6-K
Verses AI Inc. (VRSSF)
UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
WASHINGTON,D.C. 20549
FORM6-K
REPORTOF FOREIGN PRIVATE ISSUER
PURSUANTTO RULE 13a-16 OR 15d-16
UNDERTHE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2025
CommissionFile Number: 000-56692
VERSESAI INC.
(Translation of registrant’s name into English)
205- 810 Quayside Drive
NewWestminster, British Columbia
CanadaV3M 6B9
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| ☐<br> Form 20-F | ☒<br> Form 40-F |
|---|
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VERSES AI INC. | ||
|---|---|---|
| By: | /s/ Kevin Wilson | |
| Name: | Kevin<br>Wilson | |
| Title: | Chief<br>Financial Officer | |
| Date:<br> February 18, 2025 |
EXHIBITINDEX
Exhibit99.1
VERSES® Genius™ Outperforms DeepSeek R1 Model in Code-Breaking “Mastermind” Challenge
Demonstration of Multi-Step Reasoning by VERSES’ Genius Agent Beats China’s Top AI Model in Accuracy, Speed, and Cost Efficiency
VANCOUVER, British Columbia, Feb. 04, 2025 — VERSES AI Inc. (CBOE:VERS) (OTCQB:VRSSF) (“VERSES’’ or the “Company”), a cognitive computing company specializing in next-generation intelligent agent systems, provides an update to its previously announced “Mastermind” challenge where the Company’s flagship product, Genius outperformed OpenAI’s o1- preview model. In this latest demonstration, VERSES demonstrates Genius, winning the code-breaking game Mastermind in a side-by-side comparison with China’s leading AI model, DeepSeek’s R1, which has been positioned as a disruptive, more cost-efficient large language model (LLM). Genius significantly outperformed DeepSeek’s R1 model while performing two hundred and forty-five (245) times faster and more than seven hundred and seventy-nine (779) times cheaper.
In the challenge, VERSES compared the DeepSeek-R1 model to Genius. Each model attempted to crack the Mastermind code on 100 games within up to ten guesses. Each model was given a hint for each guess and must reason about the missing part of the correct answer, requiring all six code colors to be correct to crack the code. For perspective, you can play the game at mastermindgame.org.
The highlighted results from Verses’ demonstration are below:
| Metric | Genius | R1 |
|---|---|---|
| Success Rate | 100% | 45% |
| Total Compute Time (100 Games) | 5m 18s (Avg 3.1s per game) | 26 hours (Avg 334s per game) |
| Total Cost for 100 Games | $0.05 (est) | $38.94 |
| Hardware Requirements | Mac M1 Pro | GPU Cloud |
| $<br>are USD, (s) are seconds | ||
| --- |
Performance Highlights:
| ● | Accuracy and Reliability. Genius solved the code 100% of the time in a consistent number of steps.<br> DeepSeek solved the game only 45% of the time. |
|---|---|
| ● | Speed.<br> Genius consistently solved games in 1.1–4.5 seconds, while DeepSeek’s solve times<br> averaged 934 seconds (approximately 15.5 mins) |
| ● | Efficiency.<br> Genius’ total compute time for 100 games was just over 5 minutes, compared to DeepSeek’s<br> 26 hours. |
| ● | Cost.<br> Genius’ compute cost was estimated at $0.05 USD for all 100 games, compared to DeepSeek’s<br> R1 model at $38.94<br>USD. |
In summary, Genius consistently outperformed DeepSeek’s model two hundred and forty-five (245) times faster and more than seven hundred and seventy-nine (779) times cheaper. A more detailed description and methodology of the test is on the Company’s blog at verses.ai.
“This is a good showcase of Genius’ domain-specific model’s advanced performance in a multi-step reasoning problem,” said Hari Thiruvengada, VERSES Chief Technology Officer. “Mastermind was the perfect choice for this test because it requires multi-step logical reasoning, predictive cause-and-effect understanding, and dynamic adaptation to crack the code. This exercise highlights how Genius excels in step-by-step reasoning by leveraging domain agents using a Bayesian approach and Active Inference.”
“Many AI models struggle to efficiently deliver results and as demonstrated in this challenge, Genius’ ability to perform multi- step reasoning and dynamically adjust to feedback is crucial for enabling agents that are not only more efficient but, more importantly, accurate and reliable enough to operate in dynamic real-world scenarios,” said Gabriel René, Founder and CEO of VERSES. “While this test highlights the competitive advantages of our technology, we believe Genius is also highly complementary to LLMs—enhancing their capabilities by providing the additional ‘brainpower’ needed to make AI agents smarter and more trustworthy within their domains. If DeepSeek’s R1 signals the commoditization phase of LLMs, demonstrating that general-purpose, open-source models can now be made much cheaper, we believe that this latest Mastermind test is the signal that the domain-specific models—uniquely enabled by Genius—are the missing links needed to make AI agents truly reliable. We believe this “last mile” challenge of AI—accuracy— is the key to unlocking adoption across the Fortune 500 market and beyond,” concluded Mr. René.
Mastermind™ is a registered trademark of Pressman Inc.
About VERSES
VERSES is a cognitive computing company building next-generation intelligent software systems modeled after the wisdom and genius of Nature. Designed around first principles found in science, physics and biology, our flagship product, Genius, is a suite of tools for machine learning practitioners to model complex dynamic systems and generate autonomous intelligent agents that continuously reason, plan, and learn. Imagine a Smarter World that elevates human potential through technology inspired by Nature. Learn more at verses.ai, LinkedIn, and X.
On behalf of the Company
Gabriel René, Founder & CEO, VERSES AI Inc.
Press Inquiries: [email protected]
Investor Relations Inquiries
U.S., Matthew Selinger, Partner, Integrous Communications, [email protected] 415-572-8152
Canada, Leo Karabelas, President, Focus Communications, [email protected] 416-543-3120
Cautionary Note Regarding Forward-Looking Statements
When used in this press release, the words “estimate”, “project”, “belief”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may” or “should” and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. Although VERSES believes, in light of the experience of their respective officers and directors, current conditions and expected future developments and other factors that have been considered appropriate, that the expectations reflected in the forward-looking statements and information in this press release are reasonable, undue reliance should not be placed on them because the parties can give no assurance that such statements will prove to be correct. The forward-looking statements and information in this press release include, among other things, statements regarding the potential impacts of Deepseek R1 on the AI technology market, the expected future development of Genius and AI technology and potential adoption of AI technology.
There are risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward- looking statements and information. In making the forward-looking statements in this news release, the Company has applied various material assumptions. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. There are a number of important factors that could cause VERSES’ actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors may include, among other things, that Deepseek R1 will continue to impact the AI technology market; that Genius and AI technology generally will continue to development as currently anticipated by management; and that developments in AI accuracy will increase adoption. The Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of its securities or its financial or operating results (as applicable).
Additionally, forward-looking statements involve a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking statements. Such risks include, without limitation: that Genius may not continue to development as currently anticipated by management; that the market for AI technology may not develop as anticipated; and that developments in AI accuracy may not increase adoption. VERSES cautions that the foregoing list of material factors is not exhaustive. When relying on VERSES’ forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. VERSES has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. The forward-looking information contained in this press release represents the expectations of VERSES as of the date of this press release and, accordingly, are subject to change after such date. VERSES does not undertake to update this information at any particular time except as required in accordance with applicable laws.
Exhibit99.2
VERSESAI INC.
CONDENSEDCONSOLIDATED INTERIM FINANCIAL STATEMENTS
FORTHE NINE MONTHS ENDED DECEMBER 31, 2024 and 2023
(Expressedin United States dollars)
VERSESAI INC.
Condensed Consolidated Interim Statements of Financial Position
(Expressedin United States dollars)
| December 31, 2024 | March 31, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Notes | (Unaudited) | (Audited) | ||||||
| ASSETS | ||||||||
| CURRENT | ||||||||
| Cash and restricted cash | 3 | $ | 876,951 | $ | 892,727 | |||
| Accounts receivable | - | 100,000 | ||||||
| Due from related parties | 9 | 1,217,461 | 983,120 | |||||
| Deferred financing costs | - | 80,993 | ||||||
| Contract assets and unbilled revenue | 4, 5 | 242,959 | 1,252,076 | |||||
| Tax receivable | 557,786 | 374,964 | ||||||
| Prepaid expenses | 14 | 849,193 | 794,351 | |||||
| 3,744,350 | 4,478,231 | |||||||
| Due from related parties | 9 | 1,201,986 | 954,150 | |||||
| Equipment | 7, 15 | 159,751 | 267,259 | |||||
| TOTAL ASSETS | $ | 5,106,087 | $ | 5,699,640 | ||||
| LIABILITIES | ||||||||
| CURRENT | ||||||||
| Accounts payable and accrued liabilities | 6, 9 | $ | 3,161,013 | $ | 2,865,002 | |||
| Deferred grant | 3 | 122,748 | - | |||||
| Deferred revenue | 100,000 | - | ||||||
| Promissory notes | 16 | - | 2,000,000 | |||||
| Provision for legal claim | 21 | 6,182,258 | 6,307,258 | |||||
| Restricted share unit liability | 8 | 6,962,912 | 576,214 | |||||
| Convertible debenture | 13 | 10,912,539 | - | |||||
| 27,441,470 | 11,748,474 | |||||||
| Loans payable | 7 | 139,029 | 140,904 | |||||
| TOTAL LIABILITIES | 27,580,499 | 11,889,378 | ||||||
| SHAREHOLDERS’ DEFICIENCY | ||||||||
| Share capital | 11 | 78,601,711 | 62,570,235 | |||||
| Obligation to issue shares | 12 | 1,139,570 | - | |||||
| Contributed surplus | 8, 9, 12 | 14,912,661 | 13,244,512 | |||||
| Accumulated other comprehensive loss | (580,920 | ) | (920,958 | ) | ||||
| Deficit | (116,547,434 | ) | (81,083,527 | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIENCY | (22,474,412 | ) | (6,189,738 | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | $ | 5,106,087 | $ | 5,699,640 |
Approved and authorized for issue on behalf of the Board on February 14, 2025.
| “Gabriel Rene” | “Dan Mapes” |
|---|---|
| Director | Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 2 |
| --- |
VERSESAI INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
For the three and nine months ended December 31, 2024 and 2023
(Expressedin United States dollars - Unaudited)
| Three months ended December 31, | Nine months ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | 2024 | 2023 | 2024 | 2023 | ||||||||||
| REVENUE | 4 | $ | - | $ | 544,536 | $ | 155,000 | $ | 1,378,869 | |||||
| COST OF REVENUE | - | (396,496 | ) | (145,000 | ) | (1,140,198 | ) | |||||||
| - | 148,040 | 10,000 | 238,671 | |||||||||||
| EXPENSES | ||||||||||||||
| Accounting fees | 77,957 | 123,886 | 428,364 | 395,926 | ||||||||||
| Consulting fees | 943,413 | 1,242,469 | 3,798,445 | 3,325,425 | ||||||||||
| Depreciation | 15 | 44,181 | 70,580 | 138,088 | 196,814 | |||||||||
| Investor relations | 293,837 | 754,247 | 899,830 | 2,163,563 | ||||||||||
| Legal fees | 202,403 | 580,208 | 1,066,515 | 1,289,425 | ||||||||||
| Management fees | 9 | 49,753 | 12,500 | 134,334 | 12,500 | |||||||||
| Marketing | 432,639 | 916,314 | 1,631,689 | 3,574,829 | ||||||||||
| Office and general | 479,046 | 420,161 | 1,420,025 | 1,318,350 | ||||||||||
| Personnel expenses | 9 | 768,718 | 654,900 | 2,530,730 | 2,713,028 | |||||||||
| Provision for contract settlement | 4, 5 | - | - | 1,252,076 | - | |||||||||
| Rent | 15,408 | 2,220 | 75,487 | 12,603 | ||||||||||
| Research and development | 2,984,580 | 3,712,272 | 11,246,495 | 7,934,611 | ||||||||||
| Share based payments | 8, 9, 11 | 6,893,858 | 6,267,643 | 8,855,582 | 7,233,036 | |||||||||
| Travel and meals | 77,026 | 372,987 | 352,062 | 814,118 | ||||||||||
| (13,262,819 | ) | (15,130,387 | ) | (33,829,722 | ) | (30,984,228 | ) | |||||||
| OTHER ITEMS: | ||||||||||||||
| Interest expense | 7, 13 | (251,962 | ) | (2,226 | ) | (545,000 | ) | (346,854 | ) | |||||
| Accretion expense | 13 | (265,356 | ) | - | (719,195 | ) | (203,918 | ) | ||||||
| Other income | 19 | 18,056 | 81,657 | 68,026 | 259,843 | |||||||||
| Grant income | 3 | 42,071 | - | 98,105 | - | |||||||||
| Loss on derivative liability | 13 | (3,010,994 | ) | - | (546,121 | ) | - | |||||||
| NET LOSS | (16,731,004 | ) | (14,902,916 | ) | (35,463,907 | ) | (31,036,486 | ) | ||||||
| Foreign exchange difference | 562,012 | 2,653 | 340,038 | (186,679 | ) | |||||||||
| NET COMPREHENSIVE LOSS | $ | (16,168,992 | ) | $ | (14,900,263 | ) | $ | (35,123,869 | ) | $ | (31,223,165 | ) | ||
| Loss Per Class A Subordinate Voting Shares - Basic and Diluted | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.23 | ) | ||
| Loss Per Class B Proportionate Voting Shares - Basic and Diluted | $ | Nil | $ | (0.64 | ) | $ | Nil | $ | (1.44 | ) | ||||
| Weighted Average Number of Class A Subordinate Voting Shares - Basic and Diluted | 172,429,919 | 83,682,041 | 129,911,731 | 73,271,616 | ||||||||||
| Weighted Average Number of Class B Proportionate Voting Shares - Basic and Diluted | - | 10,000,000 | - | 10,000,000 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 3 |
| --- |
VERSESAI INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Deficiency
For the nine months ended December 31, 2024 and 2023
(Expressedin United States dollars - Unaudited)
| Number of Class B Proportionate Voting Shares | Number of Class A Subordinate Voting Shares | Share Capital | Contributed Surplus | Obligation to Issue Shares | Accumulated Other Comprehensive Loss | Deficit | Total Shareholders’ Deficiency | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, March 31, 2023 | 10,000,000 | 55,805,937 | $ | 30,264,179 | $ | 5,606,507 | $ | 83,456 | $ | (636,527 | ) | $ | (34,476,242 | ) | $ | 841,373 | |||||||
| Exercise of options and warrants | - | 13,316,750 | 10,462,990 | (1,023,091 | ) | (83,456 | ) | - | - | 9,356,443 | |||||||||||||
| Issuance of units for cash | - | 4,878,048 | 7,491,999 | - | - | - | - | 7,491,999 | |||||||||||||||
| Private placement issuance costs | - | 50,000 | (1,593,214 | ) | 697,807 | - | - | - | (895,407 | ) | |||||||||||||
| Conversion of convertible debentures (net) | - | 4,372,648 | 5,699,420 | (98,048 | ) | - | - | - | 5,601,372 | ||||||||||||||
| Stock options granted | - | - | - | 6,336,800 | - | - | - | 6,336,800 | |||||||||||||||
| Modification of finders’ warrants | - | - | - | 440,604 | - | - | - | 440,604 | |||||||||||||||
| Special warrants issued | - | - | - | - | 10,026,270 | - | - | 10,026,270 | |||||||||||||||
| Special warrants issuance costs | - | - | - | 782,626 | (1,584,795 | ) | - | - | (802,169 | ) | |||||||||||||
| Special warrants converted to shares | - | 6,612,849 | 8,441,475 | - | (8,441,475 | ) | - | - | - | ||||||||||||||
| Issuance of shares for settlement | - | 200,000 | 198,801 | - | - | - | - | 198,801 | |||||||||||||||
| Foreign exchange difference | - | - | - | - | - | (186,679 | ) | - | (186,679 | ) | |||||||||||||
| Net loss | - | - | - | - | - | - | (31,036,486 | ) | (31,036,486 | ) | |||||||||||||
| Balance, December 31, 2023 | 10,000,000 | 85,236,232 | $ | 60,965,650 | $ | 12,743,205 | $ | - | $ | (823,206 | ) | $ | (65,512,728 | ) | $ | 7,372,921 | |||||||
| Exercise of options and warrants | - | 632,371 | 579,585 | (96,571 | ) | - | - | - | 483,014 | ||||||||||||||
| Stock options granted | - | - | - | 597,878 | - | - | - | 597,878 | |||||||||||||||
| SAFE conversion to shares | - | 675,000 | 1,025,000 | - | - | - | - | 1,025,000 | |||||||||||||||
| Foreign exchange difference | - | - | - | - | - | (97,752 | ) | - | (97,752 | ) | |||||||||||||
| Net loss | - | - | - | - | - | - | (15,570,799 | ) | (15,570,799 | ) | |||||||||||||
| Balance, March 31, 2024 | 10,000,000 | 86,543,603 | $ | 62,570,235 | $ | 13,244,512 | $ | - | $ | (920,958 | ) | $ | (81,083,527 | ) | $ | (6,189,738 | ) | ||||||
| Exercise of options and warrants | - | 3,364,349 | 3,005,348 | (987,543 | ) | - | - | - | 2,017,805 | ||||||||||||||
| Stock options granted | - | - | - | 2,173,967 | - | - | - | 2,173,967 | |||||||||||||||
| Conversion of Class B Proportionate Voting shares into Class A Subordinate Voting shares | (10,000,000 | ) | 62,500,000 | - | - | - | - | - | - | ||||||||||||||
| Shares issued for services | - | 50,000 | 49,714 | - | - | - | - | 49,714 | |||||||||||||||
| Special warrants proceeds received | - | - | - | - | 8,569,395 | - | - | 8,569,395 | |||||||||||||||
| Special warrants issuance costs | - | - | - | 239,684 | (670,851 | ) | - | - | (431,167 | ) | |||||||||||||
| Special warrants converted to shares | - | 10,000,000 | 6,758,974 | - | (6,758,974 | ) | - | - | - | ||||||||||||||
| Issuance of units for cash | - | 14,623,300 | 6,690,340 | - | - | - | - | 6,690,340 | |||||||||||||||
| Private placement issuance costs | - | - | (757,317 | ) | 242,041 | - | - | - | (515,276 | ) | |||||||||||||
| RSU settlement | - | 333,333 | 284,417 | - | - | - | - | 284,417 | |||||||||||||||
| Net loss | - | - | - | - | - | 340,038 | (35,463,907 | ) | (35,123,869 | ) | |||||||||||||
| Balance, December 31, 2024 | - | 177,414,585 | $ | 78,601,711 | $ | 14,912,661 | $ | 1,139,570 | $ | (580,920 | ) | $ | (116,547,434 | ) | $ | (22,474,412 | ) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 4 |
| --- |
VERSESAI INC.
Condensed Consolidated Interim Statements of Cash Flows
For the nine months ended December 31, 2024 and 2023
(Expressedin United States dollars)
| For the year ended | December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|---|
| Cash provided by (used in): | ||||||
| OPERATING ACTIVITIES | ||||||
| Net loss for the period | $ | (35,463,907 | ) | $ | (31,036,486 | ) |
| Items not involving cash | ||||||
| Accretion expense | 719,195 | 203,918 | ||||
| Depreciation | 138,088 | 196,814 | ||||
| Fair value gain on derivative liability | (546,121 | ) | - | |||
| Foreign exchange effect on convertible debenture | 204,694 | 154,109 | ||||
| Interest expense | 545,000 | 346,854 | ||||
| Issuance of shares for services and advisory units | 49,714 | 61,049 | ||||
| Provision for contract settlement | 1,252,076 | - | ||||
| Share based payments | 8,855,582 | 7,233,036 | ||||
| (24,245,679 | ) | (22,840,706 | ) | |||
| Net changes in non-cash working capital items: | ||||||
| Accounts receivable | 100,000 | (1,235,000 | ) | |||
| Contract assets and unbilled revenue | (242,959 | ) | 373,878 | |||
| Tax receivable | (182,822 | ) | (149,556 | ) | ||
| Prepaid expenses | (54,842 | ) | 211,787 | |||
| Deferred financing costs | 80,993 | - | ||||
| Deferred revenue | 100,000 | 247,344 | ||||
| Accounts payable and accrued liabilities | 164,722 | 708,854 | ||||
| Net cash used in operating activities | (24,280,587 | ) | (22,683,399 | ) | ||
| INVESTING ACTIVITIES | ||||||
| Due from related parties | (482,177 | ) | (674,854 | ) | ||
| Investment in equipment | (30,580 | ) | (161,099 | ) | ||
| Net cash used in investing activities | (512,757 | ) | (835,953 | ) | ||
| FINANCING ACTIVITIES | ||||||
| Deferred grant | 122,748 | - | ||||
| Repayments of loans | (2,005,815 | ) | (5,814 | ) | ||
| Proceeds from issuance of units | 6,690,340 | 17,518,269 | ||||
| Private placement issuance costs | (515,276 | ) | (1,746,316 | ) | ||
| Proceeds from issuance of convertible debenture | 10,000,000 | - | ||||
| Proceeds from issuance of equity instruments | 2,017,805 | 9,356,443 | ||||
| Proceeds from issuance of special warrants | 8,511,105 | - | ||||
| Special warrants issuance costs | (372,877 | ) | - | |||
| Lease payments | - | (94,838 | ) | |||
| Net cash provided by financing activities | 24,448,030 | 25,027,744 | ||||
| Foreign exchange effect on cash | 329,538 | (186,679 | ) | |||
| Net change in cash during the period | (15,776 | ) | 1,321,713 | |||
| Cash, beginning of the period | 892,727 | 4,397,281 | ||||
| Cash, end of the period | $ | 876,951 | $ | 5,718,994 |
Supplemental cash flow information (Note 19).
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 5 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 1. | NATURE OF BUSINESS AND GOING CONCERN |
|---|
Chromos Capital Corp. was incorporated under the Business Corporations Act (British Columbia) on November 19, 2020. On June 17, 2021, Chromos Capital Corp. changed its name to Verses Technologies Inc. On March 31, 2023, Verses Technologies Inc. changed its name to Verses AI Inc. (“VAI”, “VERSES” or the “Company”).
VERSES is a cognitive computing company specializing in biologically inspired distributed intelligence. Their flagship offering, Genius^TM^, is patterned after natural systems and neuroscience. Key features of Genius^TM^ include generalizability, predictive queries, real-time adaptation, and an automated computing network. Built on
open standards, Genius^TM^ transforms disparate data into knowledge models that foster trustworthy collaboration between humans, machines, and artificial intelligence, across digital and physical domains.
On June 28, 2022, the Class A Subordinate Voting Shares of the Company (the “Subordinate Voting Shares”) were listed and started trading on the Cboe Canada Exchange (“Cboe Canada”) (“Listing”) under the symbol “VERS”.
On October 4, 2022, the Company announced that the Company’s Subordinate Voting Shares have commenced trading on the OTCQX® Best Market, an over-the-counter public market in the United States, under the ticker symbol “VRSSF”. VERSES will continue to trade on Cboe Canada in Canada, as its primary listing.
The Company’s head office and registered and records office is located at 205 - 810 Quayside Drive, New Westminster, British Columbia, V3M 6B9, Canada.
For the nine months ended December 31, 2024, the Company incurred a net loss of $ 35,463,907 (December 31, 2023 - $31,036,486) which was funded by the issuance of convertible debenture, special warrants, issuance of units, and exercises of options and warrants. As of December 31, 2024, the Company has an accumulated deficit of $116,547,434 (March 31, 2024 - $81,083,527). The Company’s ability to continue its operations and to realize its assets at their carrying values is dependent upon obtaining additional financing and generating revenues sufficient to cover its operating costs.
The necessity that the Company raise sufficient funds to carry out its growth plans are conditional, in part, on the continuation of its agreements and investor support. The material uncertainty raised by these events and conditions may cast substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated interim financial statements do not give effect to any adjustments, which would be necessary should the Company be unable to continue as a going concern. In such circumstances, the Company would be required to realize its assets and discharge its liabilities outside of the normal course of business, and the amounts realized could differ materially from those reflected in the accompanying condensed consolidated interim financial statements.
| 2. | SUMMARY OF MATERIAL ACCOUNTING POLICIES |
|---|---|
| a) | Statement<br> of compliance |
| --- | --- |
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s audited annual consolidated financial statements for the fiscal year ended March 31, 2024, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The condensed consolidated interim financial statements were authorized for issue in accordance with a resolution from the Board of Directors on November 14, 2024.
| 6 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 2. | SUMMARY OF MATERIALACCOUNTING POLICIES (continued) |
|---|
| b) | Basis<br> of preparation |
|---|
These condensed consolidated interim financial statements have been prepared on the historical cost basis, using the accrual basis of accounting, except for cash flow information and certain financial instruments, which are measured at fair value. The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of the audited annual consolidated financial statements as of March 31, 2024. The condensed consolidated interim financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended March 31, 2024.
| c) | Consolidation |
|---|
These condensed consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiaries. The results of the subsidiaries will continue to be included in the condensed consolidated interim financial statements of the Company until the date that the Company’s control over the subsidiaries ceases. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Details of the Company’s principal subsidiaries at December 31, 2024 and March 31, 2024 are as follows:
| Name | Place of Incorporation | December 31, 2024<br> <br>Interest | March 31, 2024<br> <br>Interest |
|---|---|---|---|
| Verses Technologies USA, Inc. <br>(formerly Verses Labs Inc.) (“VTU”) | Wyoming, USA | 100% | 100% |
| Verses Operations Canada Inc. (“VOC”) | British Columbia, CA | 100% | 100% |
| Verses Logistics Inc. (“VLOG”) | Wyoming, USA | 100% | 100% |
| Verses Realities Inc. (“VRI”) | Wyoming, USA | 100% | 100% |
| Verses Inc. (“VINC”) | Wyoming, USA | 100% | 100% |
| Verses Health Inc. (“VHE”) | Wyoming, USA | 100% | 100% |
| Verses Global BV (“VBV”) | Netherlands | 100% | 100% |
| Verses Solutions Inc (“VSOL”) | Wyoming, USA | 100% | Nil |
| d) | Significant<br> accounting estimates and judgments | ||
| --- | --- |
The preparation of these condensed consolidated interim 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 consolidated interim financial statements and reported amounts of expenses during the reporting period. These condensed consolidated interim financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes could differ from these estimates.
| 7 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 2. | SUMMARY OF MATERIALACCOUNTING POLICIES (continued) | | --- | --- |
| d) | Significant<br> accounting estimates and judgments (continued) |
|---|
The significant judgements made by management in the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the annual audited consolidated financial statements for the year ended March 31, 2024, with the exception of the following:
| ● | Convertible<br> Debenture – The convertible debenture included an option which can be settled in the<br> Company’s Class A Subordinate Voting Shares. The conversion feature was determined<br> to a derivative instrument and is measured at fair value through profit or loss using the<br> Monte Carlo simulation. The host liability is initially recognized using the residual value<br> method, as the fair value, calculated at the net present value of the liability based upon<br> non-convertible debt issued by comparable companies would have exceeded the principal value<br> of the convertible debenture, and subsequently accounted for at amortized cost using the<br> effective interest rate method. The conversion feature was determined to a derivative instrument<br> and is measured at fair value through profit or loss using the Monte Carlo simulation. |
|---|---|
| 3. | DEFERRED GRANT |
| --- | --- |
The Company’s subsidiary, VBV, entered into a grant agreement (alongside other beneficiaries) with the Horizon Europe, which is delegated under the European Commission, to provide technical expertise on artificial intelligence.
Under the grant agreement, VBV received $226,877 (€209,056) on July 24, 2024, upon the execution of the agreement. The funds under this agreement are to reimburse the Company for amounts spent on the project. The Company is required to submit their costs incurred related to the project and only approved expenses under the project are reimbursed.
Of the expenses incurred, $16,437 (2024 - $Nil) are outstanding in accounts payable and accrued liabilities, with $174,375 (2024 - $Nil) remaining in restricted cash. Grant income of $98,105 was recognized during the period ended December 31, 2024.
| Balance, March 31, 2024 | $ | - | |
|---|---|---|---|
| Grant received | 226,877 | ||
| Expenses on the project | (98,105 | ) | |
| Exchange difference | (6,024 | ) | |
| Balance, end of the period | $ | 122,748 |
| 4. | REVENUE |
|---|
The Company recognized revenues from contracts with customers in accordance with the following timing under IFRS 15 Revenue from Contractswith Customers.
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Recognized at a point in time (1) | $ | - | $ | - | $ | 155,000 | $ | 218,600 |
| Recognized over the duration of contracts (2) | - | 544,536 | - | 1,160,269 | ||||
| Total | $ | - | $ | 544,536 | $ | 155,000 | $ | 1,378,869 |
(1) Includes revenues from completed Proof of Concept contracts (“POCs”).
(2) Includes revenue from Software as a Service (“SaaS”).
| 8 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 4. | REVENUE (continued) |
|---|
On August 14, 2024, the Company announced the existing SaaS contract with its customer was voided by both parties. As a result, the Company has not recognized any revenues related to SaaS services in the current year, and has recorded a provision for the contract settlement for $1,252,076 (Note 5).
| 5. | CONTRACT ASSETS AND UNBILLED REVENUE |
|---|
The Company’s contract assets and unbilled revenues are summarized as follows:
| Contract assets | Unbilled revenue | Total | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Balance, March 31, 2023 | $ | 156,490 | $ | 1,193,945 | $ | 1,350,435 | |||
| Additions | - | 1,108,131 | 1,108,131 | ||||||
| Invoiced | - | (1,050,000 | ) | (1,050,000 | ) | ||||
| Costs recognized | (156,490 | ) | - | (156,490 | ) | ||||
| Balance, March 31, 2024 | $ | - | $ | 1,252,076 | $ | 1,252,076 | |||
| Additions | 242,959 | - | 242,959 | ||||||
| Provision for contract settlement (Note 4) | - | (1,252,076 | ) | (1,252,076 | ) | ||||
| Balance, December 31, 2024 | $ | 242,959 | $ | - | $ | 242,959 |
| 6. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
|---|
The Company’s accounts payable and accrued liabilities are summarized as follows:
| December 31, 2024 | March 31, 2024 | |||
|---|---|---|---|---|
| Accounts payable | $ | 3,119,313 | $ | 2,782,502 |
| Accrued liabilities | 41,700 | 82,500 | ||
| $ | 3,161,013 | $ | 2,865,002 | |
| 7. | LOANS PAYABLE | |||
| --- | --- |
Loan activity consisted of the following:
| For the period ended | December 31, 2024 | March 31, 2024 | ||||
|---|---|---|---|---|---|---|
| Balance, beginning of the period | $ | 140,904 | $ | 143,331 | ||
| Repayment | (5,815 | ) | (7,752 | ) | ||
| Interest expense | 3,940 | 5,325 | ||||
| Balance, end of the period | $ | 139,029 | $ | 140,904 |
On June 5, 2020, the Company received a $142,400 loan from the U.S. Small Business Administration. The loan is secured by all tangible and intangible personal property of VTU, and bears interest of 3.75% per annum and requires monthly payments of $646 starting in June 2021 with a maturity of 30 years.
| 9 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASED PAYMENTS |
|---|
The Company has an Omnibus Equity Incentive Plan (the “Plan”) available to employees, directors, officers, and consultants with grants under the Plan approved from time to time by the Board of Directors. Under the Plan, the Company is authorized to issue options to purchase an aggregate of up to 25% of the Company’s issued and outstanding Subordinate Voting Shares. Each option can be exercised to acquire one Subordinate Voting Share of the Company. The exercise price for an option granted under the Plan may not be less than the market price at the date of grant.
Options to purchase Subordinate Voting Shares have been granted to directors, employees, and consultants as follows:
| Expiry date | Weighted Average Remaining Contractual Life in Years | Exercise Price (CAD) | Outstanding | ||
|---|---|---|---|---|---|
| June 16, 2027 | 2.46 | 2,800,000 | |||
| September 16, 2027 | 2.71 | 665,000 | |||
| April 28, 2028 | 3.33 | 100,000 | |||
| December 15, 2028 | 3.96 | 9,536,805 | |||
| December 20, 2028 | 3.97 | 3,680,000 | |||
| April 15, 2029 | 4.29 | 245,000 | |||
| July 3, 2029 | 4.51 | 4,045,900 | |||
| 3.14 | 21,072,705 |
All values are in US Dollars.
A summary of the Company’s stock options as at December 31, 2024, and changes for the periods then ended is as follows:
| Number of stock options | Weighted Average Exercise Price (CAD) | |||
|---|---|---|---|---|
| Outstanding, March 31, 2023 | 6,980,000 | |||
| Granted | 10,000,000 | |||
| Exercised | (2,333,750 | ) | ||
| Outstanding, March 31, 2024 | 14,646,250 | |||
| Granted | 9,830,994 | |||
| Exercised | (1,200,000 | ) | ||
| Cancelled | (2,204,539 | ) | ||
| Outstanding, December 31, 2024 | 21,072,705 | |||
| Exercisable, December 31, 2024 | 13,579,561 |
All values are in US Dollars.
During the period ended December 31, 2024:
| - | 682,800<br> stock options at an average exercise price of CAD$1.24 belonging to inactive employees were<br> cancelled according to the Plan. The original fair value of these stock options of $254,027<br> was reclassified from contributed surplus to share based payments upon cancellation. |
|---|---|
| - | 1,521,739<br> options at an exercise price of CAD$1.35 belonging to an employee were cancelled. The original<br> fair value of these stock options of $1,142,294 was reclassified from contributed surplus<br> to share based payments upon cancellation. |
| --- | --- |
| 10 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 8. | SHARE BASEDPAYMENTS (continued) | | --- | --- |
On December 23, 2024, the Company granted 1,335,000 stock options to employees and independent contractors of the Company with an exercise price of CAD$1.13, expiring in 5 years, with 25% vesting on the date that is one (1) year from the vesting start date and 6.25% every subsequent quarter. The stock options were fair valued at the end of the period at $792,184, of which $205,794 is recognized in the current period using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date | CAD1.13 | |
|---|---|---|
| Risk-free interest rate | 3.04 | |
| Expected life | 5 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.59 |
All values are in US Dollars.
On December 23, 2024, the Company granted 1,600,000 stock options to strategic consultants of the Company with an exercise price of CAD$1.13, expiring in 5 years, where 33.33% of the stock options vested on the grant date and 33.33% will vest every 6 months after the grant date. The Company also granted 745,000 stock options to strategic consultants of the Company with an exercise price of CAD$1.13, expiring in 5 years, where 25% vests on the date that is one (1) year from the Vesting Start Date and 6.25% vests at the end of each full quarter thereafter.
The stock options were fair valued at $2,136,348, of which $706,325 is recognized in the current period using the Black-Scholes option pricing model with the following assumptions:
| Share price at revaluation date | CAD1.64 | |
|---|---|---|
| Risk-free interest rate | 2.87 | |
| Expected life | 5 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.91 |
All values are in US Dollars.
On October 9, 2024, the Company granted 1,521,739 stock options to an employee with an exercise price of CAD$0.53, expiring in December 2028, where 100% vested on the grant date. The stock options were fair valued at $420,029, which is recognized in the current period using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date | CAD0.53 | |
|---|---|---|
| Risk-free interest rate | 3.04 | |
| Expected life | 4.2 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.28 |
All values are in US Dollars.
| 11 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASEDPAYMENTS (continued) |
|---|
On July 3, 2024, the Company granted 2,313,700 stock options to employees and independent contractors of the Company with a weighted average exercise price of CAD$1.08, expiring in 5 years, with 25% vesting on the date that is one (1) year from the vesting start date and 6.25% every subsequent quarter. The stock options were fair valued at the end of the period at $1,376,157, of which $548,532 is recognized in the current period using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at revaluation date | CAD1.07 | |
|---|---|---|
| Risk-free interest rate | 3.57 | |
| Expected life | 5 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.59 |
All values are in US Dollars.
