not required to have, nor

were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain

an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of

the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

/s/ Ramirez Jimenez International CPAs

We have served as Versus Systems Inc.

subsidiaries auditors since 2021.

Irvine, California

March 31, 2025

Versus Systems Inc.

Consolidated Balance Sheets

(Expressed in US Dollars)

December 31, December 31,

Current assets

Receivables, net of allowance for credit losses (Note 5)

Prepaid expenses and other current assets

Cash and cash equivalents $ 3,065,914 $ 4,689,007

Receivables, net of allowance for credit losses -

Prepaid expenses 469,646 160,474

Total current assets 3,535,560 4,867,703

Restricted deposit (Note 6)

Property and equipment, net (Note 7)

Intangible assets (Note 10)

Restricted deposit -

Property and equipment -

Total assets $ 3,535,560 $ 4,878,317

LIABILITIES AND EQUITY

Accounts payable and accrued liabilities (Note 11, Note 12 and Note 14)

Current liabilities

Accounts payable and accrued liabilities $ 26,288 $ 286,427

Deferred revenue -

Notes payable - Related Party (Note 12)

Lease liability (Note 19)

Total current liabilities 26,288 321,476

1 unchanged sentence

Total liabilities 26,288 321,476

Equity (Deficit)

capital (Note 13)

Stockholders’ equity

Share capital

Class A shares, no par value.

Unlimited authorized shares;

0 and 21 issued or outstanding, respectively

no shares issued or outstanding, respectively -

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

Unlimited authorized shares;

2,506,015 and 260,761 shares issued and outstanding, respectively

4,901,677 and 2,506,015 shares issued and outstanding as of December 31, 2024 and 2023, respectively 150,587,018 147,130,123

Accumulated other comprehensive income 318,659 248,287

( 135,434,022 )

( 125,907,025 )

Non-controlling interest (Note 8)

( 7,387,547 )

( 6,402,387 )

Total Liabilities and Equity

The accompanying notes are an integral part of these consolidated financial

Deficit ( 139,476,353 ) ( 135,434,022 )

Total Versus Systems, Inc.

stockholders’ equity 11,429,324 11,944,388

Non-controlling interest ( 7,920,052 ) ( 7,387,547 )

Total stockholders’ equity 3,509,272 4,556,841

Total liabilities, noncontrolling interest and stockholders’ equity $ 3,535,560 $ 4,878,317

The accompanying notes are an integral part of

these consolidated financial statements.

Versus Systems Inc.

Consolidated Statements of Operations and Comprehensive

(Expressed in US Dollars)

Consolidated Statements of Operations and Comprehensive Loss

Cost of revenues

6 unchanged sentences

( 10,852,374 )

Change in fair value of warrant liability

Employee retention credit

6 unchanged sentences

( 10,512,157 )

Other total comprehensive income (loss):

Net loss attributable to non-controlling interest

Net loss attributable to Versus Systems, Inc.

( 4,042,331 )

( 9,526,997 )

Per share Data:

Basic and diluted loss per share to shareholders

Weighted average shares – basic and diluted

Comprehensive income (loss)

( 4,574,836 )

( 10,512,157 )

Other comprehensive income (loss), net of tax

Change in foreign currency translation, net of tax

3 unchanged sentences

$ ( 10,418,840 )

comprehensive income attributable to non-controlling interest

comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to shareholders

1 unchanged sentence

$ ( 9,433,680 )

Basic and diluted earnings per share to shareholders

Shares used in computation

The accompanying notes are an integral part of these consolidated financial

The accompanying notes are an integral part of

these consolidated financial statements.

Versus Systems Inc.

Consolidated Statements of

Changes in Stockholder's Equity (Deficit)

(Expressed in US Dollars)

Consolidated Statements of Changes in Stockholder’s Equity

Systems, Inc.

Non-controlling

Total Stockholders’

Balance at December 31, 2022

1 unchanged sentence

( 6,402,387 )

Shares issued in connection with public offering

Exercise of warrants

Shares issued in connection with private placement

Shares issued in connection with acquisition

( 2,703,326 )

Holdco shares exchanged for common shares

( 4,562,631 )

( 4,376,337 )

Shares issued in public offering

Class A shares converted

Share issuance costs

Stock-based compensation

( 1,452,380 )

1 unchanged sentence

( 1,452,380 )

Stock-based compensation

Cumulative translation adjustment

Loss and comprehensive loss

( 9,526,997 )

1 unchanged sentence

( 10,512,157 )

( 22,473,192 )

Balance at December 31, 2023

2 unchanged sentences

Exercise of warrants

Shares issued in connection with private placement

Shares issued in public offering

Class A shares converted

Share issuance costs

Conversion of debt into common stock

Stock-based compensation

( 1,452,380 )

Cumulative translation adjustment

Loss and comprehensive loss

( 4,042,331 )

4 unchanged sentences

( 7,920,052 )

The accompanying notes are an integral part of these consolidated financial

The accompanying notes are an integral part of

these consolidated financial statements.

Versus Systems Inc.

Consolidated Statements of Cash Flows

(Expressed in US Dollars)

Cash flows from operating activities

OPERATING ACTIVITIES

2 unchanged sentences

Adjustments to reconcile net loss to net cash:

Amortization (Note 7)

Amortization of intangible assets (Note 10)

Amortization of property and equipment

Amortization of intangible assets

Impairment of goodwill and other intangibles

Finance expense

Accretion of interest expense

Loss on sale of equipment

Gain from debt settlement

Effect of foreign exchange

Change in fair value of warrant liability

Share-based compensation

3 unchanged sentences

Accounts payable and accrued liabilities

Cash flows from operating activities

Cash flows used in operating activities

( 4,971,948 )

( 5,582,139 )

INVESTING ACTIVITIES

Proceeds from sale of equipment

Development of intangible assets

Cash flows used in investing activities

FINANCING ACTIVITIES

1 unchanged sentence

( 2,519,835 )

Proceeds from convertible debt – related party

Proceeds from warrant exercises

1 unchanged sentence

Payments for lease liabilities

Payments of share issuance costs

( 1,736,662 )

Payments of share and debt issuance costs

Cash flows from financing activities

INVESTING ACTIVITIES

Purchase of equipment

Proceeds from sale of equipment

Development of intangible assets

( 2,496,621 )

Cash flows from investing activities

Effect of foreign exchange

Change in cash and cash equivalents during the period

( 1,623,093 )

Change in cash during the period

Cash - Beginning of period

Cash - End of period

Supplemental Cash Flow Information (Note 18)

The accompanying notes are an integral part of these consolidated financial

Cash and cash equivalents - Beginning of period

Cash and cash equivalents - End of period

Supplemental disclosures of cash flow

Interest paid

Income taxes paid

Noncash investing and financing activities

Debt converted into common stock and warrants

The accompanying notes are an integral part of

these consolidated financial statements.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

OF OPERATIONS

(the Company) was continued under the Business Corporations Act (British Columbia) effective January 2, 2007.

The Company’s

head office and registered and records office is 1558 West Hastings Street, Vancouver, BC, V6C 3J4, Canada.

The Company’s common

stock is traded on the NASDAQ under the symbol “VS”.

