ROZE AI INC. 424B4final IPO prospectus

Executive Summary

Roze AI sells wireless fire-detection equipment and AI-enabled disaster-prevention systems, principally through project installations in South Korea—not a recurring-revenue software business. FY2025 revenue fell 72.1% to $2.30M as construction projects stalled, gross margin contracted to 27.1%, and net loss widened to $(6.03)M. Its Nasdaq debut is an unpriced direct listing registering up to 18.1M resale shares, not an underwritten capital raise; a separate $10.0M preferred-share placement supplies financing but creates substantial variable-price dilution. The investment case rests on converting a large, largely unfunded backlog into cash-generating installations, while any opening valuation must be assessed against depressed revenue, continuing losses and an expanding share count.

The Offering

• Deal size and valuation: up to 18,138,565 common shares registered for secondary resale, comprising 13,878,565 outstanding shares and 4,260,000 warrant shares. No preset offering price means aggregate sale proceeds, implied market capitalization and valuation multiples cannot be calculated. After the scheduled CEO issuance, common shares total 62,893,389; immediately eligible resale shares represent an implied 22.1% of that count, while the full registration represents 27.0% assuming warrant exercise. These are potential sales, not a fixed stake allocated to IPO buyers.
• Structure and timing: prospectus dated 9/28/2026; first trading day stated as 9/29/2026 on Nasdaq, ticker RZAI. Nasdaq’s opening auction determines price, without underwriting or stabilization. RBW Capital Partners, through Dawson James Securities, advises the listing.
• Company financing: the separate 9/28/2026 placement sold 1,250,000 Class C preferred shares for $10.0M gross and $9.36M net after specified expenses. Resale proceeds go to existing holders; the placement funds the company. Estimated direct-listing expenses are $1.10M.
• Preferred dilution: each $8.00 preferred share carries $10.00 stated value and converts at the lower of $8.00 or 80% of the lowest preceding five-day closing price. The initial $4.00 floor falls to $1.00 within 120 days and can decline further. Conversion creates 1,562,500–12,500,000 common shares at those endpoints; including the CEO issuance, warrants and 807,972 audited year-end options gives an illustrative diluted common count of 69.5M–80.5M, before other convertible debt or accrued preferred amounts.
• Capitalization bridge: “after listing” below means the prospectus’s adjusted 12/31/2025 balance sheet incorporating subsequent financing and the CEO award—not a new reporting period. A $1.06M January convertible-bond issuance and $9.36M net placement lift cash to $11.5M; debt increases rather than being repaid. Equity rises to $9.04M. No fixed public purchase price supports a per-share tangible-asset dilution comparison.
• Listing compensation: the advisor received 1,064,230 common shares plus a $0.250M cash fee; the CEO is scheduled to receive another 7,250,000 shares. Neither issuance brings cash into the business.
• Resale supply: most unregistered holdings have one-year lock-ups, with leak-outs from month seven; others have 60-day, three-month or six-month restrictions. Officers’ and directors’ restrictions generally extend until six months after effectiveness of the preferred investors’ separate registration. Registered resale shares are generally unlocked, and conversion-share registration is due within 10 days of listing, with effectiveness within 45 days.

Key Financial Highlights

Financial statements use International Financial Reporting Standards. Amounts are in $M unless stated otherwise; annual figures are historical.

• Margin compression: delayed high-margin projects left a smaller revenue base supporting operating costs, while R&D increased to $2.39M from $0.989M.
• Cash-loss divergence: receivable collections released $0.796M of working capital, and non-cash charges also reduced cash outflow relative to net loss; this is not evidence of operating profitability.
• Equity deficit: accumulated losses reached $16.8M, overwhelming contributed capital. FY2025 equity also equals tangible equity; total liabilities exceeded debt materially, so the deficit is not simply borrowing.
• Liquidity: the auditor highlighted substantial going-concern doubt. Management says the placement resolves that concern, but $4.06M of bank-loan principal was contractually due within one year of FY2025 end, alongside continuing operating burn.

Business Model and Growth Drivers

• Revenue model: equipment and customized installations dominate; FY2025 product revenue was $1.85M and service revenue $0.442M. All sales were domestic, and material subscription revenue is not expected within the next 12 months.
• Customer economics: FY2025 had 93 active customers, including 66 new customers contributing 59.9% of revenue. Average order value fell to $0.0168M from $0.0614M as billings reflected early project stages; transactions per customer declined to 1.47 from 1.58.
• Backlog opportunity: 32 contracted projects totaled $527M at 12/31/2025. Thirteen projects worth $252M were expected to start or generate partial revenue within 12 months, generally across 36-month execution periods, but none had received required project financing. Only one had a partial advance; contract value is not assured revenue.
• Strategy: management seeks larger integrated deployments, monitoring and maintenance, existing-building installations and overseas expansion. Vietnam has generated no revenue, and the proposed U.S. collaboration lacks definitive agreements or committed funding.
• Technology investment: the Disaster AI Platform combines sensors, predictive analysis and building-specific digital twins. Semiconductor development specifies ≈$9.0M across research and manufacturing preparation, with a first-version launch target of Q1 2028; commercial benefits remain prospective.

Governance and Control

• Voting control: common and Class A preferred shares each carry one vote; CEO Young Jin Cho owns all 61.0M Class A shares. The prospectus expects 61% voting control after the listing-related transactions, enabling him to determine shareholder decisions despite inconsistent ownership percentages elsewhere.
• Oversight exemptions: controlled-company and Canadian home-country provisions permit reduced independent oversight, a 5% meeting quorum and departures from certain shareholder-approval requirements for securities issuance.
• Disclosure cadence: foreign-private-issuer status permits less frequent reporting than domestic issuers; emerging-growth-company exemptions remove auditor attestation of internal controls.
• Incentives and conflicts: Cho’s consulting agreement permits 8.25M milestone shares in total, including the scheduled 7.25M award. He also acquired the Vietnam distributor, making overseas commercialization a related-party relationship.

Risk Assessment

• Audit and funding: the going-concern warning reflects recurring losses; new financing improves liquidity but does not establish sustainable operations.
• Financing dilution: falling common prices increase preferred conversion shares, while registration defaults raise stated value by 50% and trigger $0.500M recurring damages; annual preferred dividends total $1.20M when applicable.
• Backlog execution: unfunded construction projects can be deferred or discontinued, and one customer represents ≈53% of the $252M near-term project group.
• Counterparty concentration: two customers account for 96.4% of year-end trade receivables and three suppliers for 82.9% of inventory purchases, exposing collections and delivery to concentrated failures.
• Technology and liability: predictive accuracy lacks quantified independent validation; defects or cyber failures in safety-critical products could cause claims, remediation costs and reputational damage.
• Key personnel: reliance on senior management makes loss or unavailability of leadership a threat to product development and commercialization.
• Trading and supply: auction-based price discovery, unlocked resales and later conversion shares can produce unstable pricing; the advisor’s shareholding creates an additional conflict around listing readiness.

Investor Actionables

• Next financial report: look for funded project commencements, milestone collections and gross-margin recovery—not backlog announcements alone.
• Financing compliance: track conversion prices, actual share issuance, registration deadlines and cash burn; missed deadlines can compound both cash costs and dilution.
• Market valuation and unlocks: compare trading capitalization with current revenue and losses using an updated diluted share count, and monitor staggered lock-ups and month-seven leak-outs.