NASDAQ: VS

With
the acquisition of Xcite Interactive in June 2021, we acquired a number of key pieces of technology and relationships that have supported
the growth and development of the Company’s engagement and rewards platform, 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. The Company’s largest customers in 2024 included the Texas Rangers and the San Jose Sharks. For
the year ended December 31, 2025, the Company’s largest customer was ASPIS, a significant shareholder and we continue to do business
with the Texas Rangers.

We offer a suite of products centered on “Winfinite” and
FFC platforms. FFC is an Augmented Reality filtering tool that can be used for mobile and in-venue applications. In addition, we have
a stand-alone gaming and prizing product that we call “Winfinite,” which allows brands, media companies, and advertising agencies
to reach out to customers directly on their mobile devices. We license these software products to teams, ad agencies, and other content
creators.

During
2025, the Company made progress in establishing operations and partnerships in Brazil, a new target market expected to begin generating
revenue in the near term. Brazil represents one of the largest sports and live events markets globally, with a highly engaged consumer
base. The Company has engaged in discussions with major soccer franchises, professional leagues, festival promoters, and rights holders
across multiple event categories. The Company has also implemented cybersecurity solutions provided by Aspis Cyber Technologies, Inc.,
to strengthen the security of its websites and technology infrastructure. In addition, the Company has initiated an ongoing project to
develop new intellectual property aimed at enhancing and modernizing its technology portfolio. These initiatives are intended to strengthen
the Company’s competitive position over time. Management continues to focus on expanding customer relationships, enhancing its
technology offerings, and pursuing new opportunities in key markets such as Brazil. The Company believes these initiatives, together
with ongoing cost discipline and strategic partnerships, may support improved financial performance in future periods.

1

Our
Products and Services

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. Under the License Agreement, 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.

In
addition, we offer the following products and services to our potential partners and customers:

●
FFC. Our
mobile and in-venue fan engagement products are used at a variety of live-event and other entertainment focused properties like stadiums
and arenas, but they can also be used at conferences, theme parks, and restaurants to increase audience and customer engagement.
Content partners, including professional sports teams, can use FFC in conjunction with their existing video screens, “jumbotrons”,
“halo boards”, “main boards”, as well as other branded experiences to reach potential customers with games
and interactive experiences that enhance the live event.

●
Winfinite. Winfinite
is an interactive advertising tool that increases awareness, affinity, data, and incremental sales. It allows content creators, marketers,
agencies, and other advertisers to increase customer acquisition and loyalty through a combination of games and rewards. The product
is compatible with a number of digital platforms and can be integrated into customers’ existing advertising campaigns.

●
Winfinite Games. Winfinite Games is our suite of customizable, lightweight web-based casual games. These games can be mounted and customized in any web experience to enhance brand engagement and affinity. Our suite provides gaming experiences ranging from sports (basketball, football, American football, hockey) to match-3, to downhill racers, card games, midway games, and trivia.

Research
and Development

Our
research and development team, including in-house and as-needed contract resources, consists of technical engineering, product management,
and user experience, and is responsible for the design, architecture, creation, and quality of our platform. We have invested substantial
resources in research and development to enhance our platform features and functionalities and expand the services we offer. We believe
the timely development of new, and the enhancement of our existing, services and platform features would enhance our competitive position.
We utilize an agile development process to deliver software releases, fixes and updates.

Competition

Interactive
media, live-events, in-venue advertising, and rewarded advertising are all highly competitive businesses, characterized by increasing
product introductions and rapidly emerging new platforms and technologies. With respect to competing for customers for our platform,
we will compete primarily on the basis of functionality, quality, brand and customer reviews. We will compete for platform placement
based on these factors, as well as our relationship with the content owner, historical performance, perception of sales potential and
relationships with owners and licensors of brands, properties and other content.

2

We
believe that our small size will provide us some amount of a competitive edge in the near term as we are able to make quick decisions
to take advantage of customer preferences and emerging technologies like AI.

With
respect to our prizing and rewards platform, we compete with a continually increasing number of companies, including industry leaders
such as TapJoy, Honey, Rakuten, and Otello who make their money largely on the free-to-play or free-to-use distribution of coupons and
rewards. Beyond these direct competitors, we face a certain amount of competition from pay-to-play “rewards” companies like
Skillz, FanDuel, or DraftKings that also use games and monetary rewards to drive user growth – although in their case, they derive
the majority of their revenues directly from users rather than brands and sponsors.

