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Item 9A. Controls and Procedures

2026-04-15 compared with 2025-03-31 · 1061 added, 1069 removed, 547 unchanged (80% of the section changed)

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation

of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls

and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required

by Rule 13a-15(b) under the Exchange Act.

Based upon that evaluation, our management, with the participation of our chief executive officer

and chief financial officer, has concluded that, as of December 31, 2024, our disclosure controls and procedures were effective in ensuring

that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,

summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be

disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including

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

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

Controls and Procedures

Our management, with the

participation of our principal executive and principal financial officer, has performed an evaluation of the effectiveness of our disclosure

controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as

required by Rule 13a-15(b) under the Exchange Act.

Based upon that evaluation, our management, with the participation of our principal

executive and principal financial officer, has concluded that, as of December 31, 2025, our disclosure controls and procedures were not

effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act

is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information

required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,

including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to

allow timely decisions regarding required disclosure, due to the material weaknesses in our internal controls over financial reporting

described below.

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.

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is

a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on

a timely basis.

on our evaluation under the framework in Internal Control-Integrated Framework, our principal executive and principal financial officer

concluded that our internal control over financial reporting was not effective as of December 31, 2025 due to the following material

● The Company did not design and implement effective segregation of duties

within the cash disbursement process, which increased the risk of misappropriation of assets.

Although third-party consultants assisted

with financial reporting and supporting the audit and review processes, the former CFO had the ability to initiate, record, and process

transactions without sufficient independent review.

The limited number of accounting and finance personnel contributed to incompatible

duties being concentrated without sufficient independent oversight;

● Certain key entity-level and financial reporting controls, including

processes to identify and assess financial reporting risks (including fraud and misappropriation of assets), manage user and privileged

access to systems supporting financial reporting and cash disbursements, and perform review and approval of journal entries were not adequately

designed or implemented to mitigate this risk.

This was primarily driven by fraudulent actions of the former CFO, which circumvented established

processes, and was exacerbated by limited resources.

light of these material weaknesses, we performed additional analysis and other post-closing procedures to ensure the reliability of financial

reporting and that our financial statements were prepared in accordance with GAAP.

Accordingly, we believe that the financial statements

included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the

periods presented.

management, under the oversight of the Audit Committee, has developed a plan to remediate the material weaknesses described above.

remediation plan includes improving segregation of duties through organizational changes, implementing controls requiring independent

preparation and review of key financial reporting activities, and strengthening controls over cash disbursements.

elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately

have the intended effects.

The material weaknesses will not be considered remediated, however, until the applicable controls operate

for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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.

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.

in Internal Control Over Financial Reporting

There were no changes in internal control over financial reports.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTION

THAT PREVENT INSPECTIONS

Not applicable.

During the fiscal quarter ended December 31, 2025, none of our directors

or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule

10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

As previously disclosed in the Company’s Form 12b-25 filed on

April 1, 2026, in the first quarter of 2026, while preparing this Annual Report on Form 10-K and the related audit of the Company’s

financial statements for the fiscal year ended December 31, 2025, management determined that improprieties involving the Company’s

former Chief Financial Officer had likely occurred.

The Audit Committee of the Board of Directors of the Company conducted

an internal investigation and confirmed that a misappropriation of assets had occurred.

In the course of the internal investigation, the

Audit Committee determined that there were material weaknesses in the Company’s internal control over financial reporting as of

December 31, 2025.

For more information about the fraudulent activity and a promissory note that was executed by the former Chief Financial

Officer in connection therewith, please see Note 11 and 12 to our consolidated financial statements for the year ended December 31, 2025,

which disclosure is incorporated herein by reference, and for more information about the material weaknesses in internal control over

financial reporting and the Company’s remedial actions, please see Part II, Item 9A.

Controls and Procedures, of this Form 10-K,

which disclosure is incorporated herein by reference.

DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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.

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.

Director and Chief Executive Officer 1

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Chief Technology Officer

Aric Spitulink

Aric Spitulnik

Independent Director

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Independent Director

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.

January 15, 2026, Geoff Deller resigned as Chief Financial Officer of the Company.

same date, the Company’s board of directors named Company Chief Executive Officer Luis

Goldner as the Company’s principal financial officer.

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.

Goldner , 56, joined our company as a director in December 2023 and became our Chief Executive Officer in August 2024 and Principal

Financial Officer in January 2026.

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

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.

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.

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

Deller was the President

and Chief Investment Officer of Orinoco Capital LLC, a private investment company, in Boca Raton, Florida.

Earlier in his career, he

held finance and operating roles in investment management.

Peachey , 50, joined our company as Chief Technology Officer in May 2016.

Peachey leads the architecture efforts for our Elixir-based

Winfinite challenge platform.

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,

From February

2012 to May 2016, Mr.

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

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.

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

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.

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.

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

Automotive, Mobility,

and Transportation at Microsoft.

Spitulnik , 54, joined our company as a director in November 2024.

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

of professional experience.

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.

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.

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

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.

Since 2020, Mr.

Barrera has served as Chief Commercial Officer of Icaro

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

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.

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

Board Composition and Structure;

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.

Composition and Structure;

Director Independence

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.

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:

Our business and affairs are managed under the direction of our board

of directors.

Our board of directors currently consists of four 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 a member would be

encouraged to resign.