NATURE OF OPERATIONS

Versus Systems Inc.

(the Company) was

continued under the Business Corporations Act (British Columbia) effective January 2, 2007.

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”.

On November 9, 2022, the Company completed a one-for-15 reverse stock split of the Company’s common shares.

On December 28, 2023,

2 unchanged sentences

to reflect the reverse share splits on a retroactive basis.

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.

The Company is in the process of considering a number of strategic

alternatives for the Company focused on maximizing shareholder value, including, but not limited to, an acquisition, merger, reverse

merger, sale of assets, strategic partnership, capital raise or other transaction.

The Company is hopeful that the change in governing

jurisdiction from British Columbia to Delaware will more appropriately reflect its shift in strategy and will (i) improve our access

to capital markets, increase funding and strategic flexibility and reduce the cost of capital, (ii) improve the Company’s ability

to execute an acquisitive growth strategy using its capital stock as consideration, and (iii) better focus management efforts on

and international operation and better attract and retain key employees.

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

As of December 31, 2023, 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.

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.

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 $ 2,500,000 .

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

In December 2024, under the terms of

the agreement, upon the Company’s shareholders’ approval and the Company’s redomiciling to Delaware, $ 2,500,000 converted

into 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.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

NATURE OF OPERATIONS (CONTINUED)

Pursuant 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

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.

As of December 31, 2024 the Company

had not granted ASPIS access to its technology for use in ASPIS’s cybersecurity technology.

The Company expects to begin the License

Agreement in during the second quarter of 2025.

Going Concern

These 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.

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 December 31,

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 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 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.

OF PRESENTATION

of presentation

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

generally accepted accounting principles (U.S.

and presentation currency

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

the Company and its subsidiaries.

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.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

OF PRESENTATION (continued)

of consolidation

consolidated financial statements include the accounts of Versus Systems Inc.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These consolidated financial statements

have been prepared in accordance with U.S.

generally accepted accounting principles (U.S.

Any reference in these notes to applicable

guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting

Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Functional and presentation currency

These consolidated financial statements

are presented in United States dollars, unless otherwise noted, which is the functional currency of the Company and its subsidiaries.

Basis of consolidation

These 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.

Name of Subsidiary

Place of Incorporation

Proportion of

Principal Activity

Versus Systems (Holdco) Inc.

United States of America

Holding Company

Versus Systems UK, Ltd.

United Kingdom

Sales Company

United States of America

Technology Company

Xcite Interactive, Inc.

United States of America

Technology Company

Reclassifications

Certain amounts in the 2022 consolidated

financial statements have been reclassified to conform to the current period presentation.

These reclassifications have no impact on previously

reported net loss or total equity.

Use of estimates

preparation of these 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.

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:

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

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.

Concentration of Credit Risk

The Company maintains its cash and cash

equivalents at insured financial institutions, the balances of which may, at times, exceed federally insured limits.

Generally, these

deposits may be redeemed upon demand, and the Company believes there is minimal risk of losses on such balances.

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.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

OF PRESENTATION (continued)

recoverability and probability of future economic benefits of intangible assets

has determined that intangible asset costs which were capitalized may have future economic benefits and may be economically recoverable.

Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including

anticipated cash flows and estimated economic life.

iii) Valuation

of share-based compensation

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).

iv) Depreciation

and Amortization

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.

v) Determination

of functional currency

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.

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

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.

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of estimates

The preparation of these 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

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;

and the impairment of goodwill and intangible

The Company considers all highly liquid

marketable securities with an original maturity of three months or less to be cash equivalents.

Accounts Receivables, Net

Trade accounts receivable are recorded

net of reserves for expected credit losses.

Estimates for allowances for credit losses are determined based on existing contractual obligations,

historical payment patterns and individual customer circumstances.

The allowance for credit losses was immaterial at both December 31,

2024 and 2023, respectively.

For the years ended December 31, 2024 and 2023, bad debt expense recorded in the consolidated statements

of operations and comprehensive loss was immaterial.

The Company’s evaluation of credit losses for the current period included an assessment

of our aged trade receivables balances and their underlying credit risk characteristics.

Our evaluation of past events, current conditions,

and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.

Basic and diluted loss per share

Basic earnings (loss) per share is

computed by dividing net income (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

which totaled 2,555 ( December 31, 2023 - 28,990 ) and warrants excluded from diluted loss per share as of December 31, 2024 totaled 1,733,741

(December 31, 2023 – 923,645 ).

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

ACCOUNTING POLICIES

and diluted loss per share

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 and warrants excluded from diluted loss per share as of

December 31, 2023 totaled 925,635 (December 31, 2022 – 442,573 ).

and equipment

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:

Straight line, 3 years

Right of use assets

Shorter of useful life or lease term

Classification

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.

For 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.

The Company applies Accounting

Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820).

ASC 820 defines fair value, establishes a framework

for measuring fair value and expands disclosures about fair value measurements.

ASC 820 requires disclosures to be provided for fair value

measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair

value as follows:

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and equipment

Property and equipment is recorded at

cost less accumulated amortization and any impairments.

Significant additions and improvements are capitalized, while repairs and maintenance

are charged to expense as incurred.

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

Fair Value Measurements and Financial

The Company applies Accounting Standards Codification

820, Fair Value Measurements and Disclosures (“ASC 820”).

ASC 820 defines fair value, establishes a framework for measuring

fair value and expands disclosures about fair value measurements.

ASC 820 requires disclosures to be provided for fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

- Level 1-Observable inputs

3 unchanged sentences

3-Unobservable inputs which are supported by little or no market activity.

820 recommends three main approaches for measuring the fair value of assets and liabilities:

the market approach, the income approach,

and the cost approach.

The Company uses the appropriate approach based on the nature of the asset or liability being measured.

instruments include Cash, Receivables, Restricted deposit, Deposits, Accounts payable, accruals, Warrant liabilities and Notes payable

-related party.

The carrying values of the financial instruments included in current assets and liabilities approximate their fair values

due to their short-term maturities.

The carrying amount of long-term borrowings approximates its fair value due to the fact that the

related interest rates approximate market rates for similar debt instruments of comparable maturities.

It is not practical to estimate

the fair value of the Note payable – related party due to its related party nature.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

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.

assets and liabilities at amortized cost

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.

assets and liabilities at FVTPL

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

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.

of financial assets at amortized cost

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.

assets excluding goodwill

Derecognition

of financial assets

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.

at December 31, 2023, the Company does not have any derivative financial assets and liabilities.

assets acquired separately are carried at cost at the time of initial recognition.

Intangible assets acquired in a business combination

and recognized separately from goodwill are 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.

with a finite useful life are 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.

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 CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

with a finite useful life are 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.

The 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 are amortized on a straight-line basis over 3 years.

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

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 is tested annually for impairment

or when there is an indication that the goodwill may be impaired.

Any impairment is recognized as an expense immediately.

financing costs

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

completion of the Company’s financings any deferred costs were offset against the proceeds.

of intangible assets excluding goodwill

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 are capitalized until the product is ready

to be sold or marketed to customers, at which time, amortization of the capitalized costs begins.

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).

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.

Company accounts for income taxes utilizing the assets and liability method.