We
also face increased competition from large media and technology companies with significant online presences, such as Apple, Alphabet/Google,
Amazon, Meta, Microsoft, Netflix Shopify, or Yahoo, as those companies move to expand their interactive offerings. This competition could
increase if these larger industry players begin to add prizing or rewards into their offerings.

We
are also aware of the increasing role of Artificial Intelligence (AI) in the personalized content space, including personalized advertising.
We have been researching the space for a number of years and have been filing patents with the United States Patent and Trademark Office
(USPTO) to protect our uses of AI and Machine Learning (ML) in trying to optimize both the player and partner experience, but we are
aware that the AI space is filled with larger, and better-funded teams, including those from Microsoft, Google, and others.

In
addition, given the open nature of the development and distribution for smartphones and tablets, we also compete or will compete with
a vast number of small companies and individuals in all of our segments who are able to create and launch software programs and platforms
for these devices using relatively limited resources and with relatively limited start-up time or expertise.

Most
of our competitors and our potential competitors have one or more advantages over us, including:

●
significantly greater financial
and personnel resources;

●
stronger brand and consumer
recognition;

●
longer and larger customer
histories, including much more consented first-party data;

●
larger datasets from which
to derive customer behavior patterns and AI training data;

●
the capacity to leverage
their marketing expenditures across a broader portfolio of mobile and non-mobile products;

●
more substantial intellectual
property of their own;

●
lower labor and development
costs and better overall economies of scale; and

●
broader distribution and
presence.

3

Government
Regulation

We
are involved in a variety of areas that are subject to governmental oversight. While we have developed a flexible platform designed to
adjust to a changing legal and regulatory landscape, there are a number of areas where federal, state and international law could force
us to make significant adjustments to our strategies and deployment efforts. As such, as with many companies in both the software and
advertising spaces, there are risks associated with the potential impacts of government regulation.

As
a company that facilitates the distribution of real-world prizes for in-game and online activities, we are, in some cases and for some
campaigns, subject to laws that surround sweepstakes, contests, and games of skill. While we use best efforts to ensure that all contests
are compliant with federal, state, and local laws pertaining to the game type, contest type, prize type, and the eligibility of individual
players, among other concerns, we are subject to those regulations and those regulations may change. We have filed patents, and have
been granted certain patent claims, protecting our ability to use player characteristics like player location, player age, and contest
type to adjust eligibility in specific contests with the intent of providing dynamic regulatory compliance. We also have also designed
the platform to make it possible to expeditiously cease providing prizes in certain jurisdictions, or cease offering certain types of
contests, such as sweepstakes or other contest types, if that becomes necessary. If necessary, we can make these changes without interruption
to our campaigns and contests in other jurisdictions.

Certain
of our campaigns and contests may be subject to laws and regulations applicable to companies engaged in skill-based contests. As we partner
with our brand and content partners to offer prizes that players may earn as a result of their in-game activities, we may be subject
in some cases to the federal Deceptive Mail Prevention and Enforcement Act as well as certain state prize, gift, or sweepstakes statutes
that may apply to certain experiences that we or our customers and partners may run from time to time. Our system does allow us to adjust
terms of service to account for this and other acts. We may also choose not to offer certain campaigns, contests or prizes in certain
areas because of these regulations.

In
addition, certain states prohibit, restrict, or regulate contests in several ways, particularly with respect to payment of entry fees,
and the size, value, and/or source of prizes to participants in such contests. Certain other states require companies to register and/or
insure certain types of contests. While we do not typically require entry fees or consideration of any type from our players, and thus
based on legal research conducted, are not subject to these regulations in most cases, we do remain conscious of these regulations. We
may choose to not offer certain prizes or certain contests in certain areas due to these regulations. We can do so without interruption
to other services and other jurisdictions. While at this time, our operations are not subject to certain regulations, for example the
pay-to-play regulations, given that our platform is free-to-play, we are conscious that because the nature of our services is relatively
new and is rapidly evolving, we may not be able to accurately predict which regulations will be applied to our business. We may also
at some point become subject to new or amended regulations.