Leadership Structure

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.

Luis Goldner currently serves as our Chief Executive Officer and Juan Carlos Barrera serves as

Chairman of the Board.

Chairman of the Board, Mr.

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 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 purpose of discussing

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

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

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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.

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.

Spitulnik 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

The compensation committee

is responsible for, among other matters:

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

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:

reviewing key employee

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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.

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 nominating and corporate

governance committee will be responsible for, among other matters:

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,

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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.

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.

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.

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.

In exercising such risk oversight, as previously disclosed in the Company’s

Form 12b-25 filed on April 1, 2026, in the first quarter of 2026, the Audit Committee conducted an internal investigation and determined

that fraudulent activity involving the Company’s former Chief Financial Officer had occurred and that there were material weaknesses

in the Company’s internal control over financial reporting as of December 31, 2025.

For more information about the fraudulent activity,

please see Notes 11 and 12 to our consolidated financial statements for the year ended December 31, 2025, which disclosure is incorporated

herein by reference, and for more information about the material weaknesses in internal control over financial reporting and the Company’s

remedial actions, please see Part II, Item 9A.

Controls and Procedures of this Form 10-K, which disclosure is incorporated herein by reference.

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.

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.

EXECUTIVE COMPENSATION

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

Option Awards

All Other Compensation

Chief Executive Officer

Matthew Pierce

Former Chief Executive Officer

Craig Finster

Former President and Chief Financial Officer

Chief Financial Officer

Keyvan Peymani

Former Executive Chairman of the Board

Former 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, 2024 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.

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.

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 2025 and 2024.

These individuals are referred to in this Annual

Report as the “named executive officers.”

Compensation Table

and Principal Position

Other Compensation

Executive Officer

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.

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

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.

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.

As of December 31, 2025, stock option grants for the purchase of an

aggregate of 401,557 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:

As of that date, there remained 373,347 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:

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.

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.

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

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

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.

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

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.

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

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.

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.

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:

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.

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.

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

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

of December 31, 2025 the Company has 401,557 options outstanding.

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, 2024 to our non-employee directors.

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, 2025 to our non-employee directors.

Juan Carlos Barrera (1)

David Catzel (2)

Aric Spitulink (3)

Luis Goldner (4)

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.

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.

Aric Spitulnik (3)

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.

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.

Spitulnik 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.

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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

of common shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership

of securities.

Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has

or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment

power,” which includes the power to dispose of or to direct the disposition of such security.

A person is also deemed to be a beneficial

owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after March 15, 2024.

rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities

as to which he has no economic interest.

Except as indicated by footnote, to our knowledge, the persons named in the table below have

sole voting and investment power with respect to all common shares shown as beneficially owned by them.

None of our major shareholders

have different voting rights than our common shareholders.

In the table below, the percentage

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., 3500 South DuPont Hwy.

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

The following table sets forth information relating to the beneficial

ownership of our common shares as of April 13, 2026 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 of common shares beneficially owned are

reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities.

Under the rules of

the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,”

which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power

to dispose of or to direct the disposition of such security.

A person is also deemed to be a beneficial owner of any securities of which

that person has a right to acquire beneficial ownership within 60 days after March 31, 2026.

Under these rules, more than one person may

be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no

economic interest.

Except as indicated by footnote, to our knowledge, the persons named in the table below have sole voting and investment

power with respect to all common shares shown as beneficially owned by them.

None of our major shareholders have different voting rights

than our common shareholders.

the table below, the percentage of beneficial ownership of our common shares is based on 4,901,677 shares of our common shares outstanding

as of April 13, 2026.

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

Dover, DE 19901

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Executive Officers and Directors as a Group (4 persons)

5% of Great Beneficial Owners

5% or Greater Beneficial Owners

ASPIS Cyber Technologies, Inc.

Cronus Equity Capital Group, LLC (2)

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

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.

Indicates beneficial ownership

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

The address of ASPIS Cyber Technologies, Inc.

is 250 Park Ave, 7 th Floor, New York, NY 10177.

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 less than 1% as of April 13, 2026.

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.

A “related party” includes:

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

described below and the compensation arrangements for our named executive officers, which we describe above, there were no related party

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

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

than the transactions described below and the compensation arrangements for our named executive officers, which we describe above, there

were no related party transactions to which we were a party since the beginning of our last fiscal year, or any currently proposed related

party transaction.

On April 30, 2025, pursuant

to the Technology License and Software Development Agreement (the “License Agreement”) with ASPIS Cyber Technologies, Inc.

(“ASPIS”), the Company delivered a functional license for its gamification, engagement, and QR code technology.

affiliate of the Company’s largest shareholder—Cronus Equity Capital Group, LLC (“CECG”)—which holds approximately

20.20% of the outstanding common shares of the Company as of December 31, 2025.

Under the License Agreement, as amended by a side letter executed on

August 11, 2025 and supported by a legal opinion and confirmation, the Initial Term is non-cancellable for twelve (12) months commencing

April 30, 2025, with monthly license fees of $165,000 payable regardless of use.

ASPIS will pay for any required technology modifications,

improvements, and developments to Versus’ technology in addition to the license fee.

The Company retains ownership of the technology,

and ASPIS holds an exclusive license to use it in the cybersecurity industry so long as ASPIS continues to pay the monthly license fee.