Under this method, deferred tax assets and liabilities are

determined based on differences between the financial statement carrying amounts of existing assets and liabilities and their respective

tax basis, and net operating loss and tax credit carry forwards, using enacted tax rates and laws that are expected to be in effect when

the differences reverse.

ASC 820 recommends three main approaches

for measuring the fair value of assets and liabilities:

the market approach, the income approach, and the cost approach.

The Company uses

the appropriate approach based on the nature of the asset or liability being measured.

Financial instruments include cash, receivables,

restricted deposit, accounts payable and accrued liabilities.

The carrying values of the financial instruments included in current assets

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

Impairment of Long-Lived Assets

The Company’s long-lived assets are primarily

comprised of intangible assets and property and equipment.

The Company evaluates its finite-lived intangible assets and property and equipment

for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable.

If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset

group to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset group.

If such assets

are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds

the fair value of the assets.

The Company impaired the Company’s finite-lived intangible assets in the year ended December 31, 2023.

See Note 5 for more information.

n addition, indefinite-lived intangible

assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that

the asset is impaired by comparing the fair value to the carrying value of the asset.

To determine the fair value of the asset, the Company

used the multi-period excess earnings method of the income approach.

The more significant assumptions inherent in the application of this

method include:

the amount and timing of projected future cash flows (including revenue, cost of sales, research and development costs,

and sales and marketing expenses), and the discount rate selected to measure the risks inherent in the future cash flows.

impaired the Company’s indefinite-lived intangible assets in the year ended December 31, 2023.

See Note 5 for more information.

Convertible Debt

The Company’s convertible debt

is accounted for in accordance with ASC 470-20, Debt with conversion and Other Options (“ASC 470-20”) and ASC 815-40,

Contracts in Entity’s Own Equity (“ASC 815-40”).

Under ASC 815-40, to qualify for equity classification (or

nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the

requirements of equity classification guidance.

Based upon the Company’s analysis, it was determined that Company’s convertible

debt does not contain embedded features requiring recognition as derivatives and bifurcation, and therefore are measured at amortized

cost and recorded as liabilities on the Consolidated Balance Sheets.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

valuation allowance is recorded against deferred tax assets in these cases then management does not believe that the realization is more

likely than not.

While management believes that its judgements and estimates regarding deferred tax assets and liabilities are appropriate,

significant differences in actual results may materially affect the Company’s future financial results.

Company recognizes any uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon audit

by relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than a 50 % likelihood of being

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

As of December 31, 2023 and 2022, the Company did not record any accruals for interest and penalties.

The Company does not foresee

material changes to its uncertain tax positions within its next twelve months.

The Company’s tax years are subject to

examination for 2020 and forward for U.S.

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In connection with the funding agreement with ASPIS, we issued common

stock warrants.

The company evaluates the terms for each of these outstanding warrants in accordance with ASC Topic 480, Distinguishing

Liabilities from Equity (“ASC 480”), and ASC Topic 815, Derivatives and Hedging ASC (“815-40”), to

determine the appropriate classification and accounting treatment.

The warrants were determined to meet the criteria to be classified

as equity instruments and were recorded under additional paid in capital on the Consolidate Balance Sheet.

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 in the condensed consolidated statement changes in shareholders’

The Company accounts for income taxes

utilizing the assets and liability method.

Under this method, deferred tax assets and liabilities are determined based on differences

between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating

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

A valuation allowance is recorded against

deferred tax assets in these cases then management does not believe that the realization is more likely than not.

While management believes

that its judgements and estimates regarding deferred tax assets and liabilities are appropriate, significant differences in actual results

may materially affect the Company’s future financial results.

The Company recognizes any uncertain income tax positions at the largest

amount that is more-likely-than-not to be sustained upon audit by relevant taxing authority.

An uncertain income tax position will not

be recognized if it has less than a 50 % likelihood of being sustained.

The Company’s policy is to recognize interest and/or penalties

related to income tax matters in income tax expense.

As of December 31, 2024 and 2023, the Company did not record any accruals for interest

and penalties.

The Company does not foresee material changes to its uncertain tax positions within its next twelve months.

The Company’s

tax years are subject to examination for 2022 and forward for U.S.

Federal tax purposes and for 2021 and forward for state tax purposes.

Company early adopted ASC 842, Leases, as of January 1, 2019 using the modified retrospective application.

Company assesses at contract inception whether a contract is or contains a lease if the contract conveys the right to control the use

of an identified asset for a period of time in exchange for consideration.

The lease term corresponds to the non-cancellable period of

each contract.

leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their

respective leases.

Operating leases (with an initial term of more than 12 months) are included in operating lease right-of-use (ROU)

assets, operating lease liabilities (current), and operating lease liabilities (non-current) in the consolidated balance sheets.

assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s

obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date

based on the present value of lease payments over the lease term.

The Company utilizes a market-based approach to estimate the incremental

borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The operating

lease ROU asset also includes any lease prepayments, reduced by lease incentives and accrued rent.

The lease terms may include options

to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

contingencies

loss contingency is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be

estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.

Loss contingencies

are determined by discounting the expected 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 liability.

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.

A loss contingency is recognized if,

as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably and it is probable

that an outflow of economic benefits will be required to settle the obligation.

Loss contingencies are determined by discounting the expected

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

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

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.

of Equity Units Issued in Private Placements

accordance with U.S.

GAAP, particularly ASC 505-10 and ASC 815, the Company has adopted the fair value method for the valuation of equity

units issued in private placements, which typically comprise common shares and warrants.

For each private placement, the Company separately

estimates the fair value of both the common shares and the warrants at the date of issuance.

The determination of fair value is based

on market conditions, volatility, and other relevant factors at the time of issuance.

The fair value of the common shares issued is measured based on observable market

prices, if available, or estimated using appropriate valuation techniques considering the

terms of the shares and market conditions.

Warrants are valued using an appropriate option-pricing model, such as the Black-Scholes

or a binomial model.

The model incorporates various inputs, including the share price, expected

volatility, expected term, risk-free interest rate, and any dividends.

total proceeds from the issuance of equity units are allocated between the common shares and the warrants based on their relative fair

values at the date of issuance.

This allocation is reflected in the equity section of the balance sheet, with the fair value of the warrants

recorded as a component of additional paid-in capital in the equity section.

If the warrants expire unexercised, the amount remains in

additional paid-in capital.

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

issued in equity financing transactions

Company engages in equity financing transactions to obtain funds necessary to continue operations.

These equity financing transactions

may involve issuance of common shares or units.

Each unit comprises a certain number of shares and a certain number of warrants.

on the terms and conditions of each equity financing transaction, the warrants are exercisable into additional common shares at a price

prior to expiry as stipulated by the transaction.

that are part of units are assigned a value based on the residual value, if any.

As of February 1, 2021, the warrants were considered a derivative liability

since the obligation to issue shares was not fixed in the Company’s functional currency.

The derivative warrant liability was measured

as fair value at issue with subsequent changes recognized in the consolidated statement of loss and comprehensive loss.

A $ 9,743,659 warrant

derivative loss was recorded in the consolidated statement of loss and comprehensive loss beginning February 1, 2021 when the Company

changed its functional currency.

