Versus Systems Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
VS$0.82-2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-01.
0001213900-24-028552
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001213900-25-026006
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 70 current paragraphs.
39 unchanged; 14 reworded; 15 added; 20 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Other income (expense)
Current report
Other income (expense) was an expense of $11,384 for the year ended December 31, 2024, representing a decrease of $351,601, or 103%, from income of $340,217 for the year ended December 31, 2023. The decrease in income can be attributed to the $354,105 employee retention credit earned in 2023 with no credit earned in 2024.
Current report
Income tax expense
Current report
Income tax expense was $24,226 for the year ended December 31, 2024, representing a decrease of 100% from no income tax expense for the year ended December 31, 2023. The increase in income tax can be attributed to taxes owed in our Canadian jurisdiction in 2024.
Current report
Stock-based compensation
Current report
Revenue recognition
Current report
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue from contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Current report
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.
Current report
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.
Current report
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.
Current report
License Revenue
Current report
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.
Current report
Deferred Revenue
Current report
Convertible Debt
Current report
We may enter into negotiated short term convertible debt agreement to provide bridge capital in between equity raises. Our convertible debt agreements include a debt discount and a common stock conversation feature that may be exercised by the noteholder that is either at or out of the money. We evaluate the terms of convertible debt issue prior to accepting such agreements to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. We evaluate our convertible debt 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.
Removed paragraphs (20)
Previous report
Change in fair value of warrant liability
Previous report
Change in fair value of the warrant liability was $0 for the year ended December 31, 2023, representing an increase of $361,055, from ($361,055) for the year ended December 31, 2022. The warrant liability was a result of having warrants in Canadian dollars and the change in functional currency to the United States dollar on February 1, 2021. The Canadian warrants expired in November 2022.
Previous report
Indebtedness
Previous report
Notes Payable
Previous report
From 2017 to December 31, 2022, we issued $4,750,818 aggregate principal amount of promissory notes primarily to Brian Tingle, one of our directors. The notes bore interest at the prime rate of the Bank of Canada, which has ranged from 2.45% to 3.95% per annum, compounded annually, that was payable quarterly, and had a maturity date of three years from the date of issuance. As of December 31, 2023, all loans have been repaid and we had recorded $0 in accrued interest that was included in accounts payable and accrued liabilities.
Previous report
Estimate for excess credit losses
Previous report
We apply the Current Expected Credit Loss (CECL) model under ASC 326 for impairment of financial assets. This model requires the recognition of an allowance for credit losses based on expected losses over the life of the asset. If the credit risk of a financial asset decreases in a subsequent period, any previously recognized impairment loss is reversed through profit or loss, limited to the extent that the carrying amount does not exceed what the amortized cost would have been had the impairment not been recognized.
Previous report
Deferred financing costs
Previous report
Deferred financing costs consist primarily of direct incremental costs related to our public offerings of our common stock completed in February 2023. Upon completion of our public offering and financing any deferred costs were offset against the proceeds.
Previous report
Property and equipment
Previous report
Property and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property and equipment. All other repair and maintenance costs are recognized in the consolidated statements of operations and comprehensive loss. The initial cost of property and equipment comprises its purchase price or construction cost and any costs directly attributable to bringing it to a working condition for its intended use. The purchase price or construction cost is the aggregate amount of cash consideration paid and the fair value of any other consideration given to acquire the asset. Where an item of property and equipment is comprised of significant components with different useful lives, the components are accounted for as separate items of property and equipment. For all property and equipment, depreciation is calculated over the depreciable amount, which is the cost of an asset less its residual value. Depreciation is calculated starting on the date that property and equipment is available for its intended use.
Previous report
Warrant liability
Previous report
Equity financing transactions may involve issuance of common shares or units. Each unit comprises a certain number of shares and a certain number of warrants. Depending on the terms and conditions of each equity financing transaction, the warrants are exercisable to purchase additional common shares at a price prior to expiry as stipulated by the transaction. Warrants that are part of units are assigned a value based on the residual value, if any.
Previous report
As of February 1, 2021, the Canadian dollar denominated warrants were considered a derivative liability since the obligation to issue shares was not fixed in our functional currency. The derivative warrant liability was measured as fair value at issue with subsequent changes recognized in the statement of loss and comprehensive loss. A $9,743,659 warrant derivative loss was recorded in the statement of loss and comprehensive loss beginning February 1, 2021 when we changed our functional currency. We use the Black-Scholes Option Pricing Model for valuation of share-based payments and derivative financial assets (e.g. investments in warrants). Option pricing models require the input of subjective assumptions including expected price volatility, interest rates, and forfeiture rates. Changes in the input assumptions can materially affect the fair value estimate and our earnings and equity reserves. The last set of Canadian warrants expired on November 17, 2022.