On an annual basis, the Board, with the assistance of, and upon recommendation

of, the Nominating and Corporate Governance Committee, makes a determination as to the independence of each director, considering the

current standards for “independence” established by the NYSE.

Our Corporate Governance Guidelines provide that a majority

of the Board must be independent.

The Board has determined that three of four directors are independent under these standards - Messrs.

Barrera, Catzel, and Spitulnik.

All members of each of the Company’s Audit, Compensation and Nominating and Corporate Governance

Committees are independent directors, as determined by the Board.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table summarizes

the fees charged by Ramirez Jimenez International CPAs and Davidson & Company LLP for certain services rendered to our company during

fiscal 2024 and fiscal 2023, respectively.

The following table summarizes the fees charged by Ramirez Jimenez

International CPAs for certain services rendered to our company during fiscal 2025 and fiscal 2024, respectively.

For the year ended

Ramirez Jimenez International CPAs

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All other fees (4)

“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.

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.

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.

The financial statements and supplementary data required by this item begin on page F-1.

The financial statement schedules are omitted because they are either not applicable or the information required is presented in the financial statements and notes thereto under “Item 8.

The financial statements and supplementary data required

by this item begin on page F-1.

The financial statement

schedules are omitted because they are either not applicable or the information required is presented in the financial statements

and notes thereto under “Item 8.

Financial Statements and Supplementary Data.”

Exhibit Index:

Incorporation by Reference

Certificate of Corporate Domestication and Certificate of Incorporation

Specimen Stock Certificate evidencing common shares.

Warrant Agent Agreement dated January 20, 2021 between Versus System Inc.

and Computershare, including forms of Unit A Warrants and Unit B Warrants.

Representative Warrant Agreement dated January 20, 2021.

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

Versus Systems Inc.

Incorporation

of Corporate Domestication and Certificate of Incorporation

Stock Certificate evidencing common shares.

Agent Agreement dated January 20, 2021 between Versus System Inc.

and Computershare, including forms of Unit A Warrants and Unit

Representative

Warrant Agreement dated January 20, 2021.

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

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

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

Master Services Agreement with PKF O’Conner Davies Advisory, LLC

of Warrant of Versus Systems Inc.

Incorporation

2017 Stock Option Plan.

US Sub Plan of 2017 Stock Option Plan

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

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.

of Conduct and Ethics.

Consent of Ramirez Jimenez International CPAs

Insider Trading Policies and Procedures

Trading Policies and Procedures

List of Subsidiaries of Versus Systems Inc.

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CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Clawback Policy (Recovery of Erroneously Awarded Compensation)

Charter of the Audit Committee.

Charter of the Compensation Committee.

Charter of the Nominating and Corporate Governance Committee.

Policy (Recovery of Erroneously Awarded Compensation)

of the Audit Committee.

of the Compensation Committee.

of the Nominating and Corporate Governance Committee.

Inline XBRL Instance Document.

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FORM 10-K SUMMARY

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.

The registrant hereby certifies that it meets all of the requirements

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

Versus Systems Inc.

/s/ Luis Goldner

March 31, 2025

April 15, 2026

Chief Executive Officer

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.

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

March 31, 2025

Director and Chief Executive

April 15, 2026

(Principal Executive Officer

/s/ Geoff Deller

Chief Financial Officer

March 31, 2025

(Principal Financial and Accounting Officer)

/s/ Juan Carlos Barrera

and Principal Financial Officer)

/s/ Juan Carlos

Chairman of the Board

March 31, 2025

April 15, 2026

Juan Carlos Barrera

/s/ David Catzel

March 31, 2025

/s/ Luis Goldner

March 31, 2025

/s/ Aric Spitulimk

March 31, 2025

Aric Spitulimk

April 15, 2026

/s/ Aric Spitulnik

April 15, 2026

Aric Spitulnik

TO CONSOLIDATED FINANCIAL STATEMENTS

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Notes to the Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2024 AND 2023

Report of Independent Registered Public Accounting

To the Versus Systems Inc.

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.

FINANCIAL STATEMENTS

OF AND FOR THE YEARS ENDED

31, 2025 and 2024

of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Versus Systems Inc.:

on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Versus

and its subsidiaries (collectively, the "Company") as of December 31, 2025 and 2024, the related consolidated statements

of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years then ended, and the

related notes to the consolidated financial statements (collectively, the "consolidated financial statements").

In our opinion,

the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as

of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, 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

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.

Basis for Opinion

The consolidated financial statements do not

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

These consolidated financial statements are the

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standards of the PCAOB.

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

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

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

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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

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

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

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.

Ramirez Jimenez International CPAs

We have served as Versus Systems Inc.

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Irvine, California

March 31, 2025

Versus Systems Inc.

Consolidated Balance Sheets

December 31, December 31,

April 15, 2026

Balance Sheets

Current assets

Cash and cash equivalents

Receivables, net of allowance for credit losses -

Accounts Receivable

Prepaid expenses

Total current assets

Restricted deposit -

Property and equipment -

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

Intangible asset

LIABILITIES AND EQUITY

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Accounts payable and accrued liabilities

Deferred revenue -

Total current liabilities

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Share capital

Class A shares, no par value.

Unlimited authorized shares;

Preferred stock, no par value.

