FINANCIAL INSTRUMENTS

12 Months Ended

Mar. 31, 2025

Investments, All Other Investments [Abstract]

FINANCIAL INSTRUMENTS

17. FINANCIAL INSTRUMENTS

As of March 31, 2025, the Company’s financial instruments consist of cash and restricted cash, accounts receivable, accounts payable and accrued liabilities, restricted share unit liability, provision for legal claim, convertible debenture, and loans payable.

In accordance with ASC 820, Fair Value Measurement, the Company categorizes financial assets and liabilities measured at fair value into a three-level hierarchy based on the inputs used in the valuation techniques. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3).

The levels of the fair value hierarchy are defined as follows:

	●	Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

	●	Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active or inactive markets.

	●	Level 3 – Unobservable inputs for the asset or liability, which are used to measure fair value to the extent that observable inputs are not available, and which are significant to the overall fair value measurement.

VERSES AI INC.

Notes to the Consolidated Financial Statements

For the years ended March 31, 2025 and 2024

(Expressed in United States dollars)

17. FINANCIAL INSTRUMENTS (continued)

SCHEDULE OF FAIR VALUE HIERARCHY

As of March 31, 2025		Level 1				Level 2				Level 3				Total
Assets:
Cash and restricted cash		$	4,816,906			$	-			$	-			$	4,816,906
Due from related parties		$	68,080			$	-			$	-			$	68,080
Liabilities:
Accounts payable		$	2,036,916			$	-			$	-			$	2,036,916
Accrued liabilities		$	41,736			$	-			$	-			$	41,736
Provision for legal claim		$	8,948,085			$	-			$	-			$	8,948,085
Restricted share unit liability		$	-			$	3,911,823			$	-			$	3,911,823
Loans payable		$	139,039			$	-			$	-			$	139,039

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		$	64,936			$	-			$	-			$	64,936
Liabilities:
Accounts payable		$	2,782,502			$	-			$	-			$	2,782,502
Accrued liabilities		$	82,500			$	-			$	-			$	82,500
Promissory notes		$	2,000,000			$	-			$	-			$	2,000,000
Provision for legal claim		$	9,921,298			$	-			$	-			$	9,921,298
Restricted share unit liability		$	-			$	576,214			$	-			$	576,214
Loans payable		$	140,904			$	-			$	-			$	140,904

VERSES AI INC.

Notes to the Consolidated Financial Statements

For the years ended March 31, 2025 and 2024

(Expressed in United States dollars)

17. FINANCIAL INSTRUMENTS (continued)

Credit risk

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 $68,080 as of March 31, 2025 (March 31, 2024 - $64,934) represent receivables from an unsecured loan 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 (Note 9).

As of March 31, 2025, management assessed that there is no need to provide a credit loss allowance.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s operations on an ongoing basis. The Company strives to ensure 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 March 31, 2025, were as follows:

			Less than 1 year				1 to 2 years				2 to 5 years				After 5 years				Total
		<1 year $				1-2 years $				2-5 years $				>5 years $				Total $
Accounts payable			2,036,916				-				-				-				2,036,916
Accrued liabilities			41,736				-				-				-				41,736
Loans payable			7,752				7,752				23,256				15,067,532				15,106,292
Total			2,086,404				7,752				23,256				15,067,532				17,184,944

As of March 31, 2025, the Company had a working capital deficit of $8,923,210 (March 31, 2024 - $ 11,867,403).

Foreign exchange 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 denominated in Euros and Canadian dollars and is therefore exposed to exchange rate fluctuations. As of March 31, 2025, the Company had the equivalent of $223,534 (March 31, 2024 - $552,476) net financial liabilities denominated in Canadian dollars and $104,416 (March 31, 2024 - $117,648) in net financial assets denominated in Euros.

VERSES AI INC.

Notes to the Consolidated Financial Statements

For the years ended March 31, 2025 and 2024

(Expressed in United States dollars)

17.

FINANCIAL INSTRUMENTS (continued)

The foreign exchange risk exposure of the Company financial instruments as at March 31, 2025 is as below:


										+/- 10% fluctuation
		Currency								Increase/(decrease)
Financial Instrument Type		CAD$				$				$ impact
Cash			5,445,994				3,788,233				378,823				(378,823	)
Tax receivable			870,173				605,293				60,529				(60,529	)
Prepaid expenses			408,202				283,946				28,395				(28,395	)
Accounts payable			(1,362,055	)			(947,445	)			(94,745	)			94,745
Accrued liabilities			(60,000	)			(41,736	)			(4,174	)			4,174
Restricted share unit liability			(5,623,668	)			(3,911,824	)			(391,182	)			391,182
			(321,354	)			(223,534	)			(22,354	)			22,354


										+/- 10% fluctuation
		Currency								Increase/(decrease)
Financial Instrument Type		EURO				$				$ impact
Restricted cash			113,701				122,740				12,274				(12,274	)
Tax receivable			(352	)			(380	)			(38	)			38
Accounts payable			(16,622	)			(17,944	)			(1,794	)			1,794
Deferred Grant			(62,615	)			(67,732	)			(6,773	)			6,773
			34,111				104,416				3,668				(3,668	)

Interest rate 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 March 31, 2025, the Company does not hold any liabilities that are subject to fluctuations in market interest rates.

Price risk

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.