Previous report
Income taxes
Previous report
We account for income taxes utilizing the assets and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating loss and tax credit carry forwards, using enacted tax rates and laws that are expected to be in effect when the differences reverse.
Previous report
A valuation allowance is recorded against deferred tax assets when management does not believe that the realization of DTA’s 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 our future financial results.
Previous report
We recognize 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. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2023 and 2022, we did not record any accruals for interest and penalties. We do not foresee material changes to our uncertain tax positions within the next twelve months.
Previous report
Determination of share-based payments
Previous report
Deferred revenues and revenue recognition
Reworded paragraphs (14)
Previous wording
Our customers are mostly sports teams, venues, and advertising agencies, who typically use our products as part of their live events or as part of an advertising campaign with the goal of engaging fans, increasing consented first-party data, and increasing sales. At December 31, 2022, we had 16 active customers. At December 31, 2023, we had five active customers.
Current wording
Our customers mostly sports teams (Professional and Collegiate), venues (Arenas, Football Stadiums, Baseball Stadiums), and advertising agencies, which typically use our products as part of their live events or as part of an advertising campaign with the goal of engaging fans, increasing consented first-party data, and increasing sales. At December 31, 2024, we had two active customers. At December 31, 2023, we had 16 active customers.
Previous wording
Our products and games are designed so that end users of our products could earn prizes by registering on our system and completing in-content challenges like trivia, polls, or casual mobile games. Players could use our system to play a variety of games and earn a wide range of prize types, provided by advertisers and sponsors. Our products, include our in-venue XEO and Filter Fan Cam products for live events, and our new stand-alone “Winfinite” product that can be used by brands, advertising agencies, and content partners to reach potential customers outside of sports venues, on mobile devices. We also have an IP portfolio that could create future licensing and product development opportunities including our recently allowed Artificial Intelligence (“AI”) and Machine Learning (“ML”) series of patent claims.
Current wording
Our products and games are designed so that end users of our products could earn prizes by registering on our system and completing in-content challenges like trivia, polls, or casual mobile games. Players could use our system to play a variety of games and earn a wide range of prize types, provided by advertisers and sponsors. Our products, include our in-venue XEO and Filter Fan Cam products for live events, and our new stand-alone “Winfinite” product line that can be used by brands, advertising agencies, and content partners to reach potential customers outside of sports venues, on mobile devices. We also have an IP portfolio that could create future licensing and product development opportunities including our recently allowed Artificial Intelligence (“AI”) and Machine Learning (“ML”) series of patent claims.
Previous wording
With the acquisition of Xcite Interactive in June 2021, we acquired a number of key pieces of technology and relationships that have helped to drive our engagement and rewards business, including a live events fan engagement business that has partnered with professional sports franchises in the National Football League (“NFL”), the National Basketball Association (“NBA”), the National Hockey League (“NHL”) and others to increase audience engagement using interactive gaming functions like trivia, polling, and casual games that can be played alongside live experiences whether a player is at-home, in a restaurant, or in-venue at the event itself. Our three largest customers in 2023 were the San Jose Sharks, the Sacramento Kings, and ENT Marketing, a marketing agency that used our platform to promote Coca-Cola products.
Current wording
With the acquisition of Xcite Interactive in June 2021, we acquired a number of key pieces of technology and relationships that have helped to drive our engagement and rewards business, including a live events fan engagement business that has partnered with professional sports franchises in the National Football League (“NFL”), the National Basketball Association (“NBA”), the National Hockey League (“NHL”) and others to increase audience engagement using interactive gaming functions like trivia, polling, and casual games that can be played alongside live experiences whether a player is at-home, in a restaurant, or in-venue at the event itself. Our largest customers in 2024 were the Texas Rangers and San Jose Sharks.
Previous wording
Our revenues are derived from three primary sources: software licensing, professional services and advertising. Revenue was $271,169 for the year ended December 31, 2023, representing a decrease of $847,671, or 76%, from $1,108,840 for the year ended December 31, 2022. The decrease was primarily due to a significant reduction in the number of clients from 16 active clients at December 31, 2022 to five active clients at December 31, 2023.