100,000,000 authorized shares;

no shares issued or outstanding, respectively

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

Unlimited authorized shares;

200,000,000 authorized shares;

4,901,677 and 4,901,677 shares issued and outstanding as of December 31, 2025 and 2024, respectively

Accumulated other comprehensive income

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

( 141,268,519

( 139,476,353

Total Versus Systems, Inc.

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Total liabilities, noncontrolling interest and stockholders’ equity

The accompanying notes are an integral part of

these consolidated financial statements.

Versus Systems Inc.

Consolidated Statements of Operations and Comprehensive Loss

Cost of revenues

Research and development

Selling, general and administrative

Impairment of goodwill and other intangibles

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

Statements of Operations and Comprehensive Loss

and development

general and administrative

Total operating expenses

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( 4,539,226 )

Employee retention credit

Other income/(expense), net

Loss before provision for income taxes

income/(expense), net

Loss before provision for

( 2,143,137 )

( 4,550,610 )

Provision for income taxes

for income taxes

( 2,144,733 )

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Net loss attributable to non-controlling interest

Net loss attributable to Versus Systems, Inc.

attributable to Versus Systems, Inc.

( 1,792,166 )

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Per share Data:

Basic and diluted loss per share to shareholders

Basic and diluted loss per

share to shareholders

Weighted average shares – basic and diluted

Comprehensive income (loss)

Comprehensive

income (loss)

( 2,144,733 )

( 4,574,836 )

Other comprehensive income (loss), net of tax

Change in foreign currency translation, net of tax

Total other comprehensive income

Total comprehensive loss

Other comprehensive income

(loss), net of tax

in foreign currency translation, net of tax

other comprehensive income

comprehensive loss

$ ( 2,021,397 )

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comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to shareholders

Comprehensive

loss attributable to shareholders

$ ( 1,668,830 )

$ ( 3,971,958 )

The accompanying notes are an integral part of

these consolidated financial statements.

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

Statements of Changes in Stockholder’s Equity

Versus Systems, Inc.

Consolidated Statements of Changes in Stockholder’s Equity

Systems, Inc.

Non-controlling

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( 135,434,022

( 6,402,387 )

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

( 9,526,997 )

( 10,512,157 )

Balance at December 31, 2024

( 139,476,353

( 7,387,547 )

Exercise of warrants

Conversion of debt into common stock

Stock-based compensation

Cumulative translation adjustment

( 4,042,331 )

( 4,574,836 )

Balance at December 31, 2025

( 141,268,519

( 7,920,052 )

The accompanying notes are an integral part of

these consolidated financial statements.

Versus Systems Inc.

Consolidated Statements of Cash Flows

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

Statements of Cash Flows

OPERATING ACTIVITIES

$ ( 4,574,836 )

$ ( 10,512,157 )

Adjustments to reconcile net loss to net cash:

Amortization of property and equipment

Amortization of intangible assets

Impairment of goodwill and other intangibles

Accretion of interest expense

Loss on sale of equipment

Gain from debt settlement

Share-based compensation

( 1,452,380 )

Changes in accounts receivable

Prepaid expenses and other current assets

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Cash flows used in operating activities

( 4,971,948 )

( 5,582,139 )

INVESTING ACTIVITIES

Proceeds from sale of equipment

Development of intangible assets

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FINANCING ACTIVITIES

Repayment of notes payable – related party

( 2,519,835 )

Proceeds from convertible debt – related party

Proceeds from warrant exercises

Proceeds from share issuances

Payments for lease liabilities

Payments of share and debt issuance costs

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Change in cash and cash equivalents during the period

( 1,623,093 )

Cash and cash equivalents - Beginning of period

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Debt converted into common stock and warrants

The accompanying notes are an integral part of

these consolidated financial statements.

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

VERSUS SYSTEMS INC.

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DECEMBER 31, 2025 and 2024

NATURE OF OPERATIONS

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 December 28, 2023,

the Company completed a one-for-16 reverse stock split of the Company’s common shares.

All share and per share data are presented

to reflect the reverse share splits on a retroactive basis.

The Company is engaged in the technology

sector and has developed a proprietary prizing and promotions tool allowing game developers and creators of streaming media, live events,

broadcast TV, games, apps, and other content to offer real world prizes inside their content.

The ability to win prizes drives increased

levels of consumer engagement creating an attractive platform for advertisers.

(the Company)

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

On December 24, 2024 a special resolution

authorizing and approving the continuance of the Company from the Province of British Columbia in accordance with the Business Corporations

Act (British Columbia) into the State of Delaware in accordance with the Delaware General Corporation Law.

The Company’s head office

and registered and records office is located at 3500 South DuPont Highway Dover, DE 19901.

The Company’s common stock is traded

on the NASDAQ under the symbol “VS”.

The Company operates within the technology

sector, focusing on engagement-enhancing solutions through its proprietary prizing and promotions platform.

This technology enables developers

and content creators across streaming, live events, broadcast, gaming, and other media to integrate real-world prizes into their experiences,

fostering greater consumer interaction and providing a compelling opportunity for brand partners and advertisers.

In June 2021, the Company completed

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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 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.

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

with ASPIS Cyber Technologies (“ASPIS”).

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 years .

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.

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.

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DECEMBER 31, 2025 and 2024

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.