As of December 31, 2023 and 2022 the associated warrants have expired and the remaining balance of the

warrant liability is $ 0 .

Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments and derivative financial assets (e.g.

in warrants).

Option pricing models require the input of subjective assumptions including expected price volatility, interest rates,

and forfeiture rates.

Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings.

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Valuation of Equity Units Issued in

Private Placements

In accordance with U.S.

GAAP, particularly

ASC 505-10 and ASC 815, the Company has adopted the fair value method for the valuation of equity units issued in private placements,

which typically comprise common shares and warrants.

For each private placement, the Company separately estimates the fair value of both

the common shares and the warrants at the date of issuance.

The determination of fair value is based on market conditions, volatility,

and other relevant factors at the time of issuance.

The fair value of the common shares issued is measured based on observable market prices, if available, or estimated using appropriate

valuation techniques considering the terms of the shares and market conditions.

Warrants are valued using an appropriate option-pricing model, such as the Black-Scholes or a binomial model.

The model incorporates

various inputs, including the share price, expected volatility, expected term, risk-free interest rate, and any dividends.

The total proceeds from the issuance

of equity units are allocated between the common shares and the warrants based on their relative fair values at the date of issuance.

This allocation is reflected in the equity section of the consolidated balance sheet, with the fair value of the warrants recorded as

a component of additional paid-in capital in the equity section.

If the warrants expire unexercised, the amount remains in additional

paid-in capital.

This method of valuation and allocation

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

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.

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.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

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.

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.

Consideration paid for the shares on the exercise of stock options is credited to capital stock.

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.

general, the Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits

will flow to the Company, 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 the Company’s activities as described

Foreseeable losses, if any, are recognized in the year or period in which the loss is determined.

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.

Company recognizes SAAS revenues from its interactive production sales over the life of the contract as its performance obligations are

Payment terms vary by contract and can be periodic or one-time payments.

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.

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.

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

recognition of sales is recorded on a monthly basis upon delivery or as the services are provided.

Cash received in advance for services

are recorded as deferred revenue based on the proportion of time remaining under the service arrangement as of the reporting date.

OF 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

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

(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

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.

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

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.

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.

Since the costs incurred to satisfy

the ASPIS technology performance obligations are incurred evenly throughout the year, the value of the technical support and new improvements

services are recognized throughout the contract period as these performance obligations are satisfied.

For the year ended December

31, 2024, no revenue was recognized on our functional IP as the Technology Agreement with ASPIS as the license had not been delivered to

ASPIS during the year.

Deferred revenue

Revenue recognition of sales is recorded

on a monthly basis upon delivery or as the services are provided.

Cash received in advance for services are recorded as deferred revenue

based on the proportion of time remaining under the service arrangement as of the reporting date.

During the year ended December 31, 2024

the Company recognized $ 35,049 of revenue attributed to the deferred revenue that existed at December 31, 2023.

No additional billing

occurred in 2024 that resulted in the addition of deferred revenue.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

functional currency is the currency of the primary economic environment in which the Company operates and has been determined for each

entity within the Company.

The functional currency for the Company and its subsidiaries is the United States dollar.

The functional currency

determinations were conducted through an analysis of the consideration factors identified in ASC 830, Foreign Currency Matters.

currency transactions in currencies other than the United States dollar are recorded at exchange rates prevailing on the dates of the

transactions.

Foreign currency transaction gains and losses are generally recognized in profit or loss and presented within gain (loss)

on foreign exchange.

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 consolidated balance sheet.

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 consolidated statement of changes in stockholders’

equity (deficit).

Comprehensive

income (loss)

Comprehensive

income (loss) consists of net income (loss) and other comprehensive income (loss) and represents the change in shareholders’ equity

(deficit) which results from transactions and events from sources other than the Company’s shareholders.

Comprehensive loss differs

from net loss for the year ended December 31, 2023 due to the effects of foreign translation gains and losses.

Recent accounting pronouncements

not yet adopted

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Research and development

Research and development costs are

expensed as incurred.

For the years ended December 31, 2024 and 2023, the Company incurred approximately $ 246,019 and $ 1,107,235 , respectively,

on research and development activities

Foreign exchange

The functional currency is the currency

of the primary economic environment in which the Company operates and has been determined for each entity within the Company.

The functional

currency for the Company and its subsidiaries is the United States dollar.

The functional currency determinations were conducted through

an analysis of the consideration factors identified in ASC 830, Foreign Currency Matters .

Foreign currency transactions in currencies

other than the United States dollar are recorded at exchange rates prevailing on the dates of the transactions.

Foreign currency transaction

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

An aggregate loss of

$ 0.1 million and $ 0.1 million arising from foreign exchange transactions is included in other (expense) income, net for the year ended

December 31, 2024 and 2023, respectively.

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 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 consolidated statements of stockholders’ equity.

Comprehensive income (loss)

Comprehensive income (loss) consists

of net income (loss) and other comprehensive income (loss) and represents the change in shareholders’ equity (deficit) which results

from transactions and events from sources other than the Company’s shareholders.

Comprehensive loss differs from net loss for the

periods ended December 31, 2024 and 2023, due to the effects of foreign translation gains and losses.

Recent accounting pronouncements not

New accounting pronouncements

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 is currently evaluating how this will impact its 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 investments.

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

Company is currently evaluating how this ASU will impact its 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

(Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity

(Topic 505), and Compensation—Stock Compensation (Topic 718).

The amendments are in response to SEC Staff Accounting Bulletin No.

120 and other SEC staff announcements and guidance.

This ASU does not introduce new guidance and therefore does not have a specified transition

or effective date.

However, for smaller reporting companies, the ASU is effective for fiscal years beginning after December 15, 2023.

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

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 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.

Entities may choose to apply these amendments retrospectively if sufficient information

is available.

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

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

Disclosure Improvements:

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

ASU introduces changes to the disclosure requirements, aligning them more closely with the SEC's initiatives for simplification and update.

It specifically addresses various amendments in the FASB Accounting Standards Codification in response to the SEC's drive for clearer

and more streamlined disclosures.

This ASU is effective for public business entities classified as smaller reporting companies for fiscal

years beginning after December 15, 2023.

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

and disclosures.

In November 2023, the FASB issued ASU 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU enhances the disclosures related to segment reporting

for public entities.

It requires entities to disclose significant segment expenses for each reportable segment, providing greater transparency

in segment performance.

The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal

years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating how this ASU will impact its

consolidated financial statements and disclosures.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

ACCOUNTING POLICIES (continued)

In December 2023, the FASB issued ASU 2023-08,

Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets.

This ASU requires

certain crypto assets to be measured at fair value, with changes in fair value recorded in net income each reporting period.

It also mandates

additional disclosures about crypto asset holdings.

This ASU is effective for all entities for fiscal years beginning after December 15,

2024, including interim periods within those years.

Early adoption is permitted.

December 2023, the FASB issued ASU 2023-09, Income Taxes (“Topic 740”):

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 consolidated financial statements and disclosures.

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.

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

Recent adopted accounting pronouncements

In January 2017, the FASB issued ASU No.

Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement

of goodwill by eliminating Step 2 from the goodwill impairment test.

An entity no longer will determine goodwill impairment by calculating

the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting

unit had been acquired in a business combination.

Instead, under the amendments in this update, an entity should perform its annual, or

interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

The FASB also eliminated the

requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that

qualitative test, to perform Step 2 of the goodwill impairment test.

It is effective for public business entities for fiscal years beginning

after December 15, 2022, with early adoption permitted.

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

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

In October 2021, the FASB issued ASU 2021-08,

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides

an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business

ASU 2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a

business combination in accordance with Topic 606.

At the acquisition date, an acquirer should account for the related revenue contracts

in accordance with Topic 606 as if it had originated the contract.

It is effective for public business entities for fiscal years beginning

after December 15, 2022, with early adoption permitted.

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

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

In June 2016, the FASB issued ASU 2016-13, Financial

Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which significantly changes how entities

measure credit losses for most financial assets and certain other instruments.

ASU 2016-13 introduces a new model for recognizing credit

losses, known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses.

CECL model, entities will be required to estimate all expected credit losses over the life of the asset.

This update applies to all entities

holding financial assets and net investment in leases that are not accounted for at fair value through net income.

This ASU is effective

for public business entities classified as smaller reporting companies for fiscal years beginning after December 15, 2022.

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

statements and 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

consolidated financial statements.

IN FUNCTIONAL AND PRESENTATION CURRENCY

Company changed its functional currency from the Canadian dollar (CAD) to the United States dollar (USD) as of February 1, 2021.

change in functional currency coincided with the January 2021 initial public offering and listing on the Nasdaq.

Versus’ business activities, comprised primarily of United States dollar revenue and expenditures, as well as, United States

dollar denominated financings, management determined that the functional currency of the Company is the United States dollar.

assets, liabilities, equity, and other components of stockholders’ equity (deficit) were translated into United States dollars

at the exchange rate at the date of change.

In August 2023, the FASB issued ASU

2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60) :

Recognition and Initial Measurement.

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 consolidated

financial statements and disclosures.

In November 2024, the FASB issued

2024-04, Debt-Debt with Conversion and Other Options (“Subtopic 470-20”) (“ASU No.

which intends to clarify the conditions in which induced conversion applies to convertible debt by outlining three criteria that must

be met for an entity to apply the induced conversion model.

The amendments in this ASU are effective for annual reporting periods beginning

after December 15, 2025 (and interim reporting periods within those annual reporting periods).

Early adoption is permitted as of the

beginning of a reporting period if the entity has also adopted ASU 2020-06 for that period.

The Company is currently evaluating how this

ASU will impact its consolidated financial statements and disclosures.

In November 2024, the FASB issued

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 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 consolidated financial statements and related disclosures.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

As of December 31, 2023, accounts receivable consists of customer receivables

of $ 8,680 (net an allowance for credit losses of $ 2,700 ) and Goods and Services Tax (GST) receivable of $ 9,542 .

As of December 31, 2022,

accounts receivable consists of customer receivables of $ 46,592 (net an allowance for credit losses of $ 6,100 ) and GST receivable of $ 14,157 .

at December 31, 2023, restricted deposits consisted of $ 8,679 (December 31, 2022 - $ 8,489 ) held in a guaranteed investment certificate

as collateral for a corporate credit card.

AND EQUIPMENT

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent adopted accounting pronouncements

In August 2020, the FASB issued ASU

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting

for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity,

and modifies the guidance on diluted earnings per share calculations as a result of these changes.

The guidance is effective for fiscal

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

The adoption of the guidance in the first

quarter of 2024 did not have a material impact on our consolidated financial statements and related disclosures.

November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (“Topic 280”):

Improvements to Reportable Segment Disclosures (“ASU No.

2023-07”), which

intends to improve reportable segment disclosure requirements, primarily through enhanced

disclosures about significant segment expenses.

The amendments in this ASU are effective

for public business entities for fiscal years beginning after December 15, 2023, and interim

periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company adopted ASU No.

2023-07 on January 1, 2024 retrospectively and the adoption did

not have a material effect on the Company’s consolidated financial statements.

to the Segments section in Note 14, Segment Reporting, to the consolidated financial statements

for further details.

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 consolidated financial statements.

PROPERTY AND EQUIPMENT

At December 31, 2022

10 unchanged sentences

At December 31, 2024

At December 31, 2023

NON-CONTROLLING

INTEREST IN VERSUS LLC

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.

March 1, 2022, the Company acquired an additional 15.1 % interest in Versus LLC in exchange for 715 common shares of the Company.

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 Company recorded depreciation expense of $ 1,688 and $ 23,574 for

the twelve months ended December 31, 2024 and 2024, respectively.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

NON-CONTROLLING

INTEREST IN VERSUS LLC (continued)

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

31, 2023 and December 31, 2022.

NON-CONTROLLING INTEREST IN VERSUS LLC

The Company holds an 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 year ended December 31, 2024 and 2023 was $ 2,942,021 and $ 5,442,876 , respectively.

The net income (loss) attributable to the non-controlling interest for the year ended December 31, 2024 and 2023 was $( 532,505 ) and $( 985,160 ), respectively

The following table presents summarized financial

information before intragroup eliminations for the non-wholly owned subsidiary as of December 31, 2024 and December 31, 2023.

Non-controlling interest percentage

8 unchanged sentences

Net loss attributed to non-controlling interest

( 2,146,185 )

OF XCITE INTERACTIVE, INC.

Summary of the Acquisition

On June 3, 2021, the Company closed its acquisition of all the issued

and outstanding common shares of Xcite Interactive Inc.

(Xcite) in exchange for common shares of the Company.

Pursuant to the terms of

the acquisition, the Company acquired all the issued and outstanding Xcite common shares.

acquisition was accounted for using the acquisition method pursuant to ASC 805, “Business Combinations”.

Under the acquisition

method, assets and liabilities are measured at their estimated fair value on the date of acquisition.

The total consideration was allocated

to the tangible and intangible assets acquired and liabilities assumed and goodwill in the amount of $ 6.5 million was recorded.

Impairment of Goodwill and Intangible Assets

Company conducts an annual impairment analysis in accordance with ASC 350 and ASC 360.

A number of factors influenced the performance

of Xcite Interactive in 2022 and beyond, including reduced revenue projections, the time and cost involved in creating custom games,

the departure of key Xcite employees, and the competitive landscape of the fan engagement industry.

As a result, the Company engaged

a third-party to conduct an impairment analysis as of December 31, 2022.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

OF XCITE INTERACTIVE, INC.

analysis determined that the fair value was $ 3,760,000 resulting in an impairment of $ 8,919,002 .

The goodwill balance of $ 6,580,660 was

written down to $ 0 .

The additional impairment of $ 2,673,342 was attributed on a pro-rata basis to the intangible assets related the Xcite

These assets include customer relationships, tradename, and developed technology.

Intangible assets are 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.

result, they recorded an impairment change in the amount of $ 3,968,332 during the year ended December 31,2023.

