VERSES AI (VRSSF) Risk Analysis

Certain of the Company's directors and officers do not devote their full time to the affairs of the Company and certain of the Company's directors and officers are also directors, officers and shareholders of other public companies in general, and as a result they may find themselves in a position where their duty to another company conflicts with their duty to the Company. Although the Company has policies which address such potential conflicts and the BCBCA has provisions governing directors in the event of such a conflict, none of the Company's constating documents or any of its other agreements contain any provisions mandating a procedure for addressing such conflicts of interest. There is no assurance that any such conflicts will be resolved in favor of the Company. If any such conflicts are not resolved in favor of the Company, the Company may be adversely affected.

Prior to April 1, 2025, the Company was a "foreign private issuer" under applicable U.S. federal securities laws and, as a result, the Company did not up until April 1, 2025 have to file the same reports that a U.S. domestic issuer files with the SEC under the Exchange Act. As a foreign private issuer, the Company was previously permitted to file with or furnish to the SEC the continuous disclosure documents that the Company was required to file in Canada under Canadian securities laws, with certain limited additional information. In addition, the Company's officers, directors and principal shareholders were exempt from the insider reporting and "short swing" profit recovery provisions of Section 16 of the Exchange Act. In addition, as a foreign private issuer, the Company was previously exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements. Furthermore, the Company was not required to publish financial statements as promptly as United States companies, could prepare its financial statements under IFRS rather than U.S. generally accepted accounting principles, and such financial statements were audited under Canadian generally accepted auditing standards. The Company lost its "foreign private issuer" status on April 1, 2025 and is now considered a U.S. domestic issuer Consequently, we are no longer eligible to file foreign issuer forms with the SEC and are now required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. The Company is also required to file its financial statement in accordance with U.S. generally accepted accounting principles, and such Company financial statements must be audited under U.S. generally accepted auditing standards. The regulatory and compliance costs to the Company under U.S. federal securities laws as a U.S. domestic issuer are expected to be significantly more than the costs the Company incurred as a foreign private issuer eligible to take advantage of the reduced disclosure requirements under the Exchange Act applicable to foreign private issuers.

You should consider an investment in our Subordinate Voting Shares to be risky, and you should invest in our Subordinate Voting Shares only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our Subordinate Voting Shares to fluctuate, in addition to the other risks mentioned in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K, are: - sale of our Subordinate Voting Shares by our shareholders, executives, and directors;         - volatility and limitations in trading volumes of our Subordinate Voting Shares;- our ability to obtain financings to conduct our business activities;         - the timing and success of introductions of new and/or enhanced products and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors;         - our ability to attract new customers;         - changes in our capital structure or dividend policy, future issuances of securities and sales of large blocks of Subordinate Voting Shares by our shareholders;- our cash position;         - announcements and events surrounding financing efforts, including debt and equity securities;         - our inability to enter new markets or develop new and/or enhanced and services products;         - reputational issues;         - announcements of acquisitions, partnerships, collaborations, joint ventures, new products and/or services, capital commitments, or other events by us or our competitors;         - changes in general economic, political and market conditions in or any of the regions in which we conduct our business;         - changes in industry conditions or perceptions;         - analyst research reports, recommendations and changes in recommendations, price targets, and withdrawals of coverage;         - departures and additions of key personnel;- disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations;         - changes in applicable laws, rules, regulations, or accounting practices and other dynamics;- actual or anticipated fluctuations in our operating results;         - changes in market valuations of other similar companies; and         - other events or factors, many of which may be out of our control, including, but not limited to, pandemics, war, or other acts of God. In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our Subordinate Voting Shares could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

We expect that significant additional capital will be needed in the future to continue our planned operations, including continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our shareholders may experience substantial dilution. We may sell Subordinate Voting Shares, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell Subordinate Voting Shares, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders, and new investors could gain rights superior to our existing shareholders.

We are a "smaller reporting company" as defined in Rule 12b-2 under the Exchange Act. We would cease to be a smaller reporting company if (i) we have a public float of $250 million or more and have annual revenues in excess of $100 million or (ii) if we have a public float of $700 million or more, determined on an annual basis. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include: - not being required to furnish a stock performance graph in our annual report;         - reduced disclosure obligations regarding executive compensation;         - being permitted to provide only two years of audited financial statements in our Annual Report on Form 10-K, with corresponding reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure; and         - not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict whether investors will find our Subordinate Voting Shares less attractive as a result of any reliance by us on these exemptions. If some investors find our Subordinate Voting Shares less attractive as a result, there may be a less active trading market for our Subordinate Voting Shares and our stock price may be more volatile.

Our stock is traded on the OTCQB in the United States and  Cboe Canada Inc. ("Cboe") in Canada. The OTCQB and Cboe are significantly more limited markets than national securities exchanges in the United States such as the New York Stock Exchange, or Nasdaq and there are lower financial or qualitative standards that a company must meet to be listed on the OTCQB and Cboe. Trading in our Subordinate Voting Shares on each of the OTCQB and Cboe may be subject to abuses, volatility and shorting, which may have little to do with our operations or business prospects. This volatility could depress the market price of our Subordinate Voting Shares for reasons unrelated to operating performance. The Financial Industry Regulatory Authority ("FINRA"), which has jurisdiction over the OTCQB, has adopted rules that require a broker-dealer to have reasonable grounds for believing an investment is suitable for that customer when recommending an investment to a customer. FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for some customers and may make it more difficult for broker-dealers to recommend that their customers buy our Subordinate Voting Shares, which may result in a limited ability to buy and sell our shares. An active trading market for our Subordinate Voting Shares has not developed, and may not develop, on the OTCQB or Cboe. A limited trading volume may prevent our shareholders from selling shares at such times or in such amounts as they may otherwise desire.