Further,
our online in-game prizing and rewards platform, which may be integrated into games whose player bases include individuals ranging from
elementary school age children to adults, is subject to laws and regulations relating to privacy and child protection. Through our applications
and online platform, we, and the content creators, owners and platform owners that incorporate our proprietary platform into their media
or hardware, may monitor and collect certain information about child users of these games and forums. A variety of laws and regulations
have been adopted in recent years aimed at protecting children using the internet, such as the Federal Children’s Online Privacy
Protection Rule (COPPA). COPPA sets forth, among other things, a number of restrictions related to what information may be collected
with respect to children under the age of 13, as well as the kinds of content that website operators may present to children under such
age. There are also a variety of laws and regulations governing individual privacy and the protection and use of information collected
from individuals, particularly in relation to an individual’s personally identifiable information (e.g., credit card numbers).
We currently employ multiple measures to ensure that we are COPPA-compliant. We screen for age at registration, we address the issue
in our terms of service, and we employ a kick-out procedure during member registration whereby anyone identifying themselves as being
under the age of 13 during the process may not register for a player account on our website or participate in any of our online experiences
or tournaments without linking their account to that of a parent or guardian.

4

Such
regulation would have a material adverse effect on our business and operations. In the area of information security and data protection,
many states have passed laws requiring notification to users when there is a security breach for personal data, such as the 2002 amendment
to California’s Information Practices Act, or requiring the adoption of minimum information security standards that are often vaguely
defined and difficult to implement. And while we believe that we are currently in compliance with these and other data protection regulations,
including the privacy regulations set out below, the costs of compliance with these laws may increase in the future as a result of changes
in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.

We
are also subject to federal, state and foreign laws regarding privacy and protection of our users’ personal information and related
data, including the California Consumer Privacy Act (CCPA), which took effect in January 2020, providing California residents increased
privacy rights and protections, including the ability to opt out of sales of their personal information; and we are subject to the European
Union’s (EU) General Data Protection Regulation (GDPR) which took effect in May 2018 and established requirements applicable to
the handling of personal information of EU residents. The CCPA may increase our compliance costs and exposure to liability. Other U.S.
states are considering adopting similar laws.

We
post our Terms of Service and Privacy Policy on our website where we set forth our practices concerning the use, transmission and disclosure
of player data. We also require players to agree to these terms when they register for our service. Our failure to comply with our posted
privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities or others,
which could damage our reputation and business. In addition, the interpretation of data protection laws, and their application to the
Internet is evolving and not settled. There is a risk that these laws may be interpreted and applied in an inconsistent manner by various
states, countries and areas of the world where our users are located, and in a manner that is not consistent with our current data protection
practices. Complying with these varying national and international requirements could cause us to incur additional costs and change our
business practices. Further, any failure by us to adequately protect our users’ privacy and data could result in a loss of player
confidence in our services and ultimately in a loss of players, which could adversely impact our business.

We
believe we are currently in compliance with all applicable state and federal laws and regulations related to our business. We continually
monitor our activity and changes in such laws to ensure, to the best extent possible, that we remain in compliance with such laws. State
and federal regulation of internet-based activity, including online prizing and rewards, is evolving and there can be no assurance that
future legislation, regulation, judicial decisions, US Attorney, or state attorney general actions will not restrict or prohibit activities
such as those made possible by our platform.

Patents
and Licenses

Our
success and ability to compete depend substantially upon our core technology and intellectual property rights. We generally rely on patent,
trademark and copyright laws, trade secret protection and confidentiality agreements to protect our intellectual property rights. In
addition, we generally require employees and consultants to execute appropriate nondisclosure and proprietary rights agreements. These
agreements acknowledge our exclusive ownership of intellectual property developed for us and require that all proprietary information
remain confidential.

5

We
maintain a program designed to identify technology that is appropriate for patent and trade secret protection, and we file patent applications
in the United States and, when appropriate, certain other countries for inventions that we consider significant. Our patent claims, extending
and expanding on claims filed in the United States in 2014 and internationally through the patent co-operation treaty in 2015, describe
a system that seeks to match competitive game players and spectators with prizing from their favorite brands through a unique conditional
prize matching system.

As
of December 31, 2025, we had pending patent claims with the U.S. Patent and Trademark Office to expand upon our existing portfolio
of prizing, promotion and financial technologies that enable brands to reach the rapidly growing competitive gaming audience of players,
spectators and broadcasters. As of December 31, 2025, we had been granted seven patents.

We
also continue to engage in licensing transactions to secure the right to use third parties’ patents. Although our business is not
materially dependent upon any one patent, our patent rights and the products made and sold under our patents, taken as a whole, are a
significant element of our business.