Relationships

At December 31, 2021

( 1,699,034 )

( 2,338,340 )

At December 31, 2022

( 1,656,691 )

( 1,745,854 )

( 3,968,332 )

At December 31, 2023

Accumulated amortization

At December 31, 2021

At December 31, 2022

At December 31, 2023

Carrying amounts

At December 31, 2021

At December 31, 2022

At December 31, 2023

PAYABLE AND ACCRUED LIABILITIES

Company’s accounts payable and accrued liabilities are comprised of the following:

Accounts payable (Note 12)

Due to related parties (Note 12 and Note 14)

Accrued liabilities (Note 12)

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

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, the Company impaired the remaining carrying value of the intangible assets in the amount of $ 3,968,332 .

Prior to the full impairment, the Company had gross carrying values of $ 14,734,942 , $ 3,170,966 , $ 420,833 , and $ 1,209,861 for the Company’s

software, customer relationships, tradename and developed technology, respectively.

The Company’s gross carrying values were netted

against the accumulated amortization of $ 11,311,681 , $ 1,425,112 , $0 , and $ 1,064,907 for the Company’s software, customer relationships,

tradename and developed technology, respectively.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company’s accounts payable

and accrued liabilities are comprised of the following:

Accounts payable

Due to related parties

Accrued liabilities

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

PAYABLE – RELATED PARTY

the year ended December 31, 2023, the Company repaid $ 2,519,835 of principal.

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

accrued interest.

NOTES PAYABLE – RELATED PARTY

During the year ended December 31, 2023, the Company repaid $ 64,550 of principal.

1 unchanged sentence

in accrued interest which was included in accounts payable and accrued liabilities.

the year ended December 31, 2023, the Company recorded finance expense of $ 0 (December 31, 2022 - $ 60,770 ), related to bringing the notes

to their present value.

Balance at December 31, 2021

Finance expense

Foreign exchange adjustment

During the year ended December 31, 2024,

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

Balance, December 31, 2022

Foreign currency adjustment

( 2,519,835 )

Cancellation of remaining debt

Balance, December 31, 2023

SHARE CAPITAL

a) Authorized

share capital

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

The Class A Shares do not have any special rights or restrictions

As of December 31, 2023 and 2022, there were 0 and 21 Class A Shares issued and outstanding, respectively.

The Class A shares

were converted to common shares on December 22, 2023.

share capital

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.

In connection with the offering, the Company incurred $ 226,544 in issuance costs as part of the transaction.

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.

RELATED PARTY TRANSACTIONS

On October 7, 2024, the Company entered

into a Business Funding Agreement (the “Funding Agreement”) with ASPIS Cyber Technologies, Inc.

(“ASPIS”), pursuant

to which ASPIS agreed to make a $ 2,500,000 investment in the Company.

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 20.20 % of the outstanding common

shares of the Company based on the amount of Company common shares issued and outstanding as of December 31, 2024.

CONVERTIBLE DEBT

In October 2024, we issued $ 2.5 million

of a 10.0 % Convertible Senior Promissory Notes due in October 2025 (the “Senior Note”) in a private placement transaction.

The Senior Note is convertible into shares of common stock and common stock warrants, or a combination of shares of common stock and common

stock warrants and bear interest at 10 %.

The holder of the note may convert to cash upon maturity in October 2025 or upon an event of

default, unpaid principal and accrued and unpaid interest become immediately due and payable.

The holder of the Note may elect to convert

the Note into shares of common stock of the Company prior to maturity at $ 1.16 a share.

The outstanding balance due under the Note and

any accrued and unpaid interest shall automatically convert into shares of Company’s common stock at the $ 1.16 a share.

incurred $ 106,768 of debt issuance cost attributed to the Senior Note.

On December 24, 2024, the Senior Note

Holder converted the outstanding Senior Note into 2,155,172 shares of common stock and 1,077,586 common stock warrants at an exercise

price of $ 4.00 per share.

The warrants were deemed to be equity classified, therefore the book value of the Senior Note was converted

to equity and recorded within additional paid in capital on the consolidated balance sheet.

Interest expense recognized related to

the Senior Note was $ 17,795 for the year ended December 31, 2024.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

SHARE CAPITAL

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.

the year ended December 31, 2022, the Company:

vi) Issued 18,229 units at a price of $ 384.00 per unit per unit for total proceeds of $ 7,000,000 .

Each unit consisted of one common share and one warrant, to purchase one common share at $ 460.80 per share until February 28, 2027.

In connection with the offering, the Company incurred $ 900,720 in issuance costs as part of the transaction.

vii) Issued 715 shares, which were converted from Versus Holdco shares.

viii) Issued 2,461 shares at a price of $ 355.20 per unit for total proceeds of $ 874,125 as a result of the underwriter exercising the overallotment.

ix) Issued 262 shares related to the Xcite acquisition and the vesting of key employee shares.

x) Issued 17,271 units at a price of $ 124.80 per unit for total proceeds of $ 2,155,195 .

The offering consisted of 8,750 common shares and 8,521 pre-funded warrants.

Authorized share capital

The Company is authorized to issue an

unlimited number of Class A Shares.

The Class A Shares do not have any special rights or restrictions attached.

As of December 31, 2024

and 2023, there were 0 and 0 Class A Shares issued and outstanding, respectively.

The Class A shares were converted to common shares on

December 22, 2023.

Issued share capital

During the year ended December 31, 2024, the Company:

i) Issued 2,155,172 shares at a price of $ 1.16 per share for total proceeds

of $ 2,500,000 as a result of the conversion of the Senior Note, net of issuance cost of $ 106,768 .

ii) Issued 240,490 common shares pursuant to exercise of 240,490 warrants at a price of $ 3.68 per share for total proceeds of $ 885,003 .

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

i) Issued 156,238 shares at a price of $ 14.40 per share for total proceeds of $ 2,250,000 in a registered direct offering.

In connection with the offering, the Company incurred $ 226,545 in issuance costs as part of the transaction.

xi) Issued 25,768 shares at $ 43.52 per share in a private placement offering for total proceeds of $ 1,119,373 .

xii) Issued 131,250 units at a price of $ 16.00 per unit for total proceeds of $ 2,099,866 .

The offering consisted of 18,750 common shares and 112,500 pre-funded warrants.

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.

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.

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

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

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.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

SHARE CAPITAL ( continued )

continuity schedule of outstanding stock options is as follows:

Balance – December 31,

Balance – December

the year ended December 31, 2023, 25,000 stock options were granted by the Company, and the Company recorded share-based compensation

of ($ 1,452,380 ) relating to options vested during the period.

the year ended December 31, 2022, 6,533 stock options were granted by the Company, and the Company recorded share-based compensation

of $ 1,567,583 relating to options vested during the period.

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

A continuity schedule of outstanding stock options is as follows:

Number Outstanding

Weighted Average Exercise

Outstanding – December 31, 2022

Outstanding – December 31, 2023

Outstanding – December 31, 2024

During the year ended December 31,

2023, no stock options were granted by the Company, and the Company recorded share-based compensation of $ 160,865 relating to options

vested during the period.

As of December 31, 2024, there was approximately none of unrecognized compensation cost related to outstanding

unvested stock options.