On July 3, 2024, the Company granted 2,000,000 stock options to strategic consultants of the Company with an exercise price of CAD$1.07, expiring in 5 years, where 33.33% stock options vested on the grant date and 33.33% will vest every 6 months after the grant date. The stock options were fair valued at $730,887, of which $630,329 is recognized in the current period using the Black-Scholes option pricing model with the following assumptions:
| Share price at revaluation date | CAD1.64 | |
|---|---|---|
| Risk-free interest rate | 2.96 | |
| Expected life | 5 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.30 |
All values are in US Dollars.
On April 15, 2024, the Company granted 115,000 stock options to employees and independent contractors of the Company with a weighted average exercise price of CAD$1.23, expiring in 5 years, with 25% vesting on the date that is one (1) year from the vesting start date and 6.25% every subsequent quarter. The stock options were fair valued at $72,423, of which $29,312 is recognized in the current period using the Black-Scholes option pricing model with the following assumptions:
| Share price at grant date | CAD1.23 | |
|---|---|---|
| Risk-free interest rate | 3.77 | |
| Expected life | 5 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Grant date fair value per option | $ | 0.63 |
All values are in US Dollars.
| 12 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASEDPAYMENTS (continued) |
|---|
On April 15, 2024, the Company granted 200,555 stock options to strategic consultants with an exercise price of CAD$1.14 and expiration in 5 years. Of these, 50,185 vested on the grant date, 15,000 on May 1, 2024, and 15,000 at the beginning of every calendar month thereafter. The remaining 370 stock options will vest 33.33% every 6 months after the grant date.
For the period ended December 31, 2024, the Company recognized $166,807 as share-based payment for stock options granted in April 2024 for strategic consultants of the Company. The fair value of stock options is estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at revaluation date | CAD1.64 | |
|---|---|---|
| Risk-free interest rate | 2.87 | |
| Expected life | 4.3 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Revaluation date fair value per option | $ | 0.85 |
All values are in US Dollars.
On December 15, 2023, the Company granted 9,394,670 stock options to employees and strategic consultants
of the Company with an exercise price of CAD$1.35, expiring in 5 years, where 4,676,035 stock options are vested on the grant date, based on previous commitments, and 6.25% every subsequent quarter.
For the period ended December 31, 2024, the Company recognized $652,566 as share-based payment for stock options granted in December 2023 using the graded vesting method over the vesting period.
On December 15, 2023, the Company granted 505,330 stock options to strategic consultants with an exercise price of CAD$1.35. The options expire in 5 years, and 33.33% vested on December 30, 2024, and 33.33% every 6 months thereafter.
For the period ended December 31, 2024, the Company recognized $199,017 as share-based payment for stock options granted in December 2023. The fair value of stock options is estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at revaluation date | CAD1.64 | |
|---|---|---|
| Risk-free interest rate | 2.87 | |
| Expected life | 3.9 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Revaluation date fair value per option | $ | 0.83 |
All values are in US Dollars.
On April 28, 2023, the Company granted 100,000 stock options to a strategic consultant with an exercise price of CAD$1.65. The options expire in 5 years, with 50,000 vesting 6 months after the grant date and 50,000 vesting 12 months after the grant date.
For the period ended December 31, 2024, the Company recognized $9,090 as share-based payment for stock options granted in April 2023 for strategic consultants of the Company. The fair value of stock options is estimated using the Black-Scholes option pricing model with the following assumptions:
| 13 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASEDPAYMENTS (continued) | |
|---|---|---|
| Share price at revaluation date | CAD0.72 | |
| --- | --- | --- |
| Risk-free interest rate | 2.87 | |
| Expected life | 3.4 years | |
| Expected volatility | 100 | |
| Expected forfeitures | 0 | |
| Expected dividends | Nil | |
| Revaluation date fair value per option | $ | 0.80 |
All values are in US Dollars.
Included in the Plan, the Company may grant RSUs to employees, directors, officers, and consultants. The RSUs can be settled at the election of the holder for Subordinate Voting Shares, cash, or a combination of Subordinate Voting Shares and cash. The RSUs were determined to be a liability instrument, and the fair value will be recognized as an expense using the graded vesting method over the vesting period.
On December 23, 2024, the Company granted 8,000,000 RSUs to strategic consultants of the Company with no exercise price, expiry date of 10 years from the grant date, where 2,417,708 vested on the grant date, 1,250,000 will vest in July 2025, 1,250,000 will vest in July 2026, 48,958 will vest monthly for 48 months, 333,334 will vest 33,33% after the grant date and 33,33% every 6 months, 200,000 will vest 33.33% after 1 year of the grant date and 33,33% every year afterwards, and 2,500,000 will vest according to the completion of specific milestones. The RSUs were fair valued on the day of the grant at $6,268,900 based on the market price of one Subordinate Voting Share at the end of the period, of which $2,927,997 is recognized in the current period using the graded vesting system.
On September 13, 2024, the Company granted 2,000,000 RSUs to a director of the Company with no exercise price, expiry date of 10 years from the grant date, vesting 666,672 within one year of the grant date and 8.33% every three months afterwards.
For the period ended December 31, 2024, the Company revalued the RSUs granted on September 13, 2024 based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $458,577 as share-based payment for RSUs in the current period.
On July 3, 2024, the Company granted 9,715,000 RSUs to a strategic consultant (50,000), directors (450,000), and employees (9,215,000). The RSUs have no exercise price, expire 10 years from the grant date, and vest 33.33% within one year of the grant date and 33.33% every year thereafter.
For the period ended December 31, 2024, the Company revalued the RSUs granted on July 3, 2024 based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $3,313,107 as share-based payment for RSUs in the current period.
On October 9, 2024, the Company cancelled 160,000 RSUs belonging to an employee. The original fair value of these RSUs of $12,717 was reclassified from RSU liability to share based payments upon cancellation.
On June 20, 2024, the Company granted 1,000,000 RSUs to a strategic investor of the Company, with no exercise price, expiry date of 10 years from the grant date, vesting equal installments of 10,000 RSUs for every CAD$100,000 in revenue derived by the Company from commercial agreements it enters into with affiliates of the strategic investor. No value was attributed to these RSUs, as the vesting is still uncertain.
On April 15, 2024, the Company granted 50,000 RSUs to a strategic consultant. The RSUs have no exercise price, expire 10 years from the grant date, and vest 100% on the grant date.
For the period ended December 31, 2024, the Company revalued the RSUs granted on April 15, 2024 based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $56,989 as share-based payment for RSUs in the current period.
| 14 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASEDPAYMENTS (continued) |
|---|
On November 15, 2023, the Company granted 150,000 RSUs to a strategic consultant of the Company, with no exercise price, expiry date of 10 years from the grant date, vesting 33.33% on the grant date, 33.33% on December 28, 2023, and 33.33% on March 28, 2024.
For the period ended December 31, 2024, the Company revalued the RSUs granted on November 15, 2023 based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $12,948 as share-based payment for RSUs in the current period.
During the year ended March 31, 2023, 500,000 RSUs were granted to a director. They have no exercise price, expire 10 years from the grant date, and vest 1/3 on the first anniversary of the Listing and 1/3 each subsequent anniversary thereafter (Note 8). At December 31, 2024, the RSUs were revalued based on the market price of one Subordinate Voting Share on the revaluation date, and the Company derecognized $75,287 as share-based payment for RSUs in the current period.
On December 27, 2024, 333,333 of the RSUs granted in the year ended March 31, 2023, were settled into Subordinate Voting Shares (Note 11).
| Number of RSUs | |||
|---|---|---|---|
| Balance, March 31, 2023 | 500,000 | ||
| Issued, November 15, 2023 | 150,000 | ||
| Balance, March 31, 2024 | 650,000 | ||
| Issued, April 15, 2024 | 50,000 | ||
| Issued, June 20, 2024 | 1,000,000 | ||
| Issued, July 3, 2024 | 9,715,000 | ||
| Issued, September 13, 2024 | 2,000,000 | ||
| Issued, December 23, 2024 | 8,000,000 | ||
| Cancelled | (160,000 | ) | |
| Converted | (333,333 | ) | |
| Balance, December 31, 2024 | 20,921,667 | ||
| Exercisable, December 31, 2024 | 2,417,708 |
| 15 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 8. | SHARE BASEDPAYMENTS (continued) |
|---|
A reconciliation of share based payments is as follows:
| Share based payments | Stock Options | RSUs | Modification of broker’s warrants | Settlement agreement | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Previous year graded vesting | 473,705 | - | - | - | 473,705 | ||||||||
| New grants Q1 2023 | 53,067 | - | - | - | 53,067 | ||||||||
| New grants Q3 2023 | 5,801,935 | 127,400 | - | - | 5,929,335 | ||||||||
| Revaluation RSUs 2023 | - | 137,524 | - | - | 137,524 | ||||||||
| Settlement agreement | - | - | - | 198,801 | 198,801 | ||||||||
| Modification of broker’s warrants | - | - | 440,604 | - | 440,604 | ||||||||
| Balance, December 31, 2023 | $ | 6,328,707 | $ | 264,924 | $ | 440,604 | $ | 198,801 | $ | 7,233,036 | |||
| Previous years graded vesting | 860,673 | - | - | - | 860,673 | ||||||||
| Revaluation RSUs 2023 | - | (62,339 | ) | - | - | (62,339 | ) | ||||||
| New grants Q1 2024 | 196,119 | 56,989 | - | - | 253,108 | ||||||||
| New grants Q2 2024 | 1,178,861 | 3,771,684 | - | - | 4,950,545 | ||||||||
| New grants Q3 2024 | 1,334,636 | 2,927,997 | - | - | 4,262,633 | ||||||||
| Cancelled options / RSUs | (1,396,321 | ) | (12,717 | ) | - | - | (1,409,038 | ) | |||||
| Balance, December 31, 2024 | $ | 2,173,968 | $ | 6,681,614 | $ | - | $ | - | $ | 8,855,582 |
| 9. | RELATED PARTY TRANSACTIONS AND BALANCES |
|---|
The Company’s related parties consist of the directors, executive officers, and companies controlled by them. Transactions are measured at the exchange amount, which is the amount agreed to by the parties.
Key management personnel include those with authority and responsibility for planning, directing, and controlling the company’s activities. The Company has determined that key management personnel consist of executive and non-executive members of its Board of Directors and senior officers.
During the three and nine months ended December 31, 2024 and 2023, related party transactions were as follows:
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Management fees | $ | 49,753 | $ | 12,500 | $ | 134,334 | $ | 12,500 |
| Management salaries and benefits included in personnel expenses | 347,051 | 305,929 | 1,117,687 | 1,033,436 | ||||
| Share-based payments (Note 8) | 302,201 | 486,509 | 626,013 | 920,566 | ||||
| $ | 699,005 | $ | 804,938 | $ | 1,878,034 | $ | 1,966,502 |
Included in accounts payable and accrued liabilities at December 31, 2024, were amounts totaling $22,500 (March 31, 2024 – $nil) due to the Chairman of the Company.
| 16 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 9. | RELATED PARTYTRANSACTIONS AND BALANCES (continued) | | --- | --- |
Included in due from related parties at December 31, 2024 were amounts totaling $2,352,142 (March 31, 2024 - $1,872,334) due from companies controlled by key management personnel. These amounts are unsecured and interest-free.
Also included in the due from related parties is an unsecured loan of $67,305 (March 31, 2024 - $64,936) to a key member of the management team. The loan has an annual interest rate of 5% and requires principal and interest to be paid in full by May 1, 2033. No repayments were made in the period ending December 31, 2024.
On December 23, 2024, the Company granted 439,506 stock options to the Chief Financial Officer and 200,000 stock options to its Chief Operating Officer with an exercise price of CAD$1.13, expiring in 5 years, where 439,506 vested on the grant date and 200,000 will vest 25% within one year of the grant date, and 6.25% every subsequent quarter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date. The stock options were fair valued at $118,679, of which $30,831 (December 31, 2023 - $355,691) is recognized in the current period using the Black-Scholes option pricing model (Note 8).
On September 13, 2024, 2,000,000 RSUs were granted to the Chairman of the Company, expiring in 10 years, where 33.33% will vest within 1 year of the vesting date, and 8.33% will vest every quarter thereafter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share. The Company used the Black-Scholes option pricing model to recognize $458,577 in the current period (Note 8).
On July 3, 2024, the Company granted 100,000 stock options to the Chief Operating Officer and 50,000 to the Chief Financial Officer. The Options have an exercise price of CAD$1.07 and expire in 5 years. 25% of the options will vest within one year of the grant date and 6.25% every subsequent quarter. The stock options were fair valued at $89,352, of which $34,956 is recognized in the current period using the Black-Scholes option pricing model (Note 8).
On July 3, 2024, the Company granted 50,000 RSUs to the Chief Financial Officer and 450,000 to the independent directors. The RSUs have no exercise price and expire in 10 years. They vest 33.33% within one year of the grant date and 33.33% yearly thereafter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $172,705 as share-based payment for RSUs in the current period (Note 8).
On December 15, 2023, the Company granted 50,000 stock options to its Chief Operating Officer with an exercise price of CAD$1.35. The options expire in 5 years, with 25% vesting within one year of the grant date and 6.25% every subsequent quarter. The stock options were fair valued at $38,203, of which $4,231 (December 31, 2023 - $19,883) is recognized in the current period using the Black-Scholes option pricing model (Note 8).
On December 31, 2024, the RSUs granted to a director in the year ended March 31, 2023, were valued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date, of which $75,287 is derecognized in the current period (December 31, 2023 - $353,392 was recognized) (Note 8).
On December 31, 2024, the stock options granted in prior periods to the directors and officers were recognized as an expense in the current period using the graded vesting method over the vesting period is $nil (December 31, 2023 - $211,483) (Note 8).
| 17 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 10. | COMMITMENTS | | --- | --- |
The Company has an obligation to pay royalties to Cyberlab, LLC (“Cyberlab”) (a company controlled by a director and officer). Cyberlab shall be entitled to receive a share of the gross revenue derived from the sales, licensing, and other commercial activities involving Spatial Domain Names, pursuant to the following schedule:
| - | Years<br> 1 through 10 of the Spatial Domain Program: Cyberlab shall be entitled to retain Five Percent<br> (5%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Five Percent (95%) to allocate between itself and other Spatial Domain Program<br> stakeholders (e.g., registries, registrars, etc.) as it sees fit. |
|---|---|
| - | Years<br> 11 through 14 of the Spatial Domain Program: Cyberlab shall be entitled to retain Four Percent<br> (4%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Six Percent (96%). |
| --- | --- |
| - | Years<br> 15 through 17 of the Spatial Domain Program: Cyberlab shall be entitled to retain Three Percent<br> (3%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Seven Percent (97%). |
| --- | --- |
| - | Years<br> 18 and 19 of the Spatial Domain Program: Cyberlab shall be entitled to retain Two Percent<br> (2%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Eight Percent (98%). |
| --- | --- |
| - | Years<br> 20 to 25 of the Spatial Domain Program: Cyberlab shall be entitled to retain One Percent<br> (1%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Nine Percent (99%). |
| --- | --- |
As of December 31, 2024, no amounts are payable under the royalty agreement.
The Company is obligated to grant stock options (“Options”), deferred share units (“DSU”), or restricted stock units (“RSU”) to qualifying consultants and employees based on their respective contracts, to be determined at the grant date based on the market price of the Company’s shares. As at December 31, 2024, the outstanding commitment balance is nil (March 31, 2024 – 8,965,855) to be granted as options, RSUs or DSUs.
The Company has entered into severance agreements with its executives. In the case of involuntary termination or a change in control, the executives are entitled to a monetary payment equal to 12 month’s worth of base salary, continuation for 12 months of medical and dental insurance, and immediate, accelerated vesting of all stock options, equity, and related compensation.
| 11. | SHARE CAPITAL |
|---|---|
| a) | Authorized<br> shares |
| --- | --- |
Effective July 20, 2021, the Company amended its Articles to create an unlimited number of Class A Subordinate Voting Shares and unlimited number of Class B Proportionate Voting Shares. Each Subordinate Voting Share shall entitle the holder thereof to one vote. Each Class B share shall entitle the holder thereof to 6.25 votes and such proportionate dividends and liquidation rights. Each Class B share is convertible, at the holder’s option, into 6.25 Subordinate Voting Shares.
On May 30, 2024, 10,000,000 Class B Proportionate Voting Shares were converted into 62,500,000 Subordinate Voting Shares.
| 18 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 11. | SHARE CAPITAL(continued) | | --- | --- |
| b) | Issued |
|---|
During the period ended December 31, 2024, the following equity instruments were exercised for gross proceeds of CAD$2,788,599:
| - | 978,749<br> warrants with an exercise price of CAD$0.80. |
|---|---|
| - | 585,600<br> warrants with an exercise price of CAD$1.00. |
| --- | --- |
| - | 600,000<br> warrants with an exercise price of CAD$0.70. |
| --- | --- |
| - | 1,000,000<br> stock options with an exercise price of CAD$0.80. |
| --- | --- |
| - | 200,000<br> stock options with an exercise price of CAD$0.80. |
| --- | --- |
The reclassification from contributed surplus from the exercises of warrants and stock options was $987,543.
On April 9, 2024, 50,000 shares were issued to a strategic consultant of the Company. The shares were fair valued at $49,714 considering the share price of CAD$1.35 stated in the consulting agreement.
In July and August 2024, the Company converted 10,000,000 Special Warrants units into 10,000,000 Subordinate Voting Shares and 4,999,998 warrants (Note 12).
On September 26, 2024, the Company closed the first tranche offering of 6,250,000 units (the “Units”) of the Company, for gross proceeds of $3,686,000 (the “LIFE Offering”).
Each Unit was sold at a price of CAD$0.80 and of one Class A Subordinate Voting share of the Company (a “Share”) and one-half of one Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant will entitle the holder thereof to acquire one Share (each, a “Warrant Share”) at an exercise price of $1.20 per Share, subject to adjustment in certain circumstances, for a period of 36 months from September 26, 2024.
In connection with the Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of $278,772; (ii) issued to certain finders and advisors an aggregate of 285,187 compensation warrants (the “Compensation Warrants”), and (iii) incurred in legal fees of $41,257. Each Compensation Warrant will be exercisable into one Unit at the Offering Price for a period of 36 months following the Closing Date.
In November and December 2024, the Company closed the 3 additional tranches of the LIFE offering of 8,373,300 units (the “Units”) of the Company, for gross proceeds of $3,004,340 (the “LIFE Offering”).
Each Unit was sold at a price of CAD$0.50 and consists of one Class A Subordinate Voting share of the Company (a “Share”) and one-half of one share purchase warrant. Each Warrant will entitle the holder thereof to acquire one Share at an exercise price of CAD$0.70 per Share, subject to adjustment in certain circumstances, for a period of 36 months from the closing date.
In connection with the Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of $174,113; (ii) issued to certain finders and advisors an aggregate of 550,264 compensation warrants (the “Compensation Warrants”), and (iii) incurred in legal fees of $63,347. Each Compensation Warrant will be exercisable into one Unit at the Offering Price for a period of 36 months following the closing date.
On December 27, 2024, 333,333 of the RSUs granted in the year ended March 31, 2023 were settled into Subordinate Voting Shares with a value of $284,417 based on the share price and exchange rate on the settlement date.
| 19 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 12. | WARRANTS | | --- | --- |
In connection with the issuance of Life Offering, completed in November and December 2024, the Company issued 4,306,650 warrants and 367,614 Compensation Warrants (Note 11).
The total fair value of the broker warrants was $165,518, estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date | CAD0.46 |
|---|---|
| Risk-free interest rate | 3.01 |
| Expected life | 3 years |
| Expected volatility (based on comparable publicly listed entities) | 100 |
| Expected dividends | Nil |
All values are in US Dollars.
On November 8, 2024, the Company closed a non-brokered private placement of special warrants (“Special Warrants”) for gross proceeds of up to CAD$1,800,000 through the sale of 3,600,000 Special Warrants at a price of CAD$0.50 per Special Warrant.
Each Special Warrant shall convert into one Unit of the Company (a “Unit”) at no additional cost four months and a day after date of issuance of the Special Warrants.
Each Unit is comprised of one Subordinate Voting Share (a “Unit Share”), and one-half of one Class A Subordinate Voting Share purchase warrant (each full warrant, a “Unit Warrant”). Each Unit Warrant shall be exercisable into one Subordinate Voting Share (a “Unit Warrant Share”) at a price of CAD$0.70 per Unit Warrant Share for a period of three (3) years from the date of issue of the Unit Warrants.
In connection with the issuance of the Special Warrant, the Company issued 182,650 Compensation Warrants.
The total fair value of the broker warrants was $58,290, estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date | CAD0.49 |
|---|---|
| Risk-free interest rate | 3.05 |
| Expected life | 3 years |
| Expected volatility (based on comparable publicly listed entities) | 100 |
| Expected dividends | Nil |
All values are in US Dollars.
In connection with the issuance of Life Offering, completed in September 2024, the Company issued 3,125,000 warrants and 285,187 Compensation Warrants (Note 11).
The total fair value of the broker warrants was $134,813, estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date | CAD0.73 |
|---|---|
| Risk-free interest rate | 2.90 |
| Expected life | 3 years |
| Expected volatility (based on comparable publicly listed entities) | 100 |
| Expected dividends | Nil |
All values are in US Dollars.
| 20 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 12. | WARRANTS (continued) | | --- | --- |
On April 18, 2024, the Company announced a non-brokered private placement of special warrants (“Special Warrants”) for gross proceeds of up to CAD$10,000,000 through the sale of 10,000,000 Special Warrants at a price of CAD$1.00 per Special Warrant.
Each Special Warrant shall convert into one Unit of the Company (a “Unit”) at no additional cost upon the earlier of: (i) the Company obtaining a receipt from the applicable securities commission(s) in Canada for the final prospectus qualifying the distribution of the Units to be issued upon exercise or deemed exercise of the Special Warrants; and (ii) the date that is four months and a day after date of issuance of the Special Warrants.
Each Unit is comprised of one Subordinate Voting Share (a “Unit Share”), and one-half of one Class A Subordinate Voting Share purchase warrant (each full warrant, a “Unit Warrant”). Each Unit Warrant shall be exercisable into one Subordinate Voting Share (a “Unit Warrant Share”) at a price of CAD$1.50 per Unit Warrant Share for a period of two (2) years from the date of issue of the Unit Warrants.
The proceeds received from the Special Warrants are to be used for general corporate and working capital purposes, for the continued development of Genius^TM^ and the release of the Genius beta program, and the repayment of outstanding loans. In particular, US$2,000,000 of the proceeds received will be used to repay the outstanding principal amount of loans accepted by VTU, from two arms’-length investors (Note 16). All securities issued pursuant to the Private Placement will be subject to a four-month hold period from the date of issue.
The Company completed the issuance of 10,000,000 Units for gross proceeds of CAD$10,000,000 and paid fees to eligible finders consisting of: (i) CAD$317,286; and (ii) 316,536 finder warrants (the “Finder Warrants”). Each Finders Warrant will be exercisable into one unit (a “Finder Unit”) at a price of CAD$1.00 per Finder Unit until the date that is two (2) years from the date of issue of the Finder Warrants, which Finder Unit will be comprised of a Subordinate Voting Share and one-half of one Subordinate Voting Share purchase warrant (each, whole warrant, a “Finder Unit Warrant”). Each Finder Unit Warrant shall be exercisable into one Subordinate Voting Share (a “Finder Unit Warrant Share”) at a price of CAD$1.50 per Finder Unit Warrant Share for a period of two (2) years from the date of issue of the Finder Unit Warrants.
The total fair value of the broker warrants was $181,394, estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Share price at grant date (based on the announcement date) | CAD1.02 |
|---|---|
| Risk-free interest rate | 4.25 |
| Expected life | 2 years |
| Expected volatility (based on comparable publicly listed entities) | 100 |
| Expected dividends | Nil |
All values are in US Dollars.
In July and August 2024, the Company converted 10,000,000 Special Warrants units into 10,000,000 Subordinate Voting Shares and 4,999,998 warrants (Note 11). Each warrant is exercisable at CAD$1.50 within 2 years of the issuance date.
In connection with the issuance of convertible debenture (Note 13) the Company issued 6,890,000 warrants. Because the unit price of the convertible debenture (CAD$1.00) is lower than the price of the units on announcement date (CAD$1.02), there is no value to be allocated to the warrants according to the residual value method.
| 21 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 12. | WARRANTS (continued) |
|---|
Warrants outstanding as at December 31, 2024 are summarized below:
| Number of<br><br> <br>warrants | Weighted Average Exercise Price (CAD) | |||
|---|---|---|---|---|
| Balance, March 31, 2023 | 26,188,410 | |||
| Issued | 9,134,608 | |||
| Exercised | (11,615,371 | ) | ||
| Balance, March 31, 2024 | 23,707,647 | |||
| Issued | 20,353,635 | |||
| Exercised | (2,164,349 | ) | ||
| Expired | (45 | ) | ||
| Balance, December 31, 2024 | 41,896,888 |
All values are in US Dollars.
As of December 31, 2024, the Company’s outstanding share purchase warrants expire as follows:
| Expiry date | Weighted Average Remaining Contractual Life in Years | Exercise Price (CAD) | Outstanding | ||
|---|---|---|---|---|---|
| April 3, 2025 | 0.25 | 3,153 | |||
| April 20, 2025 | 0.30 | 5,250 | |||
| June 2, 2025 | 0.42 | 31,038 | |||
| June 16, 2025 | 0.46 | 27,465 | |||
| July 10, 2025 | 0.52 | 2,660 | |||
| August 15, 2025 | 0.62 | 223,512 | |||
| August 15, 2025 | 0.62 | 1,151,892 | |||
| August 15, 2025 | 0.62 | 10,675,599 | |||
| August 25, 2025 | 0.65 | 4,977 | |||
| April 15, 2026 | 1.29 | 1,250,000 | |||
| April 17, 2026 | 1.29 | 90,400 | |||
| April 29, 2026 | 1.33 | 180,160 | |||
| May 16, 2026 | 1.37 | 45,976 | |||
| July 6, 2026 | 1.51 | 789,127 | |||
| July 6, 2026 | 1.51 | 7,956,740 | |||
| August 17, 2026 | 1.63 | 3,499,998 | |||
| August 30, 2026 | 1.66 | 1,162,650 | |||
| September 17, 2026 | 1.71 | 337,350 | |||
| December 22, 2026 | 1.98 | 21,840 | |||
| June 20, 2027 | 2.47 | 6,890,000 | |||
| September 26, 2027 | 2.74 | 285,187 | |||
| September 26, 2027 | 2.74 | 3,125,000 | |||
| November 8, 2027 | 2.85 | 390,000 | |||
| November 8, 2027 | 2.85 | 2,353,850 | |||
| November 15, 2027 | 2.87 | 60,164 | |||
| November 15, 2027 | 2.87 | 462,800 | |||
| December 9, 2027 | 2.94 | 100,100 | |||
| December 9, 2027 | 2.94 | 770,000 | |||
| 1.65 | 41,896,888 |
All values are in US Dollars.
| 22 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 13. | CONVERTIBLE DEBENTURE |
|---|
On June 20, 2024 the Company entered into a funding agreement with Group 42 Holding Ltd (“G42”), a leading UAE-based AI technology group (the “Strategic Investment”).
Pursuant to the Strategic Investment, G42 has invested $10,000,000 via a private placement of unsecured convertible debenture units of VERSES (the “Units”). Each Unit will consist of: (i) CAD$1,000 in principal amount of unsecured convertible debenture (“Convertible Debenture”); and (ii) 500 detachable share purchase warrants (the “Warrants”) to purchase Subordinate Voting Shares. The Convertible Debenture shall bear interest at a rate of 10% per annum and mature on June 20, 2026 (the “Maturity Date”).
The principal amount of the Convertible Debenture (the “Principal Amount”), together with all accrued interest (collectively, the “Convertible Amount”), shall be convertible, for no additional consideration, on the earliest to occur of: (A) the date on which the Company completes an equity financing, in one or more tranches, for aggregate gross proceeds of at least CAD$15,000,000 at a price per Subordinate Voting Share of not less than CAD$1.00 (an “Equity Financing”), (B) the date on which G42 elects to convert the Convertible Debenture, and (C) the Maturity Date.
In the event of a conversion of the Convertible Debenture: (i) on the Maturity Date or at the election of G42, the Convertible Amount shall be converted into such number of Subordinate Voting Shares as is equal to the Convertible Amount divided by CAD$1.20 per Share; and (ii) in connection with an Equity Financing, the Convertible Amount shall be converted into such number of Subordinate Voting Shares as is equal to the Convertible Amount divided by the issue price per Subordinate Voting Share sold pursuant to the Equity Financing, multiplied by 80%, provided that, in no event shall such conversion price be greater than CAD$1.20.
If the conversion occurs prior to the Maturity Date, the Holder shall be entitled to all accrued and outstanding unpaid interest, plus an amount equal to the amount of interest that would have otherwise accrued on the Principal Amount to the Maturity Date but for such prior Conversion.
Each Warrant will be exercisable into one Subordinate Voting Share at a price of CAD$1.50 per share until June 20, 2027 (the “Expiry Date”), subject to acceleration. If at any time prior to the Expiry Date, the volume-weighted average trading price of the Subordinate Voting Shares on Cboe Canada (or such other principal exchange or market where the Subordinate Voting Shares are then listed or quoted for trading) exceeds CAD$5.55, as adjusted in accordance with the terms of the certificate representing the Warrants (the “Warrant Certificates”), for a period of 10 consecutive trading days, Verses may, at its option, accelerate the Expiry Date to the date that is 30 days following the written notice to G42, in the form of a press release or other form of notice permitted by the Warrant Certificates.
In connection with commercial agreements that may be entered into between VERSES and affiliates of G42, G42 will also receive 1,000,000 restricted stock units (“RSUs”) of VERSES, each vested RSU to be settled through the issuance of one (1) Subordinate Voting Share. The RSUs will vest in installments of 10,000 RSUs for every CAD$100,000 of revenue derived by VERSES from such commercial agreements.
A reconciliation of convertible debenture is as follows:
| Balance, March 31, 2024 | $ | - | |
|---|---|---|---|
| Fair value of derivative liability (1) | 5,722,835 | ||
| Host liability (2) | 4,056,723 | ||
| Issuance costs | (325,679 | ) | |
| Foreign exchange effect on convertible debenture | 204,694 | ||
| Accretion expense | 719,195 | ||
| Interest payable | 534,771 | ||
| Balance, December 31, 2024 | $ | 10,912,539 |
| 23 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 13. | CONVERTIBLEDEBENTURE (continued) | | --- | --- |
(1) The Company measured the embedded derivative liability using the Monte-Carlo binomial model, with the following assumptions: share price of CAD$1.64 (issuance date CAD$1.12) based on the market price of the Company’s shares; risk-free interest rate of 3.16% (issuance date 4.63%) based on the Canadian bond yield rate; expected volatility of 100% based on comparable publicly listed entities; and an expected life between 0.0278 and 1.4722 years (issuance date 0.02 and 1.5 years) based on management’s estimate of the probability of the conversion feature being exercised. The changes in the estimates resulted in a loss on the fair value of derivative liability of $546,121 in the current period.
(2) IFRS 9 requires entities to calculate the fair value of the embedded derivative first, with the residual value being assigned to the host liability. Subsequently, the derivative liability is measured at FVTPL, while the host debt liability component is measured at amortized cost.
| 14. | PREPAID EXPENSES |
|---|
Prepaid expenses consisted of the following:
| December 31, 2024 | March 31, 2024 | |||
|---|---|---|---|---|
| Deposit | $ | 10,000 | $ | 59,535 |
| Retainer | 252,351 | 126,153 | ||
| Prepaid insurance | 215,602 | 107,663 | ||
| Subscriptions | 371,240 | 501,000 | ||
| Balance, end of the period | $ | 849,193 | $ | 794,351 |
| 15. | EQUIPMENT | |||
| --- | --- |
| Cost | Equipment | |
|---|---|---|
| Balance, March 31, 2023 | 365,017 | |
| Additions | 185,155 | |
| Balance, March 31, 2024 | $ | 550,172 |
| Additions | 30,580 | |
| Balance, December 31, 2024 | $ | 580,752 |
| Accumulated depreciation | Equipment | |
|---|---|---|
| Balance, March 31, 2023 | 130,177 | |
| Additions | 152,736 | |
| Balance, March 31, 2024 | $ | 282,913 |
| Additions | 138,088 | |
| Balance, December 31, 2024 | $ | 421,001 |
| Net book value, March 31, 2024 | $ | 267,259 |
| Net book value, December 31, 2024 | $ | 159,751 |
| 24 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 16. | PROMISSORY NOTES |
|---|
On March 11, 2024, the Company’s wholly owned subsidiary VTU, has accepted an interest free loan in the amount of $2,000,000 from two arms-length investors for $1,000,000 each. The loan matures on the earlier of (i) March 10, 2025; and (ii) the date the Company completes a bona fide transaction or series of transactions with the principal purpose of raising capital, pursuant to which the Company issues and sells its securities to one or more bona fide third parties. On the maturity date, the Company may elect to repay loan by way of cash, or through the issuance of Subordinate Voting Shares in the capital of the Company at a per share price equal to the price of the securities issued in the Equity Financing, subject to the approval of CBOE Canada Inc.
On April 18, 2024, the promissory notes were settled through the issuance of Special Warrants (Note 12).
| 17. | FINANCIAL INSTRUMENTS |
|---|
As of December 31, 2024, the Company’s financial instruments consist of cash and restricted cash, accounts receivable, due from related parties, accounts payable and accrued liabilities, restricted share unit liability, provision for legal claim, convertible debenture, and loans payable.
IFRS 13 Fair Value Measurement establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. IFRS 13 prioritizes the inputs into three levels that may be used to measure fair value:
| ● | Level<br> 1 – Unadjusted quoted prices in active markets that are accessible at the measurement<br> date for identical unrestricted assets or liabilities. |
|---|---|
| ● | Level<br> 2 – Inputs that are observable, either directly or indirectly, but do not qualify as<br> Level 1 inputs (i.e., quoted prices for similar assets or liabilities). |
| --- | --- |
| ● | Level<br> 3 – Prices or valuation techniques that are not based on observable market data and<br> require inputs that are both significant to the fair value measurement and unobservable. |
| --- | --- |
The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.
The fair value of cash and restricted cash, accounts receivable, due from related parties, accounts payable and accrued liabilities, promissory notes, provision for legal claim, and loans payable are measured using Level 1 inputs, the fair value of restricted share unit liability and convertible debentures are measured using Level 2 and Level 3 inputs.
The carrying value of the Company’s other financial instruments approximate their fair values due to their short-term maturities.
There were no transfers between the levels of the fair value hierarchy during the period.
| 25 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 17. | FINANCIAL INSTRUMENTS(continued) | | --- | --- |
| As of December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Assets: | ||||||||
| Cash and restricted cash | $ | 876,951 | $ | - | $ | - | $ | 876,951 |
| Due from related parties | $ | 2,419,447 | $ | - | $ | - | $ | 2,419,447 |
| Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 3,161,013 | $ | - | $ | - | $ | 3,161,013 |
| Convertible debenture | $ | - | $ | 5,189,704 | $ | 5,722,835 | $ | 10,912,539 |
| Provision for legal claim | $ | 6,182,258 | $ | - | $ | - | $ | 6,182,258 |
| Restricted share unit liability | $ | - | $ | 6,962,912 | $ | - | $ | 6,962,912 |
| Loans payable | $ | 139,029 | $ | - | $ | - | $ | 139,029 |
| As of March 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets: | ||||||||
| Cash | $ | 892,727 | $ | - | $ | - | $ | 892,727 |
| Accounts receivable | $ | 100,000 | $ | - | $ | - | $ | 100,000 |
| Due from related parties | $ | 1,937,270 | $ | - | $ | - | $ | 1,937,270 |
| Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 2,865,002 | $ | - | $ | - | $ | 2,865,002 |
| Promissory notes | $ | 2,000,000 | $ | - | $ | - | $ | 2,000,000 |
| Provision for legal claim | $ | 6,307,258 | $ | - | $ | - | $ | 6,307,258 |
| Restricted share unit liability | $ | - | $ | 576,214 | $ | - | $ | 576,214 |
| Loans payable | $ | 140,904 | $ | - | $ | - | $ | 140,904 |
Creditrisk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The financial instrument that potentially subjects the Company to concentrations of credit risk consists principally of cash, accounts receivable, and due from related parties. To minimize the credit risk, the Company places its cash with large financial institutions.
Amounts due from related parties of $2,419,447 (March 31, 2024 - $1,937,270) are due from companies controlled by key management personnel. These amounts are expected to be settled through future services agreements, and as such, credit risk is assessed as low. As of December 31, 2024, management assessed that there is no need to provide a credit loss allowance.
Liquidityrisk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations, cash holdings, and anticipated future financing transactions.
| 26 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 17. | FINANCIAL INSTRUMENTS(continued) | | --- | --- |
Contractual cash flow requirements as of December 31, 2024, were as follows:
| <1 year | 1-2 years | 2-5 years | >5 years | Total | |
|---|---|---|---|---|---|
| Accounts payable and accrued liabilities | |||||
| Convertible debenture | |||||
| Loans payable | |||||
| Total |
All values are in US Dollars.
As of December 31, 2024, the Company had a working capital deficit of $23,697,120 (March 31, 2024 - $7,270,243).
Foreignexchange risk
Foreign exchange risk is the risk that the fair value or future cash flows will fluctuate due to changes in foreign exchange rates. The Company has financial assets denoted in Euros and Canadian dollars and is therefore exposed to exchange rate fluctuations. As of December 31, 2024, the Company had the equivalent of $18,162,147 (March 31, 2024 - $552,476) net financial liabilities denominated in Canadian dollars and $158,057 (March 31, 2024 - $117,648) in net financial assets denominated in Euros.
The foreign exchange risk exposure of the Company financial instruments as at December 31, 2024 is as below:
| +/- 10% fluctuation | ||||||
|---|---|---|---|---|---|---|
| Currency | Increase/(decrease) | |||||
| Financial Instrument Type | CAD | impact | ||||
| Cash | (66,826 | ) | ||||
| Tax receivable | (55,767 | ) | ||||
| Prepaid expenses | (54,546 | ) | ||||
| Accounts payable and accrued liabilities | ) | ) | 205,808 | |||
| Convertible debenture | ) | ) | 1,091,254 | |||
| Restricted share unit liability | ) | ) | 696,291 | |||
| ) | ) | 1,816,214 |
All values are in US Dollars.
| +/- 10% fluctuation | ||||||
|---|---|---|---|---|---|---|
| Currency | Increase/(decrease) | |||||
| Financial Instrument Type | O | impact | ||||
| Restricted cash | (17,438 | ) | ||||
| Tax receivable | (12 | ) | ||||
| Accounts payable and accrued liabilities | ) | ) | 1,644 | |||
| Deferred Grant | ) | ) | 12,275 | |||
| (3,531 | ) |
All values are in Euros.
Interestrate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The interest earned on cash balances approximate fair value rates, and the Company is not subject to significant risk due to fluctuating interest rates. As of December 31, 2024, the Company does not hold any liabilities that are subject to fluctuations in market interest rates.
| 27 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 17. | FINANCIAL INSTRUMENTS(continued) |
|---|
Pricerisk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or currency risk. The Company is not exposed to other price risk.
| 18. | MANAGEMENT OF CAPITAL |
|---|
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development of their technology. The Company considers the items in shareholders’ equity as capital. There has been no change to what the Company considers capital from the prior year. The Company does not have any externally imposed capital requirements to which it is subject to.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may issue Subordinate Voting Shares, dispose of assets or adjust the amount of cash. There has been no change to how capital is managed from the prior year.
| 19. | SUPPLEMENTAL CASH FLOW INFORMATION |
|---|
The supplemental cash paid and received by the Company as at December 31, 2024 is as below:
| For nine months ended | ||||
|---|---|---|---|---|
| December 31, | ||||
| 2024 | 2023 | |||
| Cash paid for interest | $ | 3,940 | $ | 4,000 |
| Cash received for interest | $ | 68,026 | $ | 259,843 |
| 20. | SEGMENTED NOTE |
|---|
All of the Company’s non-current assets as of December 31, 2024 and March 31, 2024 and all of the Company’s revenue for the period ended December 31, 2024 and 2023 were in the United States.
The operating segments have been disclosed by geographical region for the three and nine months ended December 31, 2024 and 2023 as follows:
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31 | December 31 | |||||||
| Total net (income) loss by country | 2024 | 2023 | 2024 | 2023 | ||||
| United States | $ | 4,222,993 | $ | 5,043,257 | $ | 16,406,589 | $ | 12,968,044 |
| Canada | 12,508,011 | 9,795,729 | 18,985,767 | 17,830,370 | ||||
| Netherlands | - | 63,930 | 71,551 | 238,072 | ||||
| Total net loss by country | $ | 16,731,004 | $ | 14,902,916 | $ | 35,463,907 | $ | 31,036,486 |
| 28 |
| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- |
| 21. | PROVISION FOR LEGAL CLAIM |
|---|
On July 13, 2022, David Thomson, a former independent contractor, filed a lawsuit against VTU, Cyberlab LLC, and two directors/officers of the Company in Los Angeles Superior Court. The claim alleged violations of various sections of the California Corporations code, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Plaintiff claimed as much as $5,000,000 in damages, subject to proof.
On September 1, 2022, the Company filed an answer denying any wrongdoing, and also made its own counterclaim against Mr. Thomson. The cross-claims against David Thomson included: (i) misappropriation of trade secrets; (ii) breach of contract; (iii) violation of the California Computer Data Access and Fraud Act (“CDAFA”); and (iv) violation of the Economic Espionage Act, along with three additional cross-claims (alleging violation of the Computer Fraud and Abuse Act, conversion, violation of the Stored Communications Act, respectively) that were subsequently dismissed by the Court. The Company, for its part, sought to recover both compensatory and punitive damages from Mr. Thomson, as well as restitution of any ill-gotten gains and an award of reasonable attorneys’ fees.
The arbitration was conducted for a total of 13 days over a period from February 5 through April 3, 2024, via a single arbitrator at the American Arbitration Association. The CDAFA claim was dismissed by the Arbitrator, but the claims for trade secret misappropriation, breach of contract and unjust enrichment were allowed to move forward.
A final arbitration award was issued on May 17, 2024. It imposed liability against: (i) Verses Technologies USA, Inc. (VTU), a subsidiary of the Company, jointly and severally with Cyberlab, LLC (a company owned by the Company’s president, Dan Mapes), in the amount of $6,307,258, inclusive of interest; and (ii) Cyberlab, VTU and its principals, Gabriel René and Daniel Mapes, jointly and severally, for damages in the amount of $1,900,000, interest of $709,973, costs of $64,303 and the fees of plaintiff’s counsel totaling $920,231. To resolve their part of joint and several liability, Mr. René and Mr. Mapes are working toward satisfying the portion of the award that applies to them as individuals, including $1,666,000 proceeds from insurance. The remaining liability belongs to VTU, a subsidiary of the Company. Initial good faith payments of $1,791,000 have been made to the claimant. However, the likelihood of a favourable or unfavourable outcome, or an estimate of the amount or range of potential loss, which is isolated to VTU and Cyberlab, is not reasonably foreseeable at this time.
On January 24, 2025, Mr. Thompson filed a Petition to Confirm the Arbitration Award with the Los Angeles Superior Court. This is a necessary “first step” that must be undertaken before an arbitration award can be converted into an enforceable judgment. A hearing on the Petition is currently set for April 29, 2025. If the Petition is granted, a judgment will be issued against VTU, Cyberlab and Mssrs. René and Mapes for the amounts listed above (though factoring in the payments that have already been made), plus interest from the date of the Arbitration Award. Settlement discussions are ongoing.
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| --- |
| **VERSES AI INC.**<br><br>Notes to the Condensed Consolidated Interim Financial Statements<br><br>For the nine months ended December 31, 2024 and 2023<br><br>\(Expressed in United States dollars - Unaudited\) |
| --- | | 22. | SUBSEQUENT EVENTS | | --- | --- |
On January 7, 2025, the Company closed offering by way of prospectus supplement (the “Offering”). Pursuant to the Offering, the Company issued 12,738,853 units of the Company (the “Units”) at a price of C$1.57 per Unit for gross proceeds of approximately CAD$20,000,000. Each Unit is comprised of one Class A Subordinate Voting Share of the Company (a “Share”) and one-half of one Share purchase warrant (each whole Share purchase warrant, a “Warrant”). Each Warrant shall entitle the holder to purchase one Share of the Company (a “Warrant Share”) at an exercise price of C$1.96 per Warrant Share at any time until January 9, 2028, subject to adjustment in certain events. The Offering was completed pursuant to an agency agreement dated January 9, 2025 between the Company and A.G.P. Canada Investments ULC ( “A.G.P. Canada”).
In connection with the Offering, the Company paid the A.G.P. Canada a cash commission equal to 8% of the gross proceeds of the Offering and issued to the A.G.P. Canada or such selling agents such number of compensation warrants as is equal to an aggregate of 8% of the number of Units sold pursuant to the Offering (the “Compensation Warrants”). Each Compensation Warrant is exercisable into a Unit at an exercise price of C$1.57 per Unit until January 9, 2028. The cash commission and the number of Compensation Warrants was reduced to 2.0% in respect to the portion of aggregate gross proceeds of the Offering attributable to subscribers identified by the Company.
After December 31, 2024, a total of 946,718 warrants were exercised at CAD$1.00 each, generating gross proceeds of CAD$946,718.
| 30 |
| --- |
Exhibit 99.3
| VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 |
|---|
This Management’s Discussion and Analysis (“MD&A”) of VERSES AI Inc. (“Company” or “VERSES”) is for the three and nine months ended December 31, 2024, and is prepared by management using information available as of February 14, 2025. The Company’s fiscal year end is March 31. The three months ended December 31, 2024, is referred to as “Q3 2025”, and the three months ended on December 31, 2023 is referred to as “Q3 2024”. This MD&A should be read in conjunction with the condensed consolidated interim financial statements of the Company for the three and nine month periods ended December 31, 2024 and the Company’s audited consolidated financial statements for the year ended March 31, 2024, and the notes thereto, prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.
This MD&A complements and supplements, but does not form part of, the Company’s condensed consolidated interim financial statements. This MD&A contains forward-looking statements. Statements regarding the adequacy of cash resources to carry out the Company’s exploration programs or the need for future financing are forward-looking statements. All forward-looking statements, including those not specifically identified herein, are made subject to cautionary language.
This MD&A is prepared in conformity with National Instrument (“NI”) 51-102F1 Management’s Discussion & Analysis.
All dollar amounts referred to in this MD&A are expressed in United States dollars unless otherwise indicated.
DISCLAIMERFOR FORWARD LOOKING STATEMENTS
This following MD&A contains “forward-looking statements” (also referred to as “forward-looking information”) within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical facts, included in this MD&A that address activities, events or developments that the Company expects or anticipate will or may occur in the future, including statements about the anticipated impact of the operations of the Company, as well as the benefits expected to result from capital expenditures, potential management contracts for ongoing services, and other such matters are forward-looking statements. When used in this MD&A, the words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe” and similar expressions are intended to identify forward-looking statements. These forward-looking statements include, among other things, statements relating to the Genius^TM^ beta program and the Company’s future objectives and plans.
There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward looking statements are subject to risks, uncertainties and assumptions, including those discussed elsewhere in this MD&A. Although the Company believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Such forward-looking statements are based on a number of assumptions of management, including, without limitation: that the Genius^TM^ beta program will proceed as planned and that the Company will be able to operate and advance its business objectives as currently anticipated.
Some of the risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include but are not limited to risks related to: failure to launch the Genius^TM^ beta program as anticipated, or at all; general business operations; sales assumptions; limited operating history; development of the Company’s brand; competition; need for continued improvement; intellectual property issues; interactive digital media; potential liability claims; litigation; insurance; economic downturns; currency; key personnel; conflicts of interest; changes in general applicable laws; compliance with advertising laws and regulations; foreign operations; no guaranteed return on investment; dilution; fluctuation of share price; access to capital; internal controls; accounting policies; and other factors beyond the control of the Company. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks as more particularly described under “Risk Factors.” Although the Company attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
| VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 |
|---|
BUSINESSOVERVIEW
The Company was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on November 19, 2020, under the name Chromos Capital Corp. On June 17, 2021, the Company changed its name to Verses Technologies Inc. and on June 21, 2021, the Company entered into a Contribution Agreement with Verses Technologies USA, Inc. (formerly Verses Labs Inc.) (“VTU”) pursuant to which VTU’s shareholders exchanged all of the outstanding shares for Class A Subordinate Voting Shares (“Subordinate Voting Shares”) of the Company (the “VTU Transaction”). Upon closing of the VTU Transaction on July 20, 2021, VTU became a wholly owned subsidiary of the Company, the shareholders of VTU held the majority of the Company’s outstanding Subordinate Voting Shares, all of the Company’s business was conducted through VTU and the management of VTU became the Company’s management.
On March 31, 2023, the Company changed its name to VERSES AI Inc.
VERSES is a cognitive computing company specializing in next generation intelligence systems. The Company is primarily focused on developing Genius™, an intelligence-as-a-service smart software platform, which has absorbed the Company’s previous KOSM™ and KOSM Exchange products.
The Company’s business is based on the vision of the “Spatial Web” – an open, hyper-connected, context-aware, governance-based network of humans, machines and intelligent agents. The Company’s ambition is to build tools that enable the Spatial Web and to become a leader in the transition from the information age to the intelligence age.
Overview of Genius^TM^
^^
Generative Artificial Intelligence (“AI”) models like GPT and DALL-E-2 excel at producing written and visual content by predicting the next statistically most likely word or pixel based on “correlations” and patterns found in enormous training data sets. While some outputs might suggest some spark of intelligence, mathematically, such generative AI models simply mimic the input data on which they were trained, including the biases therein, without genuine understanding or reasoning. Further, there are ethical concerns around, among other things, the predisposition of such technology for potentially generating misinformation, bias inherent in the training data and the likelihood of intellectual property infringement used in training data without consent or remuneration. The Company believes it will take more than increasing the volume of training data sets to create intelligent software that can reason, plan and learn.
VERSES is developing Genius as its flagship product, with the intention that it will generate intelligent agents (“Genius Agents”), that are each expected to function as a “digital brain” by transforming data into interoperable knowledge model (“Genius Core”) on which to infer the “causality” and hidden states that generate the data they observe. This causal modeling or “inference” mechanism is being built on Active Inference, a framework based on the Free Energy Principle.
In conventional computing, storage and compute are independent components and the sequential data transfer between the two is massively inefficient in both time and energy. In the human brain, neurons function as both memory and processor and, being interconnected, process information in parallel. Genius Core and Genius Agents are being designed to function like integrated memory and processor. Consequently, Genius Agents and Genius Core are not separate products but rather integral parts of Genius.
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| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
Genius is not fully operational or widely available in the market, as it is currently in the development/testing stage.
The Company launched a private beta program of Genius (including Genius Agents and Genius Core) in early 2024 with ten partners, all of whom the Company had an existing business relationship with. The Company has launched the public beta program for a broader number of developers for the second half of 2024. This public beta program is expected to include enhanced functionalities and is intended to help the Company increase its potential customer base, while refining its product offerings in anticipation of the full launch of Genius.
GeniusAgents
Genius Agents are intended to read from and write to HSML knowledge models to reason, plan and learn. Much like a real assistant, Genius Agents are being designed to solve complex problems based on context, intent, requirements, and restrictions. The more context (such as location, schedule, weather, history, preferences, goals, and available resources) that a Genius Agent has, the more hyper-personalized the results and recommendations it can provide. Genius Agents are being designed to adapt to dynamically changing conditions and collaborate with other agents, which are essential for evolving from automatic, to automated, to autonomous, and ultimately, to autonomic self-organizing systems.
Genius Agents are being designed to be able to perform other highly context-dependent and multi-step decisions in a professional capacity such as aggregating information from multiple sources into a unified report with charts, graphs, summaries, and suggested action items. For instance, a Genius Agent is being designed to be able to ingest a number of unstructured pdfs. research papers and generate an HSML knowledge graph mapping all authors, university attributions, bibliographical references, external citations, diagrams, formulas, and other content to answer complex questions – the answers to which are not explicit and must be inferred.
GeniusCore
Genius Core is being developed to actively manage, organize, and store data, while transforming it into strategic, actionable insights. Data structures such as document-oriented databases, knowledge graphs, and vector databases offer different solutions for data storage and retrieval, each having unique strengths and weaknesses. Genius Core is being designed as a unique search, recommendation, and knowledge engine that is intended to combine the benefits of all three types (document, graph, and vector) by transforming structured and unstructured data into a unified hyperspatial knowledge model that is expected to be uniquely suited to serve as memory for AI systems which need to represent complex multidimensional relationships. In Genius Core, entities and their relationships are being modeled in HSML and queried via HSQL.
Business Model
The Company intends to market Genius to developers as a Software-as-a-Service (SaaS) for making their applications smarter, safer and more sustainable. We anticipate offering subscription tiers priced based on usage and pricing will be informed by various performance metrics gathered during the beta program.
| 3 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
Highlights- Q3 2025 and Subsequent Events
On November 6, 2024, the Company announced that it intends to complete a non-brokered private placement of up to 6,800,000 units of the Company (the “LIFE Units”) at a price of CAD$0.50 per Unit for aggregate gross proceeds of up to CAD$3.4 million (the “LIFE Offering”) and a non-brokered private placement of up to 3,200,000 special warrants (the “Special Warrants”) of the Company, each exercisable for one unit of the Company (each, an “Equity Unit”, and together with the LIFE Units, the “Units”) at no additional cost, for aggregate gross proceeds of up to CAD$1.6 million (the “Special Warrant Offering”, and together with the LIFE Offering, the “Offering”).
Each Unit will consist of one Class A Subordinate Voting share of the Company (a “Share”) and one-half of one Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant will entitle the holder thereof to acquire one Share (each, a “Warrant Share”) at an exercise price of CAD$0.70 per Share, subject to adjustment in certain circumstances, for a period of 36 months from the Closing Date.
On November 8, 2024, the Company announced that it closed its previously announced non-brokered private placement of 3,600,000 Special Warrants of the Company (the “Special Warrants”) at a price of CAD$0.50 (the “Offering Price”) per Special Warrant for aggregate gross proceeds of CAD$1.8 million (the “Special Warrant Offering”). The Company’s decision to increase the size of the Special Warrant Offering from CAD$1.6 million to CAD$1.8 million was accepted by Cboe Canada (the “Exchange”) prior to closing.
In connection with the Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of CAD$91,325; and (ii) issued to certain finders and advisors an aggregate of 182,650 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant will be exercisable into one Equity Unit at the Offering Price for a period of 36 months following November 8, 2024.
On November 8, 2024, the Company closed the first tranche of its previously announced non-brokered private placement of 5,807,700 units of the Company (the “LIFE Units”) at a price of CAD$0.50 per LIFE Unit (the “Offering Price”) for aggregate gross proceeds of CAD$2,903,850 (the “LIFE Offering”).
In connection with the Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of CAD$103,675; and (ii) issued to certain finders and advisors an aggregate of 207,350 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant will be exercisable into one Equity Unit at the Offering Price for a period of 36 months following the Closing Date.
On November 15, 2024, the Company closed the second tranche of its previously announced non-brokered privateplacement (the “LIFE Offering”) of units of the Company (the “LIFE Units”) for aggregate gross proceeds in this second tranche of $512,800.
In connection with the second tranche of the LIFE Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of C$30,082; and (ii) issued to certain finders and advisors an aggregate of 60,164 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant will be exercisable into one unit of the Company (“Compensation Warrants”).
On December 9, 2024, the Company closed the third tranche of its previously announced non-brokered private placement (the “LIFE Offering”) of units of the Company (the “LIFE Units”) for gross proceeds in this third tranche of $770,000 from a single investor.
In connection with the third tranche of the LIFE Offering, the Company: (i) paid to certain finders and advisors an aggregate cash commission of $50,050; and (ii) issued to certain finders and advisors an aggregate of 100,100 compensation warrants (the “Compensation Warrants”).
| 4 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
On December 17, 2024, the Company revealed performance highlights of its flagship product Genius winning the code-breaking game Mastermind in a side by side comparison with a leading generative AI model, OpenAI’s o1 Preview, which is positioned as an industry-leading reasoning model. Over one hundred test runs, Genius consistently outperformed OpenAI’s o1-preview model one hundred and forty (140) times faster and more than five thousand times (5,000) cheaper.
On January 9, 2025, the Company announced it had closed its previously announced “reasonable best efforts” offering by way of prospectus supplement (the “Offering”). Pursuant to the Offering, the Company issued 12,738,853 units of the Company (the “Units”) at a price of C$1.57 per Unit for gross proceeds of approximately C$20,000,000. Each Unit is comprised of one Class A Subordinate Voting Share of the Company (a “Share”) and one-half of one Share purchase warrant (each whole Share purchase warrant, a “Warrant”). Each Warrant shall entitle the holder to purchase one Share of the Company (a “Warrant Share”) at an exercise price of C$1.96 per Warrant Share at any time until January 9, 2028, subject to adjustment in certain events. The Offering was completed pursuant to an agency agreement dated January 9, 2025 between the Company and A.G.P. Canada Investments ULC ( “A.G.P. Canada”).
In connection with the Offering, the Company paid the A.G.P. Canada a cash commission equal to 8% of the gross proceeds of the Offering and issued to the A.G.P. Canada or such selling agents such number of compensation warrants as is equal to an aggregate of 8% of the number of Units sold pursuant to the Offering (the “Compensation Warrants”). Each Compensation Warrant is exercisable into a Unit at an exercise price of C$1.57 per Unit until January 9, 2028. The cash commission and the number of Compensation Warrants was reduced to 2.0% in respect to the portion of aggregate gross proceeds of the Offering attributable to subscribers identified by the Company.
SELECTEDQUARTERLY FINANCIAL INFORMATION
The following table presents selected financial information for each of the last eight quarters.
| December 31, 2024 | September 30,2024 | June 30, 2024 | March 31, 2024 | ||
|---|---|---|---|---|---|
| Revenue | |||||
| Net comprehensive profit (loss) | ) | ||||
| Loss per class A subordinate voting shares - basic and diluted | ) | ||||
| Loss per class B proportionate voting shares - basic and diluted | ) | ||||
| Total assets | |||||
| Working capital (deficit) | ) |
All values are in US Dollars.
| December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||
|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||
| Net comprehensive profit (loss) | ) | ) | ) | ) | ||||
| Loss per class A subordinate voting shares - basic and diluted | ) | ) | ) | ) | ||||
| Loss per class B proportionate voting shares - basic and diluted | ) | ) | ) | ) | ||||
| Total assets | ||||||||
| Working capital (deficit) |
All values are in US Dollars.
During the quarter ended March 31, 2023, the Company recorded net comprehensive loss of $5,240,776, which is $669,420 higher than the net comprehensive loss recorded in the quarter ending December 31, 2023, due to lower grant income and revenue ($383,723), and higher interest expenses from the convertible debenture ($101,918).
| 5 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
During the quarter ended June 30, 2023, the Company recorded net comprehensive loss of $8,150,603, which is $2,909,827 higher than the net comprehensive loss recorded in the quarter ending March 31, 2023, due higher marketing expenses ($942,011), share-based payments from the revaluation of the options and broker warrants ($615,394), investor relations expenses ($465,535), and research and development expenses ($414,746).
During the quarter ended September 30, 2023, the Company recorded total assets of $17,965,967 which is $6,750,366 higher than previous quarter mainly due to new fundraising in July 2023. The increase in total assets combined with the conversion of the convertible debentures resulted in a higher working capital, which is $13,454,631 higher than in the previous quarter.
During the quarter ended December 31, 2023, the Company recorded a net comprehensive loss of $14,900,263 which is $6,715,864 higher than previous quarter mainly due to the grant of stock options to employees and strategic consultants which resulted in a rise in share-based compensation to $6,267,643.
During the quarter ended March 31, 2024, the Company recorded a net comprehensive loss of $15,668,551 which is $768,288 higher than previous quarter mainly due to a provision for legal settlement regarding an arbitration award against VTU for $6,307,258 which was partially offset by a lower share based payment expense of $5,650,560.
During the quarter ended June 30, 2024, the Company recorded a net comprehensive loss of $10,487,104 which is $5,181,447 lower than previous quarter mainly due to a provision for legal settlement regarding an arbitration award against VTU for $6,307,258 recorded in the previous quarter. The difference was partially offset by the provision for contract settlement of $1,252,076 recorded in June 2024.
During the quarter ended September 30, 2024, the Company recorded a net comprehensive loss of $8,467,773 which is $2,019,331 lower than previous quarter mainly due to the gain on the derivative liability portion of the convertible debenture recorded in the quarter ($2,464,873).
During the quarter ended December 31, 2024, the Company recorded a net comprehensive loss of $16,168,992, which is $7,701,219 higher than previous quarter, mainly due the loss on the derivative liability portion of the convertible debenture recorded in the quarter ($5,475,867) and the grant and revaluation of stock options and RSUs to employees and strategic consultants which resulted in a rise in share-based compensation of $5,153,634. Lower operational expenses partially offset de increase by $2,156,644.
SELECTEDQUARTERLY FINANCIAL INFORMATION
The following table sets forth selected financial information for Q3 2025 and Q32 2024, which has been derived from the condensed consolidated interim financial statements and accompanying notes, in each case prepared in accordance with IFRS. The following discussion should be read in conjunction with the condensed consolidated interim financial statements, and it may not be indicative of the Company’s future performance.
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| --- |
| VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 |
|---|
FINANCIALRESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2024
| Q3 2025 | Q3 2024 | ||||
|---|---|---|---|---|---|
| Total revenue | $ | - | $ | 544,536 | |
| Loss from Continuing Operations | (13,262,819 | (14,982,347 | ) | ||
| Loss from Continuing Operations Per Class A Subordinate Voting Shares - Basic and Diluted | (0.08 | (0.10 | ) | ||
| Loss from Continuing Operations Per Class B Proportionate Voting Shares - Basic and Diluted | Nil | (0.64 | ) | ||
| Net Comprehensive loss | (16,168,992 | (14,900,263 | ) | ||
| Loss Per Class A Subordinate Voting Shares - Basic and Diluted | (0.09 | (0.10 | ) | ||
| Loss Per Class B Proportionate Voting Shares - Basic and Diluted | Nil | (0.64 | ) | ||
| Total assets | 5,106,087 | 11,400,490 | |||
| Total liabilities | $ | 27,580,499 | $ | 4,027,569 |
All values are in US Dollars.
The following table provides an overview of the financial results in Q3 2025 as compared to Q3 2024:
| Q3 2025 | Q3 2024 | |||||
|---|---|---|---|---|---|---|
| Revenue | $ | - | $ | 544,536 | ||
| Cost of revenue | - | (396,496 | ) | |||
| - | 148,040 | |||||
| Expenses: | ||||||
| Accounting fees | 77,957 | 123,886 | ||||
| Consulting fees | 943,413 | 1,242,469 | ||||
| Depreciation | 44,181 | 70,580 | ||||
| Investor relations | 293,837 | 754,247 | ||||
| Legal fees | 202,403 | 580,208 | ||||
| Management fees | 49,753 | 12,500 | ||||
| Marketing | 432,639 | 916,314 | ||||
| Office and general | 479,046 | 420,161 | ||||
| Personnel expenses | 768,718 | 654,900 | ||||
| Rent | 15,408 | 2,220 | ||||
| Research and development | 2,984,580 | 3,712,272 | ||||
| Share based payments | 6,893,858 | 6,267,643 | ||||
| Travel and meals | 77,026 | 372,987 | ||||
| 13,262,819 | 15,130,387 | |||||
| Other items: | ||||||
| Interest expense | (251,962 | ) | (2,226 | ) | ||
| Accretion expense | (265,356 | ) | - | |||
| Other income | 18,056 | 81,657 | ||||
| Grant income | 42,071 | - | ||||
| Loss on derivative liability | (3,010,994 | ) | - | |||
| NET LOSS | $ | (16,731,004 | ) | $ | (14,902,916 | ) |
| 7 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
DISCUSSIONSOF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2024
VERSES recorded a net loss of $16,731,004 in Q3 2025, which is $1,828,088 higher than the loss of $14,902,916 in Q3 2024, mainly attributed to the loss on derivative liability ($3,010,994), which was partially offset by lower operational expenses ($1,867,568).
Revenues
During Q3 2025, the Company’s revenue was $nil, a decrease of $544,536 compared to $544,536 recorded in Q3 2024 mainly due to the early termination of the Company’s SaaS project.
| For the quarter ended | Q3 2025 | Q3 2024 | Change | ||||
|---|---|---|---|---|---|---|---|
| Recognized at a point in time | $ | - | $ | - | $ | - | |
| Recognized over the duration of contracts | - | 544,536 | (544,536 | ) | |||
| Total Revenue | $ | - | $ | 544,536 | $ | (544,536 | ) |
Costof revenue
The Company incurred $nil in cost of revenue during Q3 2025, a decrease of $396,496 when compared to $396,496 recorded in Q3 2024. The reduction is attributed to the early termination of the Company’s SaaS project.
Expenses
Expenses decreased $1,867,568 from $15,130,387 in Q3 2024 to $13,262,819 in Q3 2025. The changes in expenses were attributable to the following items:
| For the period ended | Q3 2025 | Q3 2024 | Change | ||||
|---|---|---|---|---|---|---|---|
| Accounting fees | $ | 77,957 | $ | 123,886 | $ | (45,929 | ) |
| Consulting fees | 943,413 | 1,242,469 | (299,056 | ) | |||
| Depreciation | 44,181 | 70,580 | (26,399 | ) | |||
| Investor relations | 293,837 | 754,247 | (460,410 | ) | |||
| Legal fees | 202,403 | 580,208 | (377,805 | ) | |||
| Management fees | 49,753 | 12,500 | 37,253 | ||||
| Marketing | 432,639 | 916,314 | (483,675 | ) | |||
| Office and general | 479,046 | 420,161 | 58,885 | ||||
| Personnel expenses | 768,718 | 654,900 | 113,818 | ||||
| Rent | 15,408 | 2,220 | 13,188 | ||||
| Research and development | 2,984,580 | 3,712,272 | (727,692 | ) | |||
| Share based payments | 6,893,858 | 6,267,643 | 626,215 | ||||
| Travel and meals | 77,026 | 372,987 | (295,961 | ) | |||
| Total operating expenses | $ | 13,262,819 | $ | 15,130,387 | $ | (1,867,568 | ) |
| ● | Consulting<br> fees decreased by $299,056 mostly because of reductions in business development fees ($499,591),<br> which was partially offset by higher fees paid to the Company’s financial advisor ($153,617),<br> and tax consulting fees ($75,000). Other general consulting expenses decreased by $28,082<br> when compared to the previous year. | ||||||
| --- | --- | ||||||
| ● | The<br> decrease in investor relations of $460,410 is mostly attributed to lower expenditure on corporate<br> and business strategy ($481,969). Other general investor relations expenditures represented<br> an increase of $21,559. | ||||||
| --- | --- |
| 8 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- | | ● | Legal<br> fees decreased by $377,805 when compared to the previous year mainly due to the reduction<br> of special projects conducted in the previous year by the Company with the support of external<br> counsel. | | --- | --- | | ● | The<br> decrease of $483,675 in marketing is mostly related to lower investments in social media<br> management and content marketing services ($105,305), marketing and investor awareness ($104,256),<br> digital marketing services ($93,659), and spatial web adoption services ($84,000). Other<br> general marketing expenditures represented a decrease of $96,455. | | --- | --- | | ● | Personnel<br> expenses increased by $113,818 mainly due to salary increases to management members. | | --- | --- | | ● | Research<br> and development (“R&D”) decreased by $727,692 as the Company reduced the<br> size of the engineering and product management teams to focus on the development of its products.<br> R&D is compounded by payroll, payroll benefits, payroll taxes, independent contractors,<br> and hosting-related costs. | | --- | --- | | ● | Share<br> based compensation increased by $626,215 due to a higher valuation of the restricted stock<br> units granted to the employees and strategic consultants of the Company ($2,973,801), new<br> RSUs granted ($2,800,597), which was partially offset by a lower value of new stock options<br> granted ($4,467,299) and a lower accrual of the graded vesting of stock options granted to<br> employees and strategic consultants of the Company ($680,884). | | --- | --- |
Otheritems
During Q3 2025, other items amounted to an expense of $3,468,185, which is an increase of $3,547,616 from an income of $79,431 during Q3 2024. The changes in other items were impacted by the following items:
| For the period ended | Q3 2025 | Q3 2024 | Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Interest expense | $ | (251,962 | ) | $ | (2,226 | ) | $ | (249,736 | ) |
| Accretion expense | (265,356 | ) | - | (265,356 | ) | ||||
| Other income | 18,056 | 81,657 | (63,601 | ) | |||||
| Grant income | 42,071 | - | 42,071 | ||||||
| Loss on derivative liability | (3,010,994 | ) | - | (3,010,994 | ) | ||||
| Total other items | $ | (3,468,185 | ) | $ | 79,431 | $ | (3,547,616 | ) | |
| ● | Interest<br> expense increase relates to the interest accrual of the convertible debentures. | ||||||||
| --- | --- | ||||||||
| ● | Accretion<br> expense attributable to convertible debenture. | ||||||||
| --- | --- | ||||||||
| ● | Other<br> income consisted of interest income from interest-bearing accounts. | ||||||||
| --- | --- | ||||||||
| ● | The<br> changes in the estimates in the Monte-Carlo binomial model resulted in a loss on the fair<br> value of the derivative liability of the convertible debenture of $3,010,994. | ||||||||
| --- | --- |
| 9 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
FINANCIALRESULTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2024
| December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|
| Total revenue | $ | 155,000 | $ | 1,378,869 | |
| Loss from Continuing Operations | (33,819,722 | (30,745,557 | ) | ||
| Loss from Continuing Operations Per Class A Subordinate Voting Shares - Basic and Diluted | (0.26 | (0.23 | ) | ||
| Loss from Continuing Operations Per Class B Proportionate Voting Shares - Basic and Diluted | (1.63 | (1.42 | ) | ||
| Net loss | (35,123,869 | (31,223,165 | ) | ||
| Loss Per Class A Subordinate Voting Shares - Basic and Diluted | (0.27 | (0.23 | ) | ||
| Loss Per Class B Proportionate Voting Shares - Basic and Diluted | Nil | (1.44 | ) | ||
| Total assets | 5,106,087 | 11,400,490 | |||
| Total liabilities | $ | 27,580,499 | $ | 4,027,569 |
All values are in US Dollars.
