2024 Q4 Form 10-Q Financial Statement

#000121390024098269 Filed on November 14, 2024

View on sec.gov

Income Statement

Concept 2024 Q4 2024 Q3 2023 Q3
Revenue $3.848K $20.00K
YoY Change -80.76% -93.69%
Cost Of Revenue $23.57K
YoY Change
Gross Profit $3.848K -$620.00
YoY Change -720.65%
Gross Profit Margin 100.0% -3.1%
Selling, General & Admin $521.4K $1.330M
YoY Change -60.8% -54.29%
% of Gross Profit 13550.16%
Research & Development $11.46K $272.1K
YoY Change -95.79%
% of Gross Profit 297.87%
Depreciation & Amortization $878.00 $640.0K
YoY Change -99.86% -9.09%
% of Gross Profit 22.82%
Operating Expenses $532.9K $1.960M
YoY Change -72.81% -45.76%
Operating Profit -$529.0K -$1.890M
YoY Change -72.01%
Interest Expense $10.00K
YoY Change -158.79%
% of Operating Profit
Other Income/Expense, Net $73.00 $350.0K
YoY Change -99.98% -278.46%
Pretax Income -$529.0K -$1.570M
YoY Change -66.31% -55.27%
Income Tax
% Of Pretax Income
Net Earnings -$529.0K -$1.570M
YoY Change -66.31% -49.06%
Net Earnings / Revenue -13746.13% -7850.0%
Basic Earnings Per Share -$0.22 -$1.99
Diluted Earnings Per Share -$0.22 -$0.15
COMMON SHARES
Basic Shares Outstanding 2.747M shares 2.551M shares 669.6K shares
Diluted Shares Outstanding 2.506M shares 669.6K shares

Balance Sheet

Concept 2024 Q4 2024 Q3 2023 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $471.3K $2.170M
YoY Change -78.28% 110.82%
Cash & Equivalents $471.2K $2.169M
Short-Term Investments
Other Short-Term Assets $770.9K $370.0K
YoY Change 108.36% 9.36%
Inventory
Prepaid Expenses $770.9K
Receivables $0.00
Other Receivables $30.00K
Total Short-Term Assets $1.243M $2.580M
YoY Change -51.82% 77.48%
LONG-TERM ASSETS
Property, Plant & Equipment $10.00K
YoY Change -95.58%
Goodwill
YoY Change
Intangibles
YoY Change
Long-Term Investments
YoY Change
Other Assets $10.00K
YoY Change -90.77%
Total Long-Term Assets $0.00 $5.110M
YoY Change -100.0% -68.63%
TOTAL ASSETS
Total Short-Term Assets $1.243M $2.580M
Total Long-Term Assets $0.00 $5.110M
Total Assets $1.243M $7.690M
YoY Change -83.84% -56.66%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $40.00K
YoY Change -85.54%
Accrued Expenses $25.78K $20.00K
YoY Change 28.92% -91.63%
Deferred Revenue $1.164K
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due $1.790M
YoY Change -35.0%
Total Short-Term Liabilities $26.95K $2.090M
YoY Change -98.71% -41.78%
LONG-TERM LIABILITIES
Long-Term Debt $0.00 $0.00
YoY Change -100.0%
Other Long-Term Liabilities
YoY Change
Total Long-Term Liabilities $0.00 $0.00
YoY Change -100.0%
TOTAL LIABILITIES
Total Short-Term Liabilities $26.95K $2.090M
Total Long-Term Liabilities $0.00 $0.00
Total Liabilities -$7.658M -$4.910M
YoY Change 55.97% 110.54%
SHAREHOLDERS EQUITY
Retained Earnings -$138.7M
YoY Change
Common Stock $147.3M
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $2.500M $12.61M
YoY Change
Total Liabilities & Shareholders Equity $1.243M $7.690M
YoY Change -83.84% -56.66%

Cashflow Statement

Concept 2024 Q4 2024 Q3 2023 Q3
OPERATING ACTIVITIES
Net Income -$529.0K -$1.570M
YoY Change -66.31% -49.06%
Depreciation, Depletion And Amortization $878.00 $640.0K
YoY Change -99.86% -9.09%
Cash From Operating Activities -$472.3K -$850.0K
YoY Change -44.44% -48.93%
INVESTING ACTIVITIES
Capital Expenditures $10.00K
YoY Change -101.25%
Acquisitions
YoY Change
Other Investing Activities $0.00
YoY Change
Cash From Investing Activities $0.00
YoY Change -100.0%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net $0.00
YoY Change -100.0%
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -180.0K
YoY Change -111.24%
NET CHANGE
Cash From Operating Activities -472.3K -850.0K
Cash From Investing Activities 0.000
Cash From Financing Activities -180.0K
Net Change In Cash -472.3K -1.030M
YoY Change -54.15% 19.3%
FREE CASH FLOW
Cash From Operating Activities -$472.3K -$850.0K
Capital Expenditures $10.00K
Free Cash Flow -$860.0K
YoY Change -0.43%