During the year ended December 31, 2023,

25,000 stock options were granted by the Company, and the Company recorded share-based compensation of ($ 1,452,380 ) 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 December 31,

Risk-free interest rate - 3.93 %

2.14 % – 4.03 %

Expected life of options

Expected dividend yield

96.90 % – 112.40 %

Expected life of options - 3.69 years

Expected dividend yield - Nil

Volatility - 132.65 %

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

CAPITAL (continued)

December 31, 2023, the Company had incentive stock options outstanding as follows:

Remaining Life

April 2, 2024

June 27, 2024

September 27, 2024

October 22, 2024

July 24, 2025

July 31, 2025

August 10, 2025

June 29, 2026

August 19, 2026

August 17, 2027

September 20, 2027

February 13, 2028

purchase warrants

continuity schedule of outstanding share purchase warrants is as follows:

Average Exercise Price

Balance – December

Balance – December 31, 2022

SHARE CAPITAL ( continued )

Warrants outstanding

During the year ended December 31, 2024, the Company:

i) Issued 1,077,586 warrants in conjunction with the conversion of the Senior Note issuance, with an exercise price of $ 4.00 per share.

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

iv) 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.

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

vi) 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:

2024 December 31,

(1) Unit A warrant balance is 7,030 as of December 31, 2023 and 2022.

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 CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

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 year ended December 31, 2022, the Company:

iv) Completed a public offering on February 28, 2022, and issued 18,229 units at a price of $ 384.00 per unit for total proceeds of $ 7,000,000 .

Each unit consisted of one common share and one warrant, to purchase one common share at $ 460.80 per share until February 28, 2027.

v) Issued 2,461 units on March 24, 2022, at a price of $ 355.20 per unit for total proceeds of $ 874,125 because the underwriter exercised its overallotment option.

Each unit consisted of one common share and one warrant, to purchase one common share at $ 460.80 per share until February 28, 2027.

vi) Issued 25,906 warrants on July 18, 2022, to purchase common shares, each exercisable for one common share at an exercise price of $ 124.80 per share in an offer to an investor.

vii) Completed a public offering on December 9, 2022 and issued 131,250 units for total proceeds of $ 2,099,866 .

Each unit consists of (1) either (a) one common share or (b) one pre-funded warrant to purchase one common share and (2) two warrants to purchase one common share each, at a public offering price of $ 16.00 per unit.

The unit will have an exercise price of $ 17.60 per share, are exercisable immediately upon issuance, and will expire five years following the date of issuance.

An additional 13,781 warrants were provided to placement agents with an exercise price of $ 20.00 per share.

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

Risk-free interest rate 4.43 % 4.13 % - 4.49 %

4.13 % - 4.49 %

3.99 % - 4.22 %

Expected life of warrants

2.06 – 4.80 years

3.06 – 5.05 years

Expected dividend yield

119 % – 124.9 %

Expected life of warrants 5 years 2.06 – 4.80 years

Expected dividend yield Nil

Volatility 132.78 % 132.78 %

Weighted average fair value per warrant $ 1.71 $ 4.69

December 31, 2023, the Company had share purchase warrants outstanding as follows:

Expiration Date

At December 31, 2024, the Company had

share purchase warrants outstanding as follows:

Expiration Date Warrants

Weighted Average Remaining Life

7 unchanged sentences

October 17, 2028 24,457 4.05 3.80

(1) Unit A warrant balance is 7,030 as of December 31, 2023 and 2022.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

PARTY TRANSACTIONS

following summarizes the Company’s related party transactions, not disclosed elsewhere in these consolidated financial statements,

during the years ended December 31, 2023 and 2022.

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.

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.

Related Party Payments

sharing and occupancy costs of $ 75,214 (December 31, 2022 - $ 64,741 ) were paid or accrued to a corporation that shares management in

common with the Company.

a) At December 31, 2023, a total of $ 177,500 (December 31, 2022 - $ 304,623 ) 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 11).

b) At December 31, 2023, a total of $0 (December 31, 2022 - $ 2,604,713 ) of notes are payable to a director of the Company (Note 12).

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

CONCENTRATION OF RISK

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.

instrument risk exposure

Company is exposed in varying degrees to a variety of financial instrument related risks.

The Board approves and monitors the risk management

Company’s cash is invested in business accounts which are available on demand.

The Company has raised additional capital during

the years ended December 31, 2023 and 2022.

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.

A 1% change in interest rates would have no significant impact on profit or loss for the year ended December

exchange risk

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.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

CONCENTRATION OF RISK (continued)

Company was exposed to the following foreign currency risk as at December 31, 2023 and December 31, 2022:

Accounts payable and accrued liabilities

at December 31, 2023, 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 $ 152,500 (December 31, 2022 - $ 15,200 ).

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).

The Board 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.

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.

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.

have been no changes to the Company’s approach to capital management during the year ended December 31, 2023.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

(Expressed in United States dollars)

SEGMENTED INFORMATION

Company is engaged in three business activities, the live events business, which includes partnering with multiple professional sports

franchises to drive in-stadium audience engagement;

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.

of identifiable assets by geographic segments are as follows:

December 24, 2029 1,077,586 4.00 4.92

December 31, 2022

CASH FLOW INFORMATION

Non-cash investing and financing activities:

Shares issued to acquire Holdco shares

Shares issued in connection with Xcite acquisition

Shares issued to convert Class A shares

OBLIGATIONS AND COMMITMENTS

Lease liabilities recognized as of January 1, 2022 $ 367,884

Change in lease liabilities ( 239,324 )

current portion 128,560

At December 31, non-current portion -

Lease liabilities recognized as of January 1, 2023 128,560

Change in lease liabilities ( 128,560 )

At December 31, 2023 0

1,733,741 32.36 4.45

(1) Unit A warrant balance is 7,030 as of December 31, 2024 and 2023.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

OBLIGATIONS AND COMMITMENTS (continued)

August 1, 2015, the Company entered into a cost sharing arrangement agreement for the provision of office space and various administrative

In May of 2018, the Company extended the cost sharing arrangement to July of 2022 at a monthly fee of CAD $ 7,000 plus GST per

September 6, 2017, the Company entered into a rental agreement for office space in Los Angeles, California.

Under the terms of the agreement

the Company will pay $ 17,324 per month commencing on October 1, 2017 until June 30, 2023.

April 30, 2023, the Company vacated its leased office space in Los Angeles, California in accordance with the termination of the lease.

As of December 31, 2023, the Company operates using a fully remote workforce and does not have any long-term lease agreements for office

space or other long-term assets.

As such, the remaining right-of-use asset balance is $ 0 .

