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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2023

 

OR

 

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM _______________ TO _______________

 

COMMISSION FILE NUMBER: 000-55079

 

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

 

Nevada   27-2343603
(State or other jurisdiction of Incorporation or organization)   (I.R.S. Employer Identification Number)
     
10800 Galaxie Avenue
Ferndale, MI
  48220
(Address of principal executive offices)   (Zip code)

 

(877) 787-6268

(Registrant’s telephone number, including area code)

 

not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [_]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X]   No [_]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [_] Accelerated filer [_]
         
  Non-accelerated filer [X] Smaller reporting company [X]
      Emerging growth company [_]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_]   No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,160,712,056 shares of common stock were issued and outstanding as of September 26, 2023.

 


Table of Contents

 

  PAGE
PART I FINANCIAL INFORMATