Versus Systems Inc. (VS) - 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Versus Systems Inc. is a fan engagement and rewards technology company providing interactive experiences for media, entertainment, and sports environments. The company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company. As of August 12, 2026, there were 6,212,646 common shares outstanding.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Total Revenue | $1,491,821 | $1,509,121 |
| Related Party Revenue | $1,485,000 (99.5%) | $1,485,000 (98.4%) |
| Net Income (Loss) | $594,273 | $(224,422) |
| Net Income (Loss) Attributable to Shareholders | $473,297 | $(209,902) |
| EPS (Basic & Diluted) | $0.10 | $(0.04) |
| Cash and Cash Equivalents | $1,361,714 (as of June 30, 2026) | |
| Total Assets | $4,312,004 | |
| Total Liabilities | $761,499 | |
| Stockholders' Equity | $3,550,505 (Total); $11,837,643 (Versus Systems Inc.) |
Liquidity: Cash increased by $834,326 during the six-month period, primarily driven by $1.7 million in financing activities (stock issuance) and improved operating cash flow compared to the prior year.
Material Changes vs. Prior Period
- Revenue Concentration: Revenue is heavily dependent on a single related party, ASPIS Cyber Technologies (affiliate of significant shareholder Cronus Equity Capital Group). ASPIS accounted for 99.5% of Q2 2026 revenue. Total revenue decreased 25% in Q2 2026 compared to Q2 2025 due to lower license fees.
- Profitability: The company reported a net income of $594,273 for Q2 2026, a decrease from $942,461 in Q2 2025. However, for the six-month period, the company reported a net loss of $224,422, an improvement from the $214,016 loss in the prior year.
- Operating Expenses: SG&A expenses decreased by 13% in Q2 2026 and 27% in the six-month period compared to the prior year, driven by headcount reductions and lower stock-based compensation.
- Capital Structure: The company issued 1,310,969 shares of common stock to ASPIS for $1.7 million in June 2026 to regain compliance with Nasdaq stockholders' equity requirements.
Outlook, Risks, and Contingencies
- Going Concern: Management has expressed substantial doubt about the company's ability to continue as a going concern. The company is not currently able to finance day-to-day activities through operations and relies on future equity/debt financing or strategic partnerships.
- Nasdaq Compliance: The company received a deficiency letter in April 2026 regarding stockholders' equity. Following the June 2026 stock issuance, Nasdaq confirmed the company regained compliance as of July 27, 2026.
- Internal Control Weaknesses: The company identified material weaknesses in internal controls over financial reporting, specifically regarding segregation of duties and cash disbursements. This was highlighted by an investigation into the misappropriation of approximately $829,895 by the former CFO between late 2024 and Q1 2026. A promissory note was executed for repayment, but collection is not assured, and no receivable was recorded.
- Revenue Recognition: A significant portion of revenue ($1.485 million in Q2) was recognized upfront from a functional license agreement with ASPIS, creating volatility in future revenue recognition.
Investor Verification Checklist
- Related Party Dependence: Verify the sustainability of the ASPIS license agreement, which represents nearly 100% of revenue.
- Cash Runway: Assess the sufficiency of the $1.36 million cash balance against operating burn rates given the "substantial doubt" going concern warning.
- Recovery of Misappropriated Funds: Monitor the status of the $829,895 owed by the former CFO and the likelihood of collection.
- Internal Controls: Review the progress of the remediation plan for material weaknesses in financial reporting and cash disbursements.
- Future Financing: Evaluate the company's ability to secure additional capital if operating losses continue.