Current wording
Our revenues are derived from three primary sources: software licensing, professional services and advertising. Revenue was $57,288 for the year ended December 31, 2024, representing a decrease of $213,881, or 79%, from $271,169 for the year ended December 31, 2023. The decrease was primarily due to a significant reduction in the number of clients from 16 active clients at December 31, 2023 to two active clients at December 31, 2024.
Previous wording
Cost of revenues was $103,067 for the year ended December 31, 2023, representing a decrease of $513,982, or 83%, from $617,049 for the year ended December 31, 2022. The decrease was primarily due to significant reductions in staff related to our company restructuring.
Current wording
Cost of revenues was $40,277 for the year ended December 31, 2024, representing a decrease of $62,790, or 61%, from $103,067 for the year ended December 31, 2023. The decrease was primarily due to significant reductions in staff related to our company restructuring.
Previous wording
Research and development was $1,107,235 for the year ended December 31, 2023, representing a decrease of $1,298,771, or 54%, from $2,406,006 for the year ended December 31, 2022. The decrease was primarily due to a reduction in staffing levels, including a large portion of our engineering staff, and a reduction in software costs.
Current wording
Research and development was $246,019 for the year ended December 31, 2024, representing a decrease of $861,216, or 78%, from $1,107,325 for the year ended December 31, 2023. The decrease was primarily due to a reduction in staffing levels, including a large portion of our engineering staff, and a reduction in software costs.
Previous wording
Selling, general and administrative was $5,944,909 for the year ended December 31, 2023, representing a decrease of $5,893,219, or 50%, from $11,838,128 for the year ended December 31, 2022. The decrease was primarily due to a reduction in staffing levels, from 39 employees at December 31, 2022 to 8 employees at December 31, 2023, and stock compensation expense, which decreased from $1,567,583 in 2022 to $(1,452,380) in 2023.
Current wording
Selling, general and administrative was $4,310,218 for the year ended December 31, 2024, representing a decrease of $1,634,691, or 27%, from $5,944,909 for the year ended December 31, 2023. The decrease was primarily due to a reduction in staffing levels, from 16 employees at December 31, 2023 to 6 employees at December 31, 2024.
Previous wording
Impairment of goodwill and other intangible assets was $3,968,332 for the year ended December 31, 2023, representing a decrease of $4,950,670 or 56% from $8,919,002 for the year ended December 31, 2022. A number of factors influenced the performance of Xcite Interactive in 2022, including reduced revenue projections, the time and cost involved in creating custom games, the departure of key Xcite employees, and the competitive landscape of the fan engagement industry. As a result, we engaged a third-party to conduct an impairment analysis as of December 31, 2022 and December 31, 2023, which resulted in an $8,919,002 impairment loss in 2022. The $3,968,332 impairment as of December 31, 2023 was related to the impairment of capitalized software from our HP contract and platform.
Current wording
Impairment of goodwill and other intangible assets was none for the year ended December 31, 2024, representing a decrease of $3,968,332 or 100% from $3,968,332 for the year ended December 31, 2023. The $3,698,332 impairment as of December 31, 2023 was related to the impairment of capitalized software from our HP contract and platform.
Previous wording
Loss from operations was $10,852,374 for the year ended December 31, 2023, representing a decrease of $11,818,971, or 52%, from $22,671,345 for the year ended December 31, 2022. Decreases in salaries because of reduced staffing levels and software were somewhat offset by decreases in revenue.
Current wording
Loss from operations was $4,539,226 for the year ended December 31, 2024, representing a decrease of $6,313,148, or 58%, from $10,852,374 for the year ended December 31, 2023. Decreases in salaries because of reduced staffing levels resulted in the decrease in the loss.
Previous wording
Since inception, we have incurred significant operating losses. For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $10.5 million and $22.4 million, respectively. During such periods, we have financed our operations primarily through an initial public offering of our common shares in January 2021 and subsequent public offerings, registered direct offerings, and private placements. In February 2023, we completed a registered direct offering of our common shares in which we received gross proceeds of $2.25 million and net proceeds of approximately $2 million. In October 2023, we completed a public direct offering of our common shares in which we received gross proceeds of approximately $3 million and net proceeds of approximately $2.5 million. In November 2023, we completed a private placement of our equity securities in which we received gross proceeds of $2.6 million. Throughout 2023, we received approximately $4.6 million in proceeds from warrant exercises. Our cash and cash equivalents as of December 31, 2023 was $4.7 million. Our primary cash needs are for working capital requirements, capital expenditures and to fund our operations.
Current wording
Since inception, we have incurred significant operating losses. For the years ended December 31, 2024 and 2023, we incurred net losses of approximately $4.6 million and $10.5 million, respectively. During such periods, we have financed our operations primarily through an initial public offering of our common shares in January 2021 and subsequent public offerings, registered direct offerings, convertible debt, warrant exercises and private placements. In October 2024 warrant holders exercised $0.9 million of warrants into common stock. Also, in November and December 2024 the Company raised $2.5 million of convertible debt. In February 2023, we completed a registered direct offering of our common shares in which we received gross proceeds of $2.25 million and net proceeds of approximately $2.0 million. In October 2023, we completed a public direct offering of our common shares in which we received gross proceeds of approximately $3.0 million and net proceeds of approximately $2.5 million. In November 2023, we completed a private placement of our equity securities in which we received gross proceeds of $2.6 million. Throughout 2023, we received approximately $4.6 million in proceeds from warrant exercises. Our cash and cash equivalents as of December 31, 2024 was $3.1 million. Our primary cash needs are for working capital requirements, capital expenditures and to fund our operations.
Previous wording
Net cash used in operating activities for the year ended December 31, 2023 was $5,471,406 as compared to $9,153,544 for the year ended December 31, 2022. The decrease in cash used in operating activities was primarily attributable to a decrease in the net loss.
Current wording
Net cash used in operating activities for the year ended December 31, 2024 was $4,971,948 as compared to $5,582,139 for the year ended December 31, 2023. The decrease in cash used in operating activities was primarily attributable to a decrease in the net loss.
Previous wording
Net cash used in investing activities for the year ended December 31, 2023 was $14,514 as compared to $2,536,832 for the year ended December 31, 2022. The change in cash flow used in investing activities was primarily attributable to a significant reduction in payroll capitalized for the development of intangible assets, and a reduction in the amount of equipment purchased.
Current wording
Net cash used in investing activities for the year ended December 31, 2024 was none as compared to $14,514 for the year ended December 31, 2023. The change in cash flow used in investing activities was primarily attributable to a significant reduction in payroll capitalized for the development of intangible assets and proceeds of sale of equipment in the prior year.
Previous wording
Net cash provided by financing activities was $8,996,080 for the year ended December 31, 2023 as compared to $11,191,067 for the year ended December 31, 2022. The change in cash flow provided by financing activities was mainly attributable to proceeds we received from the issuance of common shares, exercise of warrants and options, and repayments on notes payable.
Current wording
Net cash provided by financing activities was $3,278,235 for the year ended December 31, 2024 as compared to $9,045,578 for the year ended December 31, 2023. The change in cash flow provided by financing activities was mainly attributable to the decrease in proceeds we received from the issuance of common shares, exercise of warrants and options, and repayments on notes payable. The Company raised $3,278,235 for the year ended December 31, 2024 from debt issuances and warrant exercise compared to $11,693,973 attributed to equity and warrants issuances, net of offering cost offset by repayment of $2,519,835 related party notes payable for the year ended December 31, 2023.
Previous wording
Intangible assets acquired separately are measured upon initial recognition at cost, which comprises the purchase price plus any costs directly attributable to the preparation of the asset for its intended use. Intangible assets acquired through business combinations (Xcite Interactive) or asset acquisitions are initially recognized at fair value as at the date of acquisition. After initial recognition, intangible assets are carried at cost less accumulated amortization and any accumulated impairment charges.
Current wording
Intangible assets acquired separately are measured upon initial recognition at cost, which comprises the purchase price plus any costs directly attributable to the preparation of the asset for its intended use. Intangible assets acquired through business combinations (Xcite Interactive) or asset acquisitions are initially recognized at fair value as at the date of acquisition. After initial recognition, intangible assets are carried at cost less accumulated amortization and any accumulated impairment charges. 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. No new intangible assets were capitalized during the year ended December 31, 2024.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Company recognizes revenues received from the development and maintenance of custom-built software and other professional services provided upon the satisfaction of its performance obligation in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Performance obligations can be satisfied either at a single point in time or over time. For those performance obligations that are satisfied at a single point in time, the revenue is recognized at that time. For each performance obligation satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of that performance obligation. The Company generally measures progress comparing hours incurred to total estimated hours.
Current report — wording carried from elsewhere
The Company’s contracts with customers may include promises to transfer multiple products and services. For these contracts, the Company accounts for individual performance obligations separately if they are capable of being distinct and distinct within the context of the contract. Determining whether products and services are considered distinct performance obligations may require significant judgment. Judgment is also required to determine the stand-alone selling price, for each distinct performance obligation.