Provision for Income

The components of loss

before income taxes are as follows:

Provision for Income Taxes

The components of loss before income

taxes are as follows:

Year Ended December 31,

5 unchanged sentences

$ ( 10,512,157 )

For purposes of reconciling the Company’s provision for income

taxes at the statutory rate and the Company’s provision (benefit) for income taxes at the effective tax rate, a notional 27 % tax

rate was applied as follows:

Loss for the year

( 10,512,157 )

( 22,473,192 )

For purposes of reconciling the Company’s

provision for income taxes at the statutory rate and the Company’s provision (benefit) for income taxes at the effective tax rate,

a notional 27 % tax rate was applied as follows:

Loss before income taxes for the

Income tax at federal statutory rate

( 2,838,000 )

( 5,876,000 )

Increase (decrease) in tax resulting from:

Change in statutory, foreign tax, foreign exchange rates and other

Change in statutory, foreign tax, foreign exchange

rates and other

Permanent differences

Share issue costs

Foreign exchange

California minimum tax

Late filing penalty

Change in unrecognized deductible temporary differences

Income tax expense

The difference between the statutory federal

income tax rate and the Company’s effective tax rate in 2023, and 2022 is primarily attributable to the difference between the

and foreign tax rates, non-deductible officer compensation, share-based compensation, true up of deferred taxes, other non-deductible

permanent items, and change in valuation allowance.

Note that the statutory rate will be the Canadian rate as the parent (filer) is domiciled

The net deferred tax assets (liabilities) are comprised of the following:

The difference between the statutory

federal income tax rate and the Company’s effective tax rate in 2024, and 2023 is primarily attributable to the difference between

and foreign tax rates, true up of deferred taxes, other non-deductible permanent items, and change in valuation allowance.

that the statutory rate will be the US rate as the parent (filer) is domiciled in United States as of December 31, 2024.

The net deferred tax assets (liabilities)

are comprised of the following:

Deferred tax assets:

Non-capital losses carry-forward

Exploration and Evaluation assets

Share issuance costs

Intangible assets

Other deferreds

Other deferred

Allowable capital losses

4 unchanged sentences

Total deferred income taxes

(1) Certain adjustments have been made to the numbers reported

in the Form 10-K for the year ended December 31, 2023, to reflect the revision of immaterial presentation errors in the prior period

primarily due to the incorrect recognition of a deferred tax asset and offsetting valuation allowance for the Company’s exploration

and evaluation assets and intangible assets.

A valuation allowance is recorded to

reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence,

including estimates of future taxable income necessary to realize future deductible amounts.

A significant piece of objective negative

evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2024.

Such objective evidence limits

the ability to consider other subjective evidence such as its projections for future growth.

On the basis of this evaluation, at December

31, 2024 and 2023, a valuation allowance of $ 22.4 million and $ 22.3 million, respectively, has been recorded.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2024 AND 2023

(Expressed in United States dollars)

TAXES (continued)

A valuation allowance is recorded

to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative

evidence, including estimates of future taxable income necessary to realize future deductible amounts.

A significant piece of objective

negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023.

Such objective evidence

limits the ability to consider other subjective evidence such as its projections for future growth.

On the basis of this evaluation, at

December 31, 2023 and 2022, a valuation allowance of $ 23.7 million and $ 20.9 million, respectively, has been recorded.

INCOME TAXES ( continued )

As of December 31, 2024, the Company

has accumulated federal and state net operating loss (“NOL”) carryforwards of $ 30.1 million and $ 15.6 million, respectively.

significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included

on the consolidated balance sheets are as follows:

Temporary Differences

Expiry Date Range

Non-capital losses available for future periods - US

2036 to indefinite

Non-capital losses available for future periods - Canada

Allowable capital losses

No expiry date

Property and equipment

No expiry date

Intangible assets

No expiry date

Exploration and evaluation assets

No expiry date

Share issuance costs

No expiry date

The Company is subject to taxation

in the United States and various states along with other foreign countries.

The Company has not been notified that it is under audit by

the IRS or any state, however, due to the presence of NOL carryforwards, all the income tax years remain open for examination in each

of these jurisdictions.

has accumulated federal and Canadian net operating loss (“NOL”) carryforwards of $ 80.3 million and $ 12.4 million, respectively.

Pursuant to the Internal Revenue Code

of 1986, as amended (“IRC”), specifically Sections 382 and 383, the Company’s ability to use tax attribute carryforwards to offset

future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing

The Company has not completed an ownership change analysis pursuant to IRC Section 382 therefore the ability to offset taxable

income in the future may be impacted by ownership changes occurring prior to December 31, 2024.

If ownership changes within the meaning

of IRC Section 382 occur in the future, the amount of remaining tax attribute carryforwards available to offset future taxable income

and income tax expense in future years may be significantly restricted or eliminated.

Further, the Company’s deferred tax assets associated

with such tax attributes could be significantly reduced or eliminated upon realization of an ownership change within the meaning of IRC

If eliminated, the related asset would be removed from the deferred tax asset schedule, with a corresponding reduction in

the valuation allowance.

Additionally, limitations on the utilization of the Company’s tax attribute carryforwards can increase the amount

of taxable income and current income tax expense recognized.

Due to the existence of the valuation allowance, ownership change limitations

that are not significant may not impact the Company’s effective tax rate.

The significant components of the Company’s

temporary differences, unused tax credits and unused tax losses that have not been included on the consolidated balance sheets are as

Temporary Differences 2024 Expiry Date Range 2023 Expiry Date Range

Non-capital losses available for future periods - US 48,716,000 2036 to indefinite 45,697,000 2036 to indefinite

Non-capital losses available for future periods - Canada 24,393,000 2026 to 2044 22,862,000 2026 to 2043

Allowable capital losses 13,643,000 No expiry date 13,463,000 No expiry date

Property and equipment 280,000 No expiry date 280,000 No expiry date

Intangible assets 9,747,000 No expiry date 9,747,000 No expiry date

Exploration and evaluation assets 5,446,000 No expiry date 5,446,000 No expiry date

Share issuance costs 2,715,000 No expiry date 2,715,000 No expiry date

The Company is subject to taxation in

the United States and various states along with other foreign countries.

The Company has not been notified that it is under audit by the

IRS or any state, however, due to the presence of NOL carryforwards, all the income tax years remain open for examination in each of these

jurisdictions.

There are no audits in any foreign jurisdictions.

The Company does not believe that it is reasonably possible

that the total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

Deferred income taxes have not been

provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to

reinvest such earnings indefinitely in active foreign operations.

attributes are subject to review, and potential adjustment, by tax authorities.

The Company does not believe that it is reasonably possible that the

total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

Deferred income taxes have not been provided

for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest

such earnings indefinitely in active foreign operations.

Tax attributes are subject to review,

and potential adjustment, by tax authorities.

The Company files income tax returns with Canada, U.S.

and state governments.

With few exceptions, the Company is no longer subject to tax examinations by tax authorities for years before

The Company has evaluated subsequent events after the balance sheet

date of December 31, 2023 through April 1, 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 consolidated financial

statements or disclosure in the notes thereto.

With few exceptions,

the Company is no longer subject to tax examinations by tax authorities for years before 2022.

SEGMENT REPORTING

Our chief operating decision maker (“CODM”),

the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated

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

The measure of segment assets is reported on the consolidated balance sheet as total assets.

SUBSEQUENT EVENTS

The Company has evaluated subsequent

events after the balance sheet date of December 31, 2024 through March 31, 2025, 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

consolidated financial statements or disclosure in the notes thereto, except the below:

In January 2025 the Company was notified by ASPIS

that the acceptance of the Company’s technology per the License Agreement would be delayed as ASPIS would not be ready to perform

any implementation services for the license.

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-K

Item 9A. Controls and Procedures