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NATURE OF OPERATIONS </b></span></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">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 1558 West Hastings Street, Vancouver, BC, V6C 3J4, Canada. The Company’s common stock is traded on the NASDAQ under the symbol “VS”. The Company’s Unit A warrants are traded on NASDAQ under “VSSYW”. On November 9, 2022, the Company completed a one-for-15 reverse stock split of the Company’s common shares. On December 28, 2023, 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">In June 2021, the Company completed its acquisition of multimedia, production, and interactive gaming company Xcite Interactive, a provider of online audience engagement through its owned and operated XEO technology platform. The Company partners with professional sports franchises across Major League Baseball (MLB), National Hockey League (NHL), National Basketball Association (NBA) and the National Football League (NFL) to drive audience engagement.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">In September 2024 the Company closed down its operations within the United Kingdom, Versus Systems UK, Ltd. The United Kingdom had limited activity for the nine months ended September 30, 2024 and 2023, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">On August 22, 2024, the Company received a letter from The Nasdaq Capital Market (“Nasdaq”), notifying the Company that it is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2.5 million. In addition, as of August 22, 2024, the Company did not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2024, the Company entered into a $2,500,000 funding agreement with ASPIS Cyber Technologies (“ASPIS”). At that time, ASPIS delivered to the Company $500,000 and agreed to, on or before November 15, 2024, deliver to the Company an additional $2,000,000. However, the Company has informally agreed to defer the $2,000,000 until Nasdaq has progressed further with its review of the Company’s plan. Pursuant to that agreement, the Company issued to ASPIS a senior convertible promissory note in the principal amount of the total amount funded. The note provides that upon approval by the Company’s shareholders and the Company’s redomiciling to Delaware the amount funded to date plus, at ASPIS’s option, any accrued and unpaid interest thereon, will be converted into units of the Company, each equal to (a) one common share of the Company and (b) a warrant to purchase one-half of one Common Share at a purchase price of $4.00 per one whole share, exercisable for five years.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">Under the terms of the agreement, upon the Company’s shareholders’ approval and the Company’s redomiciling to Delaware, assuming only $2,500,000 is funded, ASPIS will receive upon the Conversion 2,155,172 Common Shares and warrants to purchase an additional 1,077,586 shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">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 license fee. The License Agreement has an initial term of one year with successive renewal terms of one year each upon ASPIS’s written approval, subject to earlier termination by the Company or ASPIS.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">In October 2024, the Company warrant holders exercised 240,490 warrants issued in December 2023 offering upon such exercise, the Company issued 240,490 common shares at a price of $3.68 per share, for $885,003 proceeds.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify"><b>Going Concern</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">These condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As of September 30, 2024, the Company has not achieved positive cash flow from operations and is not able to finance day to day activities through operations and as such, there is substantial doubt as to the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds therefrom and/or raise equity capital or borrowings sufficient to meet current and future obligations. These condensed interim consolidated financial statements do not include any adjustments as to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">Management’s plans include attempting to secure additional required funding through equity or debt financing, if available, seeking to enter into a partnership or other strategic agreement regarding, or sales or out-licensing of, its technology. There can be no assurance that we will be able to obtain required funding in the future. If the Company does not obtain required funding, the Company’s cash resources will be depleted in the near term and the Company would be required to materially reduce or suspend operations, which would likely have a material adverse effect on the Company’s business, stock price and our relationships with third parties with whom the Company have business relationships. If the 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 us. The Company has implemented expense reduction measures including, without limitation, employee headcount reductions and the reduction or discontinuation of certain product development programs. Additionally, the Company is not in compliance with certain listing standards of the Nasdaq National Market and there can be no assurance that the Company will be successful in curing the deficiencies and regaining compliance by the applicable cure dates. (See Note 11 for additional information).</p>
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us-gaap Common Stock Convertible Conversion Price Increase
CommonStockConvertibleConversionPriceIncrease
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us-gaap Conversion Of Stock Shares Converted1
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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify"><b>Use of estimates</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">The preparation of these condensed interim consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial statements. Estimates and assumptions are continually evaluated and are based on historical experience and management’s assessment of current events and other facts and circumstances that are considered to be relevant. Actual results could differ from these estimates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: justify">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, relate to, but are not limited to, the following:</p>
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us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
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Depreciation
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Depreciation
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us-gaap Depreciation
Depreciation
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us-gaap Depreciation
Depreciation
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us-gaap Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions Risk Free Interest Rate
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P5Y
us-gaap Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions Expected Volatility Rate
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CY2023Q4 vs Warrants Issued
WarrantsIssued
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CY2023Q4 us-gaap Class Of Warrant Or Right Exercise Price Of Warrants Or Rights1
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CY2023Q4 us-gaap Proceeds From Partnership Contribution
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CY2024Q3 ecd Non Rule10b51 Arr Trmntd Flag
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CY2024Q3 ecd Rule10b51 Arr Adopted Flag
Rule10b51ArrAdoptedFlag
false
dei Entity Tax Identification Number
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CY2024Q3 us-gaap Property Plant And Equipment Net
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CY2024Q3 us-gaap Common Stock Par Or Stated Value Per Share
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CY2023Q4 us-gaap Common Stock Par Or Stated Value Per Share
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CY2024Q3 us-gaap Cost Of Revenue
CostOfRevenue
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CY2024Q3 us-gaap Labor And Related Expense
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CY2023Q3 us-gaap Income Tax Expense Benefit
IncomeTaxExpenseBenefit
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us-gaap Gain Loss On Sale Of Property Plant Equipment
GainLossOnSaleOfPropertyPlantEquipment
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dei Current Fiscal Year End Date
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dei Document Fiscal Period Focus
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dei Entity Central Index Key
EntityCentralIndexKey
0001701963

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