The following table provides an overview of the financial results for the NINE months ended December 31, 2024, as compared to December 31, 2023:
| For the period ended | December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|---|
| Revenue | $ | 155,000 | $ | 1,378,869 | ||
| Cost of revenue | (145,000 | ) | (1,140,198 | ) | ||
| 10,000 | 238,671 | |||||
| Expenses: | ||||||
| Accounting fees | 428,364 | 395,926 | ||||
| Consulting fees | 3,798,445 | 3,325,425 | ||||
| Depreciation | 138,088 | 196,814 | ||||
| Investor relations | 899,830 | 2,163,563 | ||||
| Legal fees | 1,066,515 | 1,289,425 | ||||
| Management fees | 134,334 | 12,500 | ||||
| Marketing | 1,631,689 | 3,574,829 | ||||
| Office and general | 1,420,025 | 1,318,350 | ||||
| Personnel expenses | 2,530,730 | 2,713,028 | ||||
| Provision for contract settlement | 1,252,076 | - | ||||
| Rent | 75,487 | 12,603 | ||||
| Research and development | 11,246,495 | 7,934,611 | ||||
| Share based payments | 8,855,582 | 7,233,036 | ||||
| Travel and meals | 352,062 | 814,118 | ||||
| 33,829,722 | 30,984,228 | |||||
| Other items: | ||||||
| Interest expense | (545,000 | ) | (346,854 | ) | ||
| Accretion expense | (719,195 | ) | (203,918 | ) | ||
| Other income | 68,026 | 259,843 | ||||
| Grant income | 98,105 | - | ||||
| Loss on derivative liability | (546,121 | ) | - | |||
| NET LOSS | $ | (35,463,907 | ) | $ | (31,036,486 | ) |
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| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
DISCUSSIONSOF OPERATIONS
VERSES recorded a net loss of $35,463,907 during the period ending December 31, 2024, which is $4,427,421 higher than the loss of $31,036,486 during the period ending December 31, 2023, mainly attributable to increases in research and development ($3,311,884), share based payments ($1,622,546), and provision for contract settlement ($1,252,076), which was partially offset by lower marketing expenses ($1,943,140) and lower investor relations expenses ($1,263,733).
Revenues
During the period ending December 31, 2024, the Company’s revenue was $155,000, a decrease of $1,223,869 compared to $1,378,869 recorded in the period ending December 31, 2023, mainly due to the early termination of the Company’s SaaS project.
| For the period ended | December 31, 2024 | December 31, 2023 | Change | ||||
|---|---|---|---|---|---|---|---|
| Recognized at a point in time | $ | 155,000 | $ | 218,600 | $ | (63,600 | ) |
| Recognized over the duration of contracts | - | 1,160,269 | (1,160,269 | ) | |||
| Total Revenue | $ | 155,000 | $ | 1,378,869 | $ | (1,223,869 | ) |
Costof revenue
The Company incurred $145,000 in cost of revenue in the period ending December 31, 2024, a decrease of $995,198 when compared to $1,140,198 recorded in the period ending December 31, 2023. The reduction is attributed to the early termination of the Company’s SaaS project.
Expenses
Expenses increased $2,845,494 from $30,984,228 in the period ending December 31, 2023, to $33,829,722 in the period ending December 31, 2024. The changes in expenses were attributable to the following items:
| For the period ended | December 31, 2024 | December 31, 2023 | Change | ||||
|---|---|---|---|---|---|---|---|
| Accounting fees | $ | 428,364 | $ | 395,926 | $ | 32,438 | |
| Consulting fees | 3,798,445 | 3,325,425 | 473,020 | ||||
| Depreciation | 138,088 | 196,814 | (58,726 | ) | |||
| Investor relations | 899,830 | 2,163,563 | (1,263,733 | ) | |||
| Legal fees | 1,066,515 | 1,289,425 | (222,910 | ) | |||
| Management fees | 134,334 | 12,500 | 121,834 | ||||
| Marketing | 1,631,689 | 3,574,829 | (1,943,140 | ) | |||
| Office and general | 1,420,025 | 1,318,350 | 101,675 | ||||
| Personnel expenses | 2,530,730 | 2,713,028 | (182,298 | ) | |||
| Provision for contract settlement | 1,252,076 | - | 1,252,076 | ||||
| Rent | 75,487 | 12,603 | 62,884 | ||||
| Research and development | 11,246,495 | 7,934,611 | 3,311,884 | ||||
| Share based payments | 8,855,582 | 7,233,036 | 1,622,546 | ||||
| Travel and meals | 352,062 | 814,118 | (462,056 | ) | |||
| Total operating expenses | $ | 33,829,722 | $ | 30,984,228 | $ | 2,845,494 | |
| ● | Consulting<br> fees increase of $473,020 is related to higher fees paid to the Company’s financial<br> advisors ($1,092,180), which was partially offset by lower business development consulting<br> costs ($696,350). Other general consulting expenses increased by $77,190 when compared to<br> the previous year. | ||||||
| --- | --- |
| 11 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- | | ● | The<br> decrease in investor relations of $1,263,733 is mostly attributed to lower expenditure in<br> corporate and business strategy ($885,513), public relations ($222,126), and capital markets<br> consultants ($80,680). Other general investor relations decreased by $75,414 when compared<br> to the previous year. | | --- | --- | | ● | Legal<br> fees decreased by $222,910 when compared to the previous year mainly due to the reduction<br> of special projects conducted in the previous year by the Company with the support of external<br> counsel. | | --- | --- | | ● | The<br> decrease of $1,943,140 in marketing is mostly related to lower investments in digital marketing<br> services ($598,713), marketing and investor awareness ($516,955), video production ($360,000),<br> and spatial web adoption services ($210,000). Other general marketing activities represented<br> a reduction of $257,472. | | --- | --- | | ● | Personnel<br> expenses decreased by $182,298 mainly due to lower expenses with the general and administrative<br> overhead. | | --- | --- | | ● | Research<br> and development (“R&D”) increased by $3,311,884 as the Company increased<br> the size of the team to focus on the development of its products. R&D is compounded by<br> payroll, payroll benefits, payroll taxes, independent contractors, and hosting-related costs. | | --- | --- | | ● | Share<br> based compensation increased by $1,622,546 due to new grants and higher value of RSUs ($6,416,690),<br> which was partially offset by a lower expense with stock options grants ($4,154,739), revaluation<br> of the modification of broker’s warrants that happened in the last year ($440,604),<br> and settlement agreement of closed last year ($198,801). | | --- | --- |
Otheritems
During the period ending December 31, 2024, other items amounted to an expense of $1,644,185, which is an increase of $1,353,256 from an expense of $290,929 during the period ending December 31, 2023. The changes in other items were impacted by the following items:
| For the period ended | December 31, 2024 | December 31, 2023 | Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Interest expense | $ | (545,000 | ) | $ | (346,854 | ) | $ | (198,146 | ) |
| Accretion expense | (719,195 | ) | (203,918 | ) | (515,277 | ) | |||
| Other income | 68,026 | 259,843 | (191,817 | ) | |||||
| Grant income | 98,105 | - | 98,105 | ||||||
| Loss on derivative liability | (546,121 | ) | - | (546,121 | ) | ||||
| Total other items | $ | (1,644,185 | ) | $ | (290,929 | ) | $ | (1,353,256 | ) |
| ● | Interest<br> expense decrease relates to the interest accrual of the convertible debentures. | ||||||||
| --- | --- | ||||||||
| ● | Accretion<br> expense attributable to convertible debenture. | ||||||||
| ● | Other<br> income consisted of interest income from interest-bearing accounts. | ||||||||
| ● | The<br> changes in the estimates in the Monte-Carlo binomial model resulted in a loss of the fair<br> value of the derivative liability of the convertible debenture of $546,121. |
| 12 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
LIQUIDITYAND CAPITAL RESOURCES
| For the period ended | December 31, 2024 | December 31, 2023 | Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Cash used in operating activities | $ | (24,280,587 | ) | $ | (22,683,399 | ) | $ | (1,597,188 | ) |
| Cash used in investing activities | (512,757 | ) | (835,953 | ) | 323,196 | ||||
| Cash provided (used in) financing activities | 24,448,030 | 25,027,744 | (579,714 | ) | |||||
| Foreign exchange effect on cash | 329,538 | (186,679 | ) | 516,217 | |||||
| Net change in cash during the period | $ | (15,776 | ) | $ | 1,321,713 | $ | (1,337,489 | ) |
Cash used in operating activities is comprised of net loss, add-back of non-cash expenses, and net change in non-cash working capital items. Cash used in operating activities increased to $1,597,188 in the period ended December 31, 2024, from $22,683,399 in the period ended December 31, 2023. The increase is mostly attributed to the higher loss adjusted by items not involving cash in the period ended December 31, 2024 ($1,404,973).
The decrease in financing activities is due to a reduction of net proceeds from the issuance of units ($9,596,889), issuance of equity instruments ($7,338,638), and repayment of promissory notes ($2,000,000). The decrease was partially offset by the issuance of convertible debentures ($10,000,000), issuance of special warrants received ($8,138,228), grant received ($122,748), and lease payments ($94,837).
The Company has historically raised sufficient funds to carry out its growth plans, in part, on the continuation of its agreements and investor support. The Company will continue to rely on such support to generate sufficient amounts of cash and cash equivalents to maintain capacity, satisfy short and long term capital requirements, and meet planned growth objectives. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions and its success with its strategic collaborations. Any quoted market for the Company’s shares may be subject to market trends generally, notwithstanding any potential success of the Company in creating new revenues, cash flows or earnings.
The Company’s ability to continue its operations and to realize its assets at their carrying values is dependent upon obtaining additional financing and generating revenues sufficient to cover its operating costs. The necessity that the Company raise sufficient funds to carry out its growth plans is conditional, in part, on the continuation of its agreements and investor support. The material uncertainty raised by these events and conditions may cast substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not give effect to any adjustments, which would be necessary should the Company be unable to continue as a going concern. In such circumstances, the Company would be required to realize its assets and discharge its liabilities outside of the normal course of business, and the amounts realized could differ materially from those reflected in the accompanying condensed consolidated interim financial statements.
The Company’s condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has not yet achieved profitable operations. The Company has been relying on debt and equity financing to fund its operations in the past. While the Company has been successful in securing financing to date, there can be no assurances that it will be able to do so in the future. As noted in the report of our independent public accountants for our financial statements for the year ended March 31, 2024, the aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that such audited annual financial statements were issued.
Historically, the Company has used net proceeds from issuances of debt and equity to provide sufficient funds to meet its near-term asset development plans and other contractual obligations when due. Management plans to fund the operations of the Company with its current working capital and through additional equity and/or debt financings. Management believes that this plan provides an opportunity for the Company to continue as a going concern.
| 13 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
In view of these matters, continuation as a going concern is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to, meet its financial requirements, raise additional capital, and the success of its future operations.
The Company’s long-term capital requirements may vary materially from those currently planned and will depend on many factors, including the rate of net sales growth, the timing and extent of spending on research and development efforts and other growth initiatives, the expansion of sales and marketing activities, the timing of new products, and overall economic conditions. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions and its success with its strategic collaborations. Any quoted market for the Subordinate Voting Shares may be subject to market trends generally, notwithstanding any potential success of the Company in creating new revenues, cash flows or earnings. The sale of additional equity would result in additional dilution to the Company’s shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that may restrict our operations. There can be no assurances that we will be able to raise additional capital on terms that are attractive to us or at all. The inability to raise capital would adversely affect our ability to achieve our business objectives.
COMMITMENTS
The Company has an obligation to pay royalties to Cyberlab, LLC (a company owned by a director and officer). Cyberlab shall be entitled to receive a share of the gross revenue derived from the sales, licensing and other commercial activities involving Spatial Domain Names, pursuant to the following schedule:
| ● | Years<br> 1 through 10 of the Spatial Domain Program: Cyberlab shall be entitled to Five Percent (5%)<br> of all gross revenue from the Spatial Domain Program, while VERSES shall retain the remaining<br> Ninety-Five Percent (95%) to allocate between itself and other Spatial Domain Program stakeholders<br> (e.g. registries, registrars, etc.) as it sees fit. |
|---|---|
| ● | Years<br> 11 through 14 of the Spatial Domain Program: Cyberlab shall be entitled to retain Four Percent<br> (4%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Six Percent (96%). |
| ● | Years<br> 15 through 17 of the Spatial Domain Program: Cyberlab shall be entitled to retain Three Percent<br> (3%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Seven Percent (97%). |
| ● | Years<br> 18 and 19 of the Spatial Domain Program: Cyberlab shall be entitled to retain Two Percent<br> (2%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Eight Percent (98%). |
| ● | Years<br> 20 through 25 of the Spatial Domain Program: Cyberlab shall be entitled to retain One Percent<br> (1%) of all gross revenue from the Spatial Domain Program, while VERSES shall retain the<br> remaining Ninety-Nine Percent (99%). |
As of December 31, 2024, no amounts are payable under the royalties agreement.
The Company is obligated to grant stock options (“Options”), deferred share units (“DSU”), or restricted stock units (“RSU”) to qualifying consultants and employees based on their respective contracts, to be determined at the grant date based on the market price of the Company’s shares. As at December 31, 2024, the outstanding commitment balance is nil (March 31, 2024 – 8,965,855) to be granted as options, RSUs or DSUs.
| 14 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
The Company has also entered into severance agreements with its executives. In the case of involuntary termination or a change in control, the executives are entitled to a monetary payment equal to 12 month’s worth of base salary, continuation for 12 months of medical and dental insurance, and immediate, accelerated vesting of all stock options, equity, and related compensation.
OUTSTANDINGSHARE CAPITAL
| As at | The date of this MD&A | December 31, 2024 | ||
|---|---|---|---|---|
| Shares issued to Class A Subordinate Voting Share shareholders | 191,487,490 | 177,414,585 |
OUTSTANDINGWARRANTS
| As at | The date of this MD&A | December 31, 2024 | |||
|---|---|---|---|---|---|
| Warrants | 47,829,720 | 41,896,888 | |||
| Special Warrants | (Note 1) | 3,600,000 | - | ||
| 51,429,720 | 41,896,888 | ||||
| (1) | Each<br> Special Warrant is exercisable, at no additional costs, for one unit of the Company (each,<br> an “Equity Unit”). Each Equity Unit consists of one Class A Subordinate Voting<br> share of the Company (a “Share”) and one-half of one Share purchase warrant (each<br> whole warrant, a “Warrant”). Each Warrant will entitle the holder thereof to<br> acquire one Share at an exercise price of CAD$0.70 per Share, subject to adjustment in certain<br> circumstances, for a period of 36 months from November 8, 2024. | ||||
| --- | --- |
OUTSTANDINGSTOCK OPTIONS
| As at | The date of this MD&A | December 31, 2024 | ||
|---|---|---|---|---|
| Stock options | 20,889,371 | 21,072,705 |
OUTSTANDINGRESTRICTED SHARE UNITS (“RSUs”)
| As at | The date of this MD&A | December 31, 2024 | |||
|---|---|---|---|---|---|
| RSUs | Note 1 | 20,921,667 | 20,921,667 |
Note:
| (1) | RSUs<br> are convertible into one Subordinate Voting Shares or payable in cash. |
|---|
TRANSACTIONSWITH RELATED PARTIES
The Company’s related parties consist of directors, executive officers, and companies owned in whole or in part by those individuals. Transactions are measured at the exchange amount, which is the amount agreed to by the parties.
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and senior officers.
| 15 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
The following salaries, fees, and expenses were incurred:
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Management fees | $ | 49,753 | $ | 12,500 | $ | 134,334 | $ | 12,500 |
| Management salaries and benefits included in personnel expenses | 347,051 | 305,929 | 1,117,687 | 1,033,436 | ||||
| Share-based payments (Note 8) | 302,201 | 486,509 | 626,013 | 920,566 | ||||
| $ | 699,005 | $ | 804,938 | $ | 1,878,034 | $ | 1,966,502 |
The following management members incurred in the salaries and management fees:
| Three months ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Management salaries, Chief Executive Officer and Founder | 112,811 | 99,445 | 423,433 | 367,574 | ||||
| Management salaries, President and Founder | 82,683 | 81,997 | 248,048 | 297,949 | ||||
| Management salaries, Chief Financial Officer | 67,129 | 66,605 | 240,004 | 195,905 | ||||
| Management salaries, Chief Operating Officer | 84,428 | 57,882 | 206,201 | 172,008 | ||||
| Management fees, Chair of the Board of Directors | 49,753 | 12,500 | 134,334 | 12,500 | ||||
| Total | $ | 396,804 | $ | 318,429 | $ | 1,252,021 | $ | 1,045,936 |
Included in accounts payable and accrued liabilities at December 31, 2024, were amounts totaling $22,500 (March 31, 2024 – $nil) due to the Chairman of the Company.
Included in due from related parties at December 31, 2024 were amounts totaling $2,352,142 (March 31, 2024 - $1,872,334) due from companies controlled by key management personnel. These amounts are unsecured and interest-free.
| - | $1,218,104<br> (March 31, 2024 - $954,150) was paid as pre-payment of royalties owing to Cyberlab, LLC (“Cyberlab”),<br> an entity controlled by Dan Mapes, President and a director of the Company. Such royalties<br> are payable and due upon the commercialization of spatial domains. This amount is unsecured<br> and interest-free. |
|---|---|
| - | $1,134,038<br> (March 31, 2024 - $918,184) was paid as advances to support the Spatial Web Foundation, an<br> entity controlled by Gabriel Rene, CEO and a director of the Company. The Spatial Web Foundation<br> is currently developing standards for the ethical interoperability between augmented and<br> virtual reality, which the Company considers essential for the proper development of Web<br> 3.0. This amount is unsecured and interest-free. |
| --- | --- |
Also included in the due from related parties is an unsecured loan of $67,305 (March 31, 2024 - $64,936) to a key member of the management team. The loan has an annual interest rate of 5% and requires principal and interest to be paid in full by May 1, 2033. No repayments were made in the period ending December 31, 2024.
| - | This<br> amount was advanced to Michael Wadden, Chief Commercial Officer of the Company, as a loan<br> to allow Mr. Wadden to discharge taxes owing in connection with equity compensation granted<br> by the Company. This loan is unsecured and has an annual interest rate of 5% and requires<br> principal and interest to be paid in full by May 1, 2033. No repayments were made in the<br> year ended March 31, 2024. |
|---|
| 16 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
On December 23, 2024, the Company granted 439,506 stock options to the Chief Financial Officer and 200,000 stock options to its Chief Operating Officer with an exercise price of CAD$1.13, expiring in 5 years, where 439,506 vested on the grant date and 200,000 will vest 25% within one year of the grant date, and 6.25% every subsequent quarter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date. The stock options were fair valued at $118,679, of which $30,831 (December 31, 2023 - $355,691) is recognized in the current period using the Black-Scholes option pricing model.
On September 13, 2024, 2,000,000 RSUs were granted to the Chairman of the Company, expiring in 10 years, where 33.33% will vest within 1 year of the vesting date, and 8.33% will vest every quarter thereafter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share. The Company used the Black-Scholes option pricing model to recognize $458,577 in the current period.
On July 3, 2024, the Company granted 100,000 stock options to the Chief Operating Officer and 50,000 to the Chief Financial Officer. The Options have an exercise price of CAD$1.07 and expire in 5 years. 25% of the options will vest within one year of the grant date and 6.25% every subsequent quarter. The stock options were fair valued at $89,352, of which $34,956 is recognized in the current period using the Black-Scholes option pricing model.
On July 3, 2024, the Company granted 50,000 RSUs to the Chief Financial Officer and 450,000 to the independent directors. The RSUs have no exercise price and expire in 10 years. They vest 33.33% within one year of the grant date and 33.33% yearly thereafter. The Company revalued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date. The Company recognized $172,705 as share-based payment for RSUs in the current period.
On December 15, 2023, the Company granted 50,000 stock options to its Chief Operating Officer with an exercise price of CAD$1.35. The options expire in 5 years, with 25% vesting within one year of the grant date and 6.25% every subsequent quarter. The stock options were fair valued at $38,203, of which $4,231 (December 31, 2023 - $19,883) is recognized in the current period using the Black-Scholes option pricing model.
On December 31, 2024, the RSUs granted to a director in the year ended March 31, 2023, were valued the RSUs based on the market price of one Subordinate Voting Share on the revaluation date, of which $75,287 is derecognized in the current period (December 31, 2023 - $353,392 was recognized).
On December 31, 2024, the stock options granted in prior periods to the directors and officers were recognized as an expense in the current period using the graded vesting method over the vesting period is $nil (December 31, 2023 - $211,483).
CRITICALACCOUNTING ESTIMATES
| ● | Equipment<br> – The Company reviews its estimate of the useful lives of depreciable assets at each<br> reporting date based on the expected utilization of the assets. Uncertainties in these estimates<br> relate to technical obsolescence that may change the utilization of equipment. |
|---|---|
| ● | Recoverability<br> of accounts receivable, contracts assets, unbilled revenues, and allowance for credit loss<br> – The Company provides an allowance for the expected credit losses based on an assessment<br> of the recoverability of accounts receivable. Allowances are applied to accounts receivable<br> at initial recognition based on the probability of default by the customers. Management analyzes<br> historical bad debts, customer concentrations, customer creditworthiness, current economic<br> trends, and changes in customer payment terms when making a judgment to evaluate the adequacy<br> of the allowance for expected credit losses. Where the expectation is different from the<br> original estimate, such difference will impact the carrying value of accounts receivable. |
| --- | --- |
| 17 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- | | ● | Share-based<br> payments – The fair value of stock options granted and compensatory warrants are measured<br> using the Black-Scholes option pricing model. Measurement inputs include share price on the<br> measurement date, exercise price of the option, expected volatility, expected life of the<br> options, expected dividends, and the risk-free rate. The Company estimates volatility based<br> on its historical share price or historical share price of comparable companies, excluding<br> specific time frames in which volatility was affected by specific transactions that are not<br> considered to be indicative of the entities’ expected share price volatility. The expected<br> life of the options and warrants is based on historical experience and general option holder<br> behavior. Dividends were not taken into consideration as the Company does not expect to pay<br> dividends. | | --- | --- | | ● | Convertible<br> debenture – The convertible debenture included an option which can be settled in the<br> Company’s Subordinate Voting Shares. Therefore, the value of the convertible debenture<br> was separated into its liability and derivative components on the consolidated statements<br> of financial position. The liability component is initially recognized at fair value, calculated<br> at the net present value of the Convertible debenture, and the derivative component is fair<br> valued based on the Monte Carlo simulation model and estimations are provided by the management.<br> The effective interest rate used is the estimated rate for non-convertible debt with similar<br> terms at the time of issue. | | --- | --- | | ● | Income<br> tax – Income tax expense is comprised of current and deferred tax. Income tax is recognized<br> in profit or loss except to the extent that it relates to items recognized directly in equity.<br> Current tax expense is the expected tax payable on taxable income for the year, using tax<br> rates enacted or substantively enacted at period end, adjusted for amendments to tax payable<br> with regards to previous years. | | --- | --- |
FINANCIALINSTRUMENTS
As of December 31, 2024, the Company’s financial instruments consist of cash and restricted cash, accounts receivable, due from related parties, accounts payable and accrued liabilities, restricted share unit liability, provision for legal claim, convertible debenture, and loans payable.
IFRS 13 Fair Value Measurement establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. IFRS 13 prioritizes the inputs into three levels that may be used to measure fair value:
● Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities.
● Level 2 – Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs (i.e., quoted prices for similar assets or liabilities).
● Level 3 – Prices or valuation techniques that are not based on observable market data and require inputs that are both significant to the fair value measurement and unobservable.
The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.
| 18 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
The fair value of cash and restricted cash, accounts receivable, due from related parties, accounts payable and accrued liabilities, promissory notes, provision for legal claim, and loans payable are measured using Level 1 inputs, the fair value of restricted share unit liability and convertible debentures are measured using Level 2 and Level 3 inputs.
The carrying value of the Company’s other financial instruments approximate their fair values due to their short-term maturities.
There were no transfers between the levels of the fair value hierarchy during the period.
| As of December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Assets: | ||||||||
| Cash and restricted cash | $ | 876,951 | $ | - | $ | - | $ | 876,951 |
| Due from related parties | $ | 2,419,447 | $ | - | $ | - | $ | 2,419,447 |
| Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 3,161,013 | $ | - | $ | - | $ | 3,161,013 |
| Convertible debenture | $ | - | $ | 5,189,704 | $ | 5,722,835 | $ | 10,912,539 |
| Provision for legal claim | $ | 6,182,258 | $ | - | $ | - | $ | 6,182,258 |
| Restricted share unit liability | $ | - | $ | 6,962,912 | $ | - | $ | 6,962,912 |
| Loans payable | $ | 139,029 | $ | - | $ | - | $ | 139,029 |
| As of March 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets: | ||||||||
| Cash | $ | 892,727 | $ | - | $ | - | $ | 892,727 |
| Accounts receivable | $ | 100,000 | $ | - | $ | - | $ | 100,000 |
| Due from related parties | $ | 1,937,270 | $ | - | $ | - | $ | 1,937,270 |
| Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 2,865,002 | $ | - | $ | - | $ | 2,865,002 |
| Promissory notes | $ | 2,000,000 | $ | - | $ | - | $ | 2,000,000 |
| Provision for legal claim | $ | 6,307,258 | $ | - | $ | - | $ | 6,307,258 |
| Restricted share unit liability | $ | - | $ | 576,214 | $ | - | $ | 576,214 |
| Loans payable | $ | 140,904 | $ | - | $ | - | $ | 140,904 |
Creditrisk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The financial instrument that potentially subjects the Company to concentrations of credit risk consists principally of cash, accounts receivable, and due from related parties. To minimize the credit risk, the Company places its cash with large financial institutions.
Amounts due from related parties of $2,419,447 (March 31, 2024 - $1,937,270) are due from companies controlled by key management personnel. These amounts are expected to be settled through future service agreements, and as such, credit risk is assessed as low. As of December 31, 2024, management assessed that there is no need to provide a credit loss allowance.
| 19 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
Liquidityrisk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations, cash holdings, and anticipated future financing transactions.
Contractual cash flow requirements as of December 31, 2024, were as follows:
| <1 year | 1-2 years | 2-5 years | >5 years | Total | |
|---|---|---|---|---|---|
| Accounts payable and accrued liabilities | |||||
| Convertible debenture | |||||
| Loans payable | |||||
| Total |
All values are in US Dollars.
As of December 31, 2024, the Company had a working capital deficit of $23,697,120 (March 31, 2024 - $7,270,243).
Foreignexchange risk
Foreign exchange risk is the risk that the fair value or future cash flows will fluctuate due to changes in foreign exchange rates. The Company has financial assets denoted in Euros and Canadian dollars and is therefore exposed to exchange rate fluctuations. As of December 31, 2024, the Company had the equivalent of $18,162,147 (March 31, 2024 - $552,476) net financial liabilities denominated in Canadian dollars and $158,057 (March 31, 2024 - $117,648) in net financial assets denominated in Euros.
Interestrate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The interest earned on cash balances approximate fair value rates, and the Company is not subject to significant risk due to fluctuating interest rates. As of December 31, 2024, the Company does not hold any liabilities that are subject to fluctuations in market interest rates.
Pricerisk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or currency risk. The Company is not exposed to other price risks.
SIGNIFICANTPROJECTS NOT GENERATING REVENUE
The Company launched a private beta program of Genius (including Genius Agents and Genius Core) in early 2024 with ten partners, all of whom the Company had an existing business relationship with. The Company has launched the public beta program for a broader number of developers for the second half of 2024. This public beta program is expected to include enhanced functionalities and is intended to help the Company increase its potential customer base, while refining its product offerings in anticipation of the full launch of Genius.
| 20 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
MANAGEMENT’SRESPONSIBILITY FOR FINANCIAL STATEMENTS
The information included in the consolidated financial statement and this MD&A is the responsibility of management, and their preparation requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amount of expenses during the reported period. Actual results could differ from those estimates.
RELIANCEON KEY PERSONNEL
The success of the Company will be largely dependent upon the performance of its management and key employees and contractors. In assessing the risk of an investment in the shares of the Company, potential investors should realize that they are relying on the experience, judgment, discretion, integrity and good faith of the proposed management of the Company.
CONFLICTSOF INTEREST
Certain directors and officers of the Company will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies. As a result of these and other activities, such directors and officers of the Company may become subject to conflicts of interest. The BCBCA provides that in the event that a director or senior officer has a material interest in a contract or proposed contract or agreement that is material to the issuer, the director or senior officer must disclose his or her interest in such contract or agreement and a director must refrain from voting on any matter in respect of such contract or agreement, subject to and in accordance with the BCBCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the BCBCA. To the knowledge of the management of the Company, as at the date of this MD&A, there are no existing or potential material conflicts of interest between the Company and a director or officer of the Company, except as otherwise disclosed in this MD&A.
DIVIDENDS
To date, the Company has not paid any dividends on its outstanding Subordinate Voting Shares. Any decision to pay dividends on the shares of the Company will be made by the Board of Directors on the basis of the Company’s earnings, financial requirements and other conditions.
LIMITEDOPERATING HISTORY
The Company was incorporated in November 2020 and has yet to generate a profit from its activities. The Company will be subject to all of the business risks and uncertainties associated with any business enterprise, including the risk that it will not achieve its growth objective. The Company anticipates that it may take several years to achieve positive cash flow from operations. There is no certainty that the Company will produce revenue, operate profitably or provide a return on investment in the future.
OTHERRISK FACTORS
The Company is subject to a number of other risks and uncertainties and is affected by several factors which could have a material adverse effect on the Company’s business, financial condition, operating results, and/or future prospects. These risks should be considered when evaluating an investment in the Company and may, among other things, cause a decline in the price of the Company’s securities. The risks and uncertainties which management considered the most material to the Company’s business are described in the section entitled, “RISK FACTORS” of the Company’s Annual Information Form filed on SEDAR on July 2, 2024.
| 21 |
| --- | | VERSES AI INC.<br><br> <br>Management’s Discussion and Analysis<br><br> <br>As of February 14, 2025 | | --- |
DISCLOSURECONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
Disclosure controls and procedures (“DC&P”) are intended to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported within the time periods specified by securities regulations and that the information required to be disclosed is accumulated and communicated to management. Internal controls over financial reporting (“ICFR”) are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. In connection with National Instrument 52-109 (Certificate of Disclosure in Issuer’s Annual and Interim Filings) (“NI 52-109”), the Chief Executive Officer and Chief Financial Officer of the Company have each delivered a certificate in form provided for in 52-109F2 - Certification of Interim Filings with respect to the Company’s DC&P and ICFR and the financial information contained in the consolidated financial statements for the period ended December 31, 2024 and this accompanying MD&A.
Changes in internal control over financial reporting
Since adoption on November 1, 2021, and during the period beginning on April 1, 2024, and ended on December 31, 2024, there have been no changes in the Company’s ICFR that have materially affected, or is reasonably likely to materially affect, the Company’s ICFR.
ADDITIONALINFORMATION
Additional information about the Company, including the financial statements, is available on the Company’s website at https://www.verses.ai and on SEDAR+ at www.sedarplus.ca.
| 22 |
| --- |
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings Full Certificate
I, GABRIEL RENE, Chief Executive Officer of Verses AI Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the<br> “interim filings”) of Verses AI Inc. (the “issuer”) for the<br> interim period ended December 31, 2024. |
|---|
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence,<br> the interim filings do not contain any untrue statement of a material fact or omit to state<br> a material fact required to be stated or that is necessary to make a statement not misleading<br> in light of the circumstances under which it was made, with respect to the period covered<br> by the interim filings. |
|---|---|
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim<br> financial report together with the other financial information included in the interim filings<br> fairly present in all material respects the financial condition, financial performance and<br> cash flows of the issuer, as of the date of and for the periods presented in the interim<br> filings. |
| --- | --- |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing<br> and maintaining disclosure controls and procedures (DC&P) and internal control over financial<br> reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| --- | --- |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s<br> other certifying<br>officer(s) and I have, as at the end of the period covered by the interim filings |
| --- | --- |
| (a) | designed<br> DC&P, or caused it to be designed under our supervision, to provide reasonable assurance<br> that |
| --- | --- |
| (i) | material<br> information relating to the issuer is made known to us by others, particularly during the<br> period in which the interim filings are being prepared; and |
| --- | --- |
| (ii) | information<br> required to be disclosed by the issuer in its annual filings, interim filings or other reports<br> filed or submitted by it under securities legislation is recorded, processed, summarized<br> and reported within the time periods specified in securities legislation; and |
| --- | --- |
| (b) | designed<br> ICFR, or caused it to be designed under our supervision, to provide reasonable assurance<br> regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with the issuer’s GAAP. |
| --- | --- |
| - 2 - |
| --- | | 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and<br> I used to design the issuer’s ICFR is Internal Control – Integrated Framework<br> (2013 Framework) published by the Committee of Sponsoring Organizations of the Treadway Commission<br> (COSO). | | --- | --- | | 5.2 | N/A | | --- | --- | | 5.3 | N/A | | --- | --- |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the<br> issuer’s ICFR that occurred during the period beginning on October 1, 2024 and ended<br> on December 31, 2024 that has materially affected, or is reasonably likely to materially<br> affect, the issuer’s ICFR. |
|---|
Date: February 14, 2025
| “Gabriel<br>Rene” |
|---|
| GABRIEL RENE |
| Chief<br>Executive Officer |
Exhibit99.5
Form 52-109F2
Certification of Interim Filings Full
Certificate
I, KEVIN WILSON, Chief Financial Officer of Verses AI Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the<br> “interim filings”) of Verses AI Inc. (the “issuer”) for the<br> interim period ended December 31, 2024. |
|---|
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence,<br> the interim filings do not contain any untrue statement of a material fact or omit to state<br> a material fact required to be stated or that is necessary to make a statement not misleading<br> in light of the circumstances under which it was made,<br> with respect to the period covered by the interim filings. |
|---|---|
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim<br> financial<br> report together with the other financial information included in the interim filings fairly<br> present<br> in all material respects the financial condition, financial performance and cash flows of<br> the issuer,<br> as of the date of and for the periods presented in the interim filings. |
| --- | --- |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing<br> and maintaining disclosure<br> controls and procedures (DC&P) and internal control over financial reporting (ICFR),<br> as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,<br> for the issuer. |
| --- | --- |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s<br> other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| --- | --- |
| (a) | designed<br> DC&P, or caused it to be designed under our supervision, to provide reasonable assurance<br> that |
| --- | --- |
| (i) | material<br> information relating to the issuer is made known to us by others, particularly<br> during the period in which the interim filings are being prepared; and |
| --- | --- |
| (ii) | information<br> required to be disclosed by the issuer in its annual filings, interim filings or<br> other reports filed or submitted by it under securities legislation is recorded, processed,<br> summarized and reported within the time periods specified in securities legislation; and |
| --- | --- |
| (b) | designed<br> ICFR, or caused it to be designed under our supervision, to provide reasonable assurance<br> regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with the issuer’s GAAP. |
| --- | --- |
| - 2 - |
| --- | | 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and<br> I used to design the issuer’s ICFR is Internal<br> Control – Integrated Framework (2013 Framework) published by the Committee of<br> Sponsoring Organizations of the Treadway Commission (COSO). | | --- | --- | | 5.2 | N/A | | --- | --- | | 5.3 | N/A | | --- | --- |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the<br> issuer’s ICFR that<br> occurred during the period beginning on October 1, 2024 and ended on December 31,<br> 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s<br> ICFR. |
|---|---|
| Date: February 14, 2025 | |
| --- | |
| “Kevin Wilson” | |
| KEVIN WILSON | |
| Chief Financial Officer |