8-K/A: VERSES AI Inc. Amends 8-K Filing to Incorporate Original Report and Updates on Litigation

VERSES AI Inc. files an amendment to its original 8-K report to incorporate it by reference into a registration statement and provides updates on ongoing litigation and changes to its omnibus incentive plan.

Summary

• VERSES AI Inc. filed an amendment to its original Form 8-K to incorporate it by reference into the company's Registration Statement on Form F-10.
• The amendment includes an update relating to litigation and other matters, originally filed on SEDAR+ on April 14, 2025.
• The company is involved in several legal proceedings, including a claim filed in 2022 by a former independent contractor, David Thomson, against one of its U.S. subsidiaries, VERSES Technologies USA, Inc. (VTU).
• An arbitration award was issued on May 17, 2024, imposing liability against VTU and Cyberlab, LLC for US$6,307,258, and against Cyberlab, VTU, and its principals for damages, interest, costs, and plaintiff's counsel fees totaling US$3,594,507.
• VTU is pursuing resolution negotiations, but the outcome is not reasonably foreseeable at this time.
• During the quarter ended June 30, 2024, the Company recorded a net comprehensive loss of US$10,337,383 which is US$5,331,168 lower than previous quarter mainly due to a provision for the arbitration award against VTU for US$6,307,258.
• A former employee filed a complaint in June 2024 against VERSES, Inc. (VINC) alleging gender and race harassment, discrimination, retaliation, and wrongful termination, seeking US$3,500,000 in damages.
• VINC filed an answer and moved to compel arbitration, but the motion was denied based on the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
• The company also provided updated disclosure regarding its omnibus equity incentive plan, clarifying the treatment of options, RSUs, PSUs, and DSUs upon termination, resignation, disability, death, or retirement.

Sentiment

Score: 3

Explanation: The document highlights several negative factors, including significant legal liabilities and ongoing litigation, which negatively impact investor sentiment.

Positives

• VTU is pursuing resolution negotiations regarding the arbitration award.
• The company disputes the allegations made by the former employee and is prepared to defend itself.
• The company is providing updated disclosure regarding its omnibus equity incentive plan.

Negatives

• VTU faces a significant arbitration award of US$6,307,258, inclusive of interest.
• Cyberlab, VTU, and its principals face an additional US$3,594,507 in damages, interest, costs, and plaintiff's counsel fees related to the arbitration.
• VERSES, Inc. (VINC) is facing a lawsuit from a former employee seeking US$3,500,000 in damages.
• The court denied VINC's motion to compel arbitration in the employment lawsuit.

Risks

• The outcome of the VTU arbitration resolution negotiations is uncertain.
• The company may incur significant expenses related to the ongoing litigation.
• The litigation could divert management's attention and resources.
• The results of the legal actions may have a material adverse effect on the company's business, operating results, or financial condition.
• There is no assurance that Mr. Thomson will not seek all or a portion of the arbitration award from the Company, or that some or all of the arbitration award could ultimately be determined to be the responsibility of the Company.
• The outcome of the employment lawsuit is uncertain, and the extent to which an outflow of funds may be required to settle this possible obligation cannot be reliably determined.

Future Outlook

VTU is pursuing resolution negotiations regarding the arbitration award, but the likelihood of a favorable or unfavorable outcome, or an estimate of the amount or range of potential loss, which is isolated to VTU, is not reasonably foreseeable at this time. The outcome of the employment lawsuit is also uncertain.

Industry Context

Companies in various sectors often face litigation and employment-related claims. The disclosure of these matters is a standard practice to inform investors about potential financial and operational risks. Changes to equity incentive plans are also common to align with company performance and employee retention goals.

Comparison to Industry Standards

• The legal challenges faced by VERSES AI are not uncommon in the tech industry, where intellectual property disputes and employment-related claims are frequent.
• For example, companies like Google and Microsoft regularly engage in litigation related to patents and antitrust matters.
• Similarly, employment lawsuits are a common occurrence for companies of all sizes, as seen with cases involving companies like Uber and Tesla.
• The size of the arbitration award against VTU is significant but not unprecedented, with some companies facing much larger settlements in legal disputes.
• The changes to the omnibus incentive plan are in line with industry practices, as companies often adjust their equity compensation plans to remain competitive and align with shareholder interests.
• Comparable companies such as C3.ai and DataRobot also utilize equity incentive plans to attract and retain talent.

Corporate Governance

Legal Proceedings

• VERSES AI Inc. and/or its directors and officers may be subject to a variety of civil or other legal proceedings, with or without merit.
• On July 13, 2022, David Thomson, a former independent contractor, filed a claim against one of the Company’s U.S. subsidiaries, VERSES Technologies USA, Inc. (VTU), Cyberlab LLC, as well as a director and officer of VTU in Los Angeles Superior Court.
• A final arbitration award was issued on May 17, 2024, imposing liability against: (i) VTU, jointly and severally with Cyberlab, LLC, in the amount of US$6,307,258, inclusive of interest; and (ii) Cyberlab, VTU and its principals, Gabriel Ren and Dan Mapes, jointly and severally, for damages in the amount of US$1,900,000, interest of US$709,973, costs of US$64,303 and the fees of plaintiffs counsel totaling US$920,231.
• On August 10, 2024, the Company learned that a complaint (the Complaint) had been filed in the Los Angeles Superior Court on June 21, 2024 by a former employee (the Complainant) against one of the Company’s US subsidiaries (VERSES, Inc. or VINC) and one of its employees in their individual capacity.

Stakeholder Impact

• Shareholders may be concerned about the potential financial impact of the ongoing litigation.
• Employees may be affected by the changes to the omnibus equity incentive plan.
• The company's reputation could be impacted by the legal proceedings.

Next Steps

• VTU will continue resolution negotiations regarding the arbitration award.
• VINC will defend itself in the employment lawsuit.
• The company will respond to discovery requests in the employment lawsuit.
• The Court will issue a final ruling on VINCs motion to compel arbitration.

Key Dates

Keywords

litigation, arbitration, VERSES AI, Form 8-K, incentive plan, legal proceedings, employment law, securities, financials