F-10: VERSES AI Inc. Files for US$100 Million Shelf Prospectus, Offering Subordinate Voting Shares, Warrants, Units, and Subscription Receipts

VERSES AI Inc. has filed a short form base shelf prospectus to offer up to US$100 million in securities, including subordinate voting shares, warrants, units, and subscription receipts.

Summary

• VERSES AI Inc. has filed a short form base shelf prospectus with securities regulatory authorities in Canada for the potential sale of up to US$100 million in securities.
• The securities that may be offered include Class A Subordinate Voting shares, warrants to purchase Subordinate Voting Shares, units comprising Subordinate Voting Shares and Warrants, and subscription receipts exercisable for Subordinate Voting Shares, Warrants or Units.
• The securities may be offered in amounts, at prices, and on terms to be determined based on market conditions at the time of sale and set forth in a shelf prospectus supplement.
• Selling securityholders of the Company may also offer and sell securities under this Prospectus.
• The securities may be offered and issued in consideration for the acquisition of other businesses, assets or securities by the Company or a subsidiary of the Company.
• The outstanding Subordinate Voting Shares are listed for trading on Cboe Canada Inc. under the symbol VERS and are quoted on the OTCQB Venture Market under the symbol VRSSF.
• On September 20, 2024, the closing price of the Subordinate Voting Shares on Cboe Canada was $0.80 and the closing price of the Subordinate Voting Shares on the OTCQB was US$0.58.
• The Warrants, the Units, and the Subscription Receipts will not be listed on any securities or stock exchange or on any automated dealer quotation system.
• The Company will raise a minimum offering under the first prospectus supplement, the net proceeds of which combined with the Company's working capital will be sufficient to meet the Company's current objectives and short-term liquidity requirements for at least 12 months from the date of such Prospectus Supplement.
• The Company is a foreign private issuer under United States securities laws and is permitted under the multijurisdictional disclosure system adopted by the United States and Canada to prepare this Prospectus in accordance with Canadian disclosure requirements.

Sentiment

Score: 6

Explanation: The sentiment is neutral. The document is a regulatory filing for a potential future offering, which provides financial flexibility but also indicates a need for capital. The company's stock is already publicly traded, but the lack of listing for other securities and the speculative nature of the investment temper the outlook.

Positives

• The shelf prospectus provides VERSES AI Inc. with flexibility to raise capital as needed over a 25-month period.
• The company intends to raise a minimum offering under the first Prospectus Supplement which, when combined with the Company's working capital, will be sufficient to meet the Company's current objectives and short-term liquidity requirements for at least 12 months.
• Listing on Cboe Canada and OTCQB provides existing liquidity for the Subordinate Voting Shares.

Negatives

• The Warrants, Units, and Subscription Receipts will not be listed on any exchange, potentially limiting liquidity for investors.
• An investment in the Securities being offered is highly speculative and involves significant risks.
• The Company has had negative cash flow from operating activities since inception.
• The Annual Financial Statements include a going-concern note.

Risks

• The prospectus highlights that an investment in the securities is highly speculative and involves significant risks.
• The company has a limited operating history and has experienced negative cash flow from operating activities since inception.
• The company may require additional funding to maintain operations.
• The company's success depends on the implementation of its growth strategy.
• The company relies on strategic partnerships.
• The company is subject to potential security breaches and software errors.
• The company may face challenges in protecting its intellectual property.
• The company is dependent on management and key personnel.
• The company is subject to government regulation and potential legal proceedings.
• The company may face risks associated with future acquisitions.
• The company may not be able to maintain effective internal controls.
• There may not be an active or liquid market for the Subordinate Voting Shares.
• The market price of the Subordinate Voting Shares may not represent the company's performance or intrinsic value.
• The company's securities may be subject to future dilution.
• The company may not pay dividends in the future.
• The company's use of proceeds is subject to management's discretion.
• The company's forward-looking statements may prove inaccurate.

Future Outlook

The Company intends to use the net proceeds from the sale of the Securities to advance the Company's business objectives, to fund ongoing operations and/or working capital requirements, to repay indebtedness outstanding from time to time, and to fund discretionary capital programs and potential future acquisitions.

Industry Context

This announcement is typical for companies seeking flexible access to capital markets. The shelf prospectus allows VERSES AI Inc. to issue securities over time, taking advantage of favorable market conditions or funding needs as they arise. This approach is common among growth-oriented companies in the technology sector.

Comparison to Industry Standards

• Comparable companies, such as those in the AI and software sectors, often utilize shelf prospectuses to maintain financial flexibility.
• The size of the offering, US$100 million, is within the typical range for companies of VERSES AI Inc.'s size and stage of development.
• The specific terms of any offering, such as pricing and warrant coverage, will be determined by market conditions at the time of issuance, aligning with industry best practices.

Management Changes

Legal Proceedings

• On July 13, 2022, David Thomson, a former independent contractor, filed a claim against VTU, Cyberlab LLC, and a director and officer of VTU in Los Angeles Superior Court.
• A final arbitration award was issued on May 17, 2024. The final award imposes 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 May 24, 2023, Cosm, Inc. (Cosm) filed a trademark opposition claim against the Company with the United States Trademark Trial and Appeal Board.
• On August 10, 2024, the Company learned ccomplaint (the Complaint) had been filed in the Los Angeles Superior Court on June 21, 2024 against one of the Companys US subsidiaries by a former employee who had been terminated for poor work performance.

Stakeholder Impact

• Shareholders: Potential dilution from the issuance of new securities.
• Investors: Opportunity to invest in VERSES AI Inc., but with significant risks.
• Employees: Continued funding for operations and potential growth.
• Customers: Continued development and support for Genius and related applications.

Next Steps

• VERSES AI Inc. will determine the specific terms of any securities offering based on market conditions.
• The company will file a prospectus supplement with details of each offering.
• The company intends to use the net proceeds from the sale of the Securities to advance the Company's business objectives, to fund ongoing operations and/or working capital requirements, to repay indebtedness outstanding from time to time, and to fund discretionary capital programs and potential future acquisitions.

Key Dates

Keywords

shelf prospectus, securities, subordinate voting shares, warrants, units, subscription receipts, capital raise, verses ai, offering