OF OPERATIONS (CONTINUED)

Pursuant to the License Agreement, as amended by a side letter executed

on August 11, 2025 and supported by a legal opinion and confirmation, the Initial Term is non-cancellable for twelve (12) months commencing

April 30, 2025, with monthly license fees of $ 165,000 payable regardless of use.

ASPIS will pay for any required technology modifications,

improvements, and developments to Versus’ technology in addition to the license fee.

The Company retains ownership of the technology,

and ASPIS holds an exclusive license to use it in the cybersecurity industry so long as ASPIS continues to pay the monthly license fee.

Going Concern

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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.

There can be no assurance that we will be able to obtain required

funding in the future.

In the absence of additional financing, the Company’s available cash resources would be reduced in the near

term, which could require the Company to scale back or temporarily defer certain operating or development activities.

Such actions could

have a material effect on the Company’s business and relationships with partners.

If adequate funding is not secured, the Company

may need to explore strategic alternatives, which could include restructuring or other actions that may adversely impact stockholder

The Company has implemented cost-optimization initiatives, including workforce realignment and prioritization of development programs

to align expenditures with near-term strategic objectives.

Management believes that continued focus on strategic partnerships, product

licensing, and disciplined cost management may provide the Company with opportunities to improve liquidity and position the business

for longer-term growth.

However, there can be no assurance that such initiatives will be sufficient to mitigate the conditions raising

substantial doubt about the Company’s ability to continue as a going concern.

VERSUS SYSTEMS INC.

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DECEMBER 31, 2025 and 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

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

The functional currency of our operating subsidiaries is generally the currency of the economic environment in which the subsidiary primarily

does business.

Our foreign subsidiaries’ financial statements are translated into U.S.

dollars using the foreign exchange rates

applicable to the dates of the financial statements.

Assets and liabilities are translated using the end-of-period spot foreign exchange

Income, expenses, and cash flows are translated at the average foreign exchange rates for each period.

Equity accounts are translated

at historical foreign exchange rates.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive

income (loss) (“AOCI”) in the consolidated statements of shareholders’ equity.

Basis of consolidation

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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.

The Company maintains its cash and

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

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

Non-controlling interest

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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.

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.

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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

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 intangible assets.

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.

Accounts Receivable

Accounts receivable are typically unsecured and are derived from revenue

earned from customers.

They are stated at invoice value less estimated allowances for credit losses.

The Company performs ongoing credit

evaluations of its customers to determine allowances for potential credit losses and doubtful accounts.

The company has confidence in

its ability to collect on all contracted revenues earned from customers.

As of December 31, 2025, accounts receivable related to ASPIS

totaled $ 836,000 , representing the unpaid amount because only the passage of time remains.

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 ).

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 401,557 (December 31,

2024 – 2,555 ) and warrants excluded from diluted loss per share as of December 31, 2025 totaled 1,733,741 (December 31, 2024 –

VERSUS SYSTEMS INC.

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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:

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

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

ASC 820 recommends three main approaches

for measuring the fair value of assets and liabilities:

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

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 uses the appropriate approach

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

Financial instruments include cash, receivables, accounts payable and accrued

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

due to their short-term maturities.

The Company accounts for income taxes

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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.

Loss contingencies

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

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.

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, 2025 and 2024, 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.

VERSUS SYSTEMS INC.

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OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Valuation of Equity Units Issued in

Private Placements

Loss contingencies

A loss contingency is recognized when it is probable that a liability

has been incurred as of the balance sheet date and the amount of the loss can be reasonably estimated.

If a range of loss exists, the

Company records the best estimate within the range, or the minimum amount if no amount within the range is a better estimate than any

If a loss is reasonably possible but not probable, or the amount cannot be reasonably estimated, the contingency is disclosed but

Valuation of Equity Units Issued

in Private Placements

In accordance with U.S.

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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.

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.

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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.

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.

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.

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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:

The Company recognizes revenue when its customer

obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange

for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting

Standards Codification ASC 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five

(i) identify the contract(s) with a customer;

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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 Company earns revenue in two primary ways:

1) the sales of software-as-a-service (SAAS) from its interactive production software platform or 2) development and maintenance of custom-built

software or other professional services.

The Company recognizes SAAS revenues from its

interactive production sales over the life of the contract as its performance obligations are satisfied.

Payment terms vary by contract

and can be periodic or one-time payments.

The Company determines that the customer receives and consumes the benefits of the service

simultaneously as the service is provided.

The transaction price is allocated to the contractual performance obligations and recognized

ratably over the contract term.

The Company recognizes revenues received

from the development and maintenance of custom-built software and other professional services provided upon the satisfaction of its performance

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.

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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.

For revenues received from the sales of advertising,

the Company is deemed the agent in its revenue agreements.

The Company does not own or obtain control of the digital advertising inventory.

The Company recognizes revenues upon the achievement of agreed-upon performance criteria for the advertising inventory, such as a number

of views, or clicks.

As the Company is acting as an agent in the transaction, the Company recognizes revenue from sales of advertising

on a net basis, which excludes amounts payable to partners under the Company’s revenue sharing agreements.

The Company’s contracts with customers

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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.

During the year ended December 31, 2025 the Company

recognized $ 176,000 attributed to professional services.

No revenue was recognized attributed to professional services for the year ended

December 31, 2024.

License Revenue – Related party

On April 30, 2025, pursuant to the Technology License and Software Development Agreement (the “License Agreement”) with ASPIS

Cyber Technologies, Inc.

(“ASPIS”), the Company delivered a functional license for its gamification, engagement, and QR code

ASPIS is an affiliate of Cronus Equity Capital Group, LLC (“CECG”), a significant shareholder of the Company.

As of December 31, 2025, CECG beneficially owned approximately 20.20 % of the Company’s outstanding common shares, and ASPIS beneficially

owned approximately 43.97 % of the Company’s outstanding common shares.

Under the License Agreement, as amended by a

side letter executed on August 11, 2025 and supported by a legal opinion and confirmation, the Initial Term is non-cancellable for twelve

(12) months commencing April 30, 2025, with monthly license fees of $ 165,000 payable regardless of use.

ASPIS will pay for any required

technology modifications, improvements, and developments to Versus’ technology in addition to the license fee.

The Company retains

ownership of the technology, and ASPIS holds an exclusive license to use it in the cybersecurity industry so long as ASPIS continues

to pay the monthly license fee.

VERSUS SYSTEMS INC.

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DECEMBER 31, 2025 and 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Since the license is a functional

license and the performance obligation was satisfied upon delivery on April 30, 2025, the Company recognized the entire transaction price

of $ 1,980,000 as revenue in the quarter ended June 30, 2025.

Any required technology modifications, improvements, and developments are

separately payable by ASPIS and are not included in the fixed monthly license fee.

The remaining fixed consideration is billed monthly

over the remaining term in accordance with the contract’s billing schedule and, because only the passage of time is required before

payment is due, unpaid amounts are presented as receivables rather than contract assets.

The Company invoices ASPIS with 30 day payment terms.

For the year ended December 31, 2025 the Company has collected $ 1,320,000 from ASPIS.

The Company has elected the practical expedient

under ASC 606-10-32-18 and does not adjust the consideration for the effects of a significant financing component if the Company expects

that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good

or service will be one year or less.

Capitalized Software Development

The Company capitalizes the costs

of software developed or obtained for internal use in accordance with FASB ASC 350-40, Internal Use Software.

Capitalized software development

costs consist of costs incurred during the application development stage and include consulting costs for projects that qualify for capitalization.

These costs relate to major new functionality.

All other costs, primarily related to maintenance and minor software fixes, are expensed

The Company will amortize the capitalized

software development costs on a straight-line basis over the estimated useful life of the software, which is generally three years , beginning

when the asset is substantially ready for use.

The amortization of capitalized software development costs will be reflected in cost of

Intangible Assets

Intangible assets consist of internally

developed software.

The Company amortizes such assets using the straight-line method over the expected useful life of the asset once.

The Company evaluates the useful lives of these assets on an annual basis.

If the estimate of an intangible asset’s remaining useful

life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining

The Company evaluates its finite-lived

intangible assets for impairment annually or 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.

Research and development

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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 .

The Company uses US dollars as the reporting currency.

The Company’s

Canadian subsidiary functional currency is the Canadian dollar.

The Company’s consolidated financial statements have been translated

Assets and liabilities accounts are translated using the exchange rate at each reporting period end date.

Equity accounts are

translated at historical rates.

Income and expense accounts are translated at the average rate of exchange during the reporting period.

The resulting translation adjustments are reported under other comprehensive income (loss).

Gains and losses resulting from the translations

of foreign currency transactions and balances are reflected in the results of operations.

The functional currency determinations were

conducted through an analysis of the consideration factors identified in ASC 830, Foreign Currency Matters .

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2025 and 2024

OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency transactions in currencies

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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.

An aggregate gain of

$ 0.1 million and loss of $ 0.1 million arising from foreign exchange transactions is included in other (expense) income, net for the year

ended December 31, 2025 and 2024, 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.

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)

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periods ended December 31, 2025 and 2024, due to the effects of foreign translation gains and losses.

Recent accounting pronouncements not

New accounting pronouncements

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 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

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.

Recently adopted accounting pronouncements

In December 2023, the FASB issued

ASU 2023-09, Income Taxes (“Topic 740”):

Improvements to Income Tax Disclosures .

This ASU enhances the transparency

and decision usefulness of income tax disclosures.

It is designed to provide more detailed information about an entity’s income

tax expenses, liabilities, and deferred tax items, potentially affecting how companies report and disclose their income tax-related information.

The ASU is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within

those fiscal years.

The adoption of the guidance in the first quarter of 2025 did not have a material impact on our consolidated financial

statements and related disclosures.

Recent accounting pronouncements

not yet adopted

In November 2024, the FASB issued ASU No.

2024-03, Income Statement-Reporting

Comprehensive Income-Expense Disaggregation Disclosures (“Subtopic 220-40”) .

This ASU improves financial reporting by

requiring that public business entities disclose additional information about specific expense categories in the notes to 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.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill

and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU

ASU 2025-06 was issued to modernize the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles—Goodwill

and Other—Internal-Use Software (referred to as “internal-use software”).

ASU 2025-06 removes all references to prescriptive

and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40.

Therefore, an entity

is required to start capitalizing software costs when both of the following occur:

Management has authorized and committed to funding

the software project.

It is probable that the project will be completed and the software will be used to perform the function intended

(referred to as the “probable-to-complete recognition threshold”).

ASU 2025-06 is effective for the Company January 1, 2028.

The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position

and results of operations.

Management does not believe any other

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or future consolidated financial statements.

PROPERTY AND EQUIPMENT

At December 31, 2022

At December 31, 2023

At December 31, 2024

Accumulated amortization

At December 31, 2022

Amortization for the period

At December 31, 2023

Amortization for the period

At December 31, 2024

Carrying amounts

At December 31, 2023

At December 31, 2024

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.

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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

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, 2025 and

2024 was $ 1,943,983 and $ 2,942,021 , respectively.

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

December 31, 2025 and 2024 was $( 352,567 ) and $( 532,505 ), respectively

The following table presents summarized

financial information before intragroup eliminations for the non-wholly owned subsidiary as of December 31, 2025 and December 31, 2024.

Non-current (1)

Net liabilities

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( 7,920,052 )

( 2,942,021 )

( 5,442,876 )

Net loss attributed to non-controlling interest

(1) Non-current liabilities primarily relate to intercompany balances within the consolidated group.

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

Intangible assets were comprised of a business-to-business

software platform that allows the Company to sell software attributed to cyber security to its customers.

The Company began the project

during the year ended December 31, 2025, therefore costs were capitalized during the years ended December 31, 2025.

No costs were amortized

during the year ended December 31, 2025 as the software development was not completed.

ACCOUNTS PAYABLE AND

ACCRUED LIABILITIES

The Company’s accounts payable

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Accounts payable

Due to related parties

Accrued liabilities

2 unchanged sentences

DECEMBER 31, 2025 and 2024

NOTES PAYABLE – RELATED PARTY

During the year ended December 31, 2023, the Company repaid $ 64,550 of principal.

As at December 31, 2023, the Company had recorded $ 23,456

in accrued interest which was included in accounts payable and accrued liabilities.

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

RELATED PARTY TRANSACTIONS

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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.

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, 2025.

In addition, for the year ended December

31, 2025 ASPIS represented approximately 91 % of revenue and 100 % of the accounts receivable.

CONVERTIBLE DEBT

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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.

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.

The Company incurred $ 106,768 of debt issuance cost attributed to the Senior Note.

On December 24, 2024, the Senior Note

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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.

Interest expense recognized related

to the Senior Note was $ 17,795 for the year ended December 31, 2024.

VERSUS SYSTEMS INC.

3 unchanged sentences

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.

The Company is authorized to issue

is three hundred million ( 300,000,000 ) shares, of which two hundred million ( 200,000,000 ) shares shall be Common Stock, and one hundred

million ( 100,000,000 ) shares shall be Preferred Stock.

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.

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 .

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.

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.

During the year ended December 31, 2025 the Company did

not issue any share capital.

Stock options

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SHARE CAPITAL ( continued )

A continuity schedule of outstanding stock options is as follows:

A continuity schedule of outstanding

stock options is as follows:

Number Outstanding

2 unchanged sentences

Outstanding – December 31, 2025

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.

Vested and exercisable

During the year ended December 31,

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:

2025 and 2024 the Company recorded share-based compensation of $ 430,428 and $ 160,865 , respectively, relating to options vested during

The remaining share-based compensation to be recognized is over the vesting term of the unvested options is $ 193,285 as of

December 31, 2025.

The remaining weighted average contractual term of the options outstanding as of December 31, 2025 is 9.2 years.

The remaining expense is expected to be recognized

over a weighted-average period of approximately 2.25 years.

The fair value of the options granted

during the year ended December 31, 2025 was $ 1.56 per share.

No options were granted during the year ended December 31, 2024.

The intrinsic value represents the

difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option.

Based on the fair market value of the Company’s common stock at December 31, 2025 the total intrinsic value of all outstanding

options was none .

The Company used the following assumptions

in calculating the fair value of stock options for the period ended:

Risk-free interest rate 4.03 %

7 unchanged sentences

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,

Risk-free interest rate 4.43 % 4.13 % - 4.49 %

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

At December 31, 2024, the Company had

share purchase warrants outstanding as follows:

During the year

ended December 31, 2024, the Company issued 1,077,586 common stock warrants in conjunction with the conversion of the Senior Note issuance,

with an exercise price of $ 4.00 per share.

At December 31, 2025, the Company

had share purchase warrants outstanding as follows:

Expiration Date Warrants

Weighted Average Remaining Life

Outstanding Exercise

Price Weighted

Remaining Life

January 26, 2026 7,030 1,800.00 0.08

8 unchanged sentences

1,733,741 18.71 3.45

(1) Unit A warrant balance is 7,030 as of December 31, 2024 and 2023.

VERSUS SYSTEMS INC.

1 unchanged sentence

DECEMBER 31, 2025 and 2024

Provision for Income Taxes

Provision for Income

The components of loss before income

6 unchanged sentences

$ ( 4,550,610 )

Upon adoption of ASU No.

2023-09, for the year

ended December 31, 2025 and 2024, the provision for income taxes differs from the expense that would be obtained by applying the U.S.

federal statutory income tax rate as a result of the following:

Loss before income taxes for the year

( 2,143,137 )

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

( 4,550,610 )

Income tax at federal statutory rate

( 1,248,000 )

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

5 unchanged sentences

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.

federal income tax rate and the Company’s effective tax rate in 2025, and 2024 is primarily attributable to the parent (filer)

now domiciled in United States as of December 31, 2024.

The net deferred tax assets (liabilities)

10 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

7 unchanged sentences

31, 2025 and 2024, a valuation allowance of $ 12.6 million and $ 22.4 million, respectively, has been recorded.

As of December 31,

2025, the Company has no more Canadian net operating loss ("NOL") carryforward and capital loss carryforwards as the Company

has transferred its continuance of business from the Province of British Columbia into the State of Delaware, and it became the U.S.

On July 4, 2025, the One Big Beautiful

Bill Act (“OBBBA”) was signed into law, introducing significant and wide-ranging changes to the U.S.

federal tax system.

The OBBBA did not have a material impact on income tax benefit or expense or related tax assets or liabilities given that the Company

remains in a net operating loss (“NOL”) position and has previously recorded a fully-offsetting valuation allowance against

all deferred tax assets.

VERSUS SYSTEMS INC.

3 unchanged sentences

As of December 31, 2025, the Company

has accumulated federal and Canadian net operating loss (“NOL”) carryforwards of $ 80.3 million and $ 12.4 million, respectively.

has accumulated federal net operating loss (“NOL”) carryforwards of $ 60.0 million.

As of December 31, 2024, the Company has

accumulated federal and Canadian NOL carryforwards of $ 80.3 million.

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.

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 period.

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, 2025.

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 Section 382.

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 Company is subject to taxation

in the United States and various states.

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.

no audits in any United States or 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.

Tax attributes are subject to review,

and potential adjustment, by tax authorities.

The Company files income tax returns with Canada, U.S.

We redomiciled our jurisdiction from British Columbia to Delaware on December 18, 2024.

Accordingly, the Company files income tax returns with the U.S.

and state governments.

With few exceptions,

the Company is no longer subject to tax examinations by tax authorities for years before 2022.

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

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 level.

Accordingly, our CODM uses consolidated net loss to measure segment profit or loss, allocate resources

and assess performance.

Further, the CODM reviews and utilizes functional expenses (cost of revenues, research and development, and general

and administrative) at the consolidated level to manage the Company’s operations.

Other segment items included in consolidated

net loss are interest income, other expense, net and the provision for income taxes, which are reflected in the consolidated statements

of operations and comprehensive loss.

The measure of segment assets is reported on the consolidated balance sheet as total assets.

VERSUS SYSTEMS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2025 and 2024

COMMITMENTS AND CONTINGENCIES

From time to time the Company may

become involved in other legal proceedings or be subject to claims arising in the ordinary course of business.

Although the results of

ordinary course litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these

ordinary course matters will not have a material adverse effect on its business, financial condition, results of operations or cash flows.

Regardless of the outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources

and other factors.

During the first quarter of 2026, the Audit Committee of the Board

of Directors, with the assistance of outside advisors, completed an investigation into the misappropriation of Company assets by the Company’s

former Chief Financial Officer.

The investigation determined that, between the fourth quarter of 2024 and the first quarter of 2026, approximately

$ 829,895 of Company funds had been misappropriated as follows for the quarters ended December 31, 2024, March 31, 2025, June 30, 2025,

September 30, 2025, December 31, 2025 and March 31, 2026:

$ 10,995 , $ 124,868 , $ 196,711 , $ 155,792 , $ 298,568 , and $ 42,961 , respectively.

Management, under the oversight of

the Audit Committee, evaluated the quantitative and qualitative significance of this matter, including the fact that it involved a former

executive officer, in accordance with Staff Accounting Bulletin No.

99, Materiality , and Staff Accounting Bulletin No.

108, Considering

the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements .

Based on that evaluation,

management concluded that the amounts were not material to any previously issued annual or interim financial statements, individually

or in the aggregate.

Accordingly, the Company has not restated or revised any previously issued financial statements in connection with

The Company determined that the misappropriated amounts related to

historical operating expenditures and were recorded within operating expenses in the periods in which they were incurred;

no adjustments to previously issued financial statements were required.

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.

events after the balance sheet date of December 31, 2025 through April 15, 2026, 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.

consolidated financial statements or disclosure in the notes thereto, except as described the below:

In connection with the matter described

in Note 11, the Company’s former Chief Financial Officer executed a promissory note dated March 23, 2026 to repay the misappropriated

Under the terms of the promissory note, the principal amount is payable to the Company in two installments due on April 22, 2026

and June 21, 2026.

The Company is pursuing recovery of the amounts misappropriated;

however, there can be no assurance that the Company

will collect the promissory note in part or in full.

On April 15, 2026, the Company and

certain of its shareholders entered into a Stock Purchase Agreement (the “SPA”).

Pursuant to the SPA, the Company will sell

to such shareholders, and such shareholders will purchase for cash, a number of shares of Company common stock, at a price, equal to $ 1,700,000

divided by 105 % of the closing price of a share of Company common stock on the day preceding consummation.

The purchase price per share

shall be 105 % of such closing price.

The parties expect to close the sale of stock contemplated by the SPA on or before May 14, 2026.

Based on the Company’s historic and projected expenses and revenues, the Company expects the proceeds from such sale to result in

the Company maintaining at least $ 2,500,000 in stockholders’ equity through at least December 31, 2026.

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