In
addition to patents, we also possess other intellectual property, including trademarks, know-how, trade secrets, design rights and copyrights.
We control access to and use of our software, technology and other proprietary information through internal and external controls, including
contractual protections with employees, contractors, customers and partners. Our software is protected by U.S. and international copyright,
patent and trade secret laws. Despite our efforts to protect our software, technology and other proprietary information, unauthorized
parties may still copy or otherwise obtain and use our software, technology and other proprietary information. In addition, we have expanded
our international operations, and effective patent, copyright, trademark and trade secret protection may not be available or may be limited
in foreign countries.

Companies
in the industry in which we operate frequently are sued or receive informal claims of patent infringement or infringement of other intellectual
property rights. We may receive such claims from companies, including from competitors and customers, some of which have substantially
more resources and have been developing relevant technology similar to ours. If we become more successful, we believe that competitors
will be more likely to try to develop products that are similar to ours and that may infringe on our proprietary rights. It may also
be more likely that competitors or other third parties will claim that our products infringe their proprietary rights. Successful claims
of infringement by a third party, if any, could result in significant penalties or injunctions that could prevent us from selling some
of our products in certain markets, result in settlements or judgments that require payment of significant royalties or damages or require
us to expend time and money to develop non-infringing products. We cannot assure you that we do not currently infringe, or that we will
not in the future infringe, upon any third-party patents or other proprietary rights, but will not and have never done so intentionally.

Corporate
History and Structure

Versus
Systems Inc., a corporation formed under the laws of British Columbia, was formed by way of an amalgamation under the name McAdam Resources,
Inc. in the Province of Ontario on December 1, 1988 and changed our name to Versus Systems Inc. on June 30, 2016. We redomiciled
our jurisdiction from British Columbia to Delaware on December 18, 2024.

6

In
June 2021, we completed the acquisition of multimedia, production, and interactive gaming company Xcite Interactive, a provider
of online audience engagement through its owned and operated XEO technology platform. We now provide products and services to multiple
professional sports organizations across Major League Baseball, the NHL, and the NBA to drive audience engagement.

In
September 2024 the Company closed down its operations within the United Kingdom, Versus Systems UK, Ltd.

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.

We
operate through our majority-owned subsidiary, Versus LLC, a Nevada limited liability company that was organized on August 21, 2013,
and through our wholly owned subsidiary, Xcite Interactive Inc, a Delaware corporation that was reorganized as such on April 1,
2019.

We
are in the process of considering several strategic alternatives for our company to expand our business portfolio focused on maximizing
shareholder value, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnership, capital
raise or other transaction. We are hopeful that our change in jurisdiction from British Columbia to Delaware, will more appropriately
reflect our shift in strategy and will (i) improve our access to capital markets, increase funding and strategic flexibility and
reduce the cost of capital, (ii) improve our ability to execute an acquisitive growth strategy using our capital stock as consideration,
and (iii) better focus management efforts on each U.S. and international operation and better attract and retain key employees.

Our
common shares are presently quoted on the Nasdaq Capital Market under the symbol “VS”.

Our principal executive offices are located at 3500 South DuPont Hwy.
Dover, DE 19901, and our telephone number is (424) 226-8588. We are a distributed organization and do not maintain business offices
in the United States, which is the country where all our employees reside. Our website address is www.versussystems.com. The information
on or accessed through our website is not incorporated in this annual report. The SEC maintains an Internet site (www.sec.gov)
that contains reports, proxy and information statements, and other information regarding issues that file electronically with the SEC.

The
following chart reflects our organizational structure (including the jurisdiction of formation or incorporation of the various entities):

Name
of Subsidiary
Country
of

Incorporation
Proportion of

Ownership

Interest

Versus
Systems (Holdco), Inc.
United States
81.9%

Versus,
LLC
United States
81.9%

Xcite Interactive,
Inc.
United States
100%

7

Employees

The
following table summarizes our staff by main category of activity at December 31, 2025 and 2024:

Main
Activity
2025
2024

Sales, marketing,
and business development
1
1

Accounts and operations
2
2

Engineering, product, and
design
1
1

General
and administrative
1
1

Total
5
5

All
of our employees are located in the United States and are predominantly full-time employees. We have never had a work stoppage, and none
of our employees is represented by a labor organization or under any collective bargaining arrangements. We consider our employee relations
to be good. All employees are subject to contractual agreements that specify requirements on confidentiality and restrictions on working
for competitors, as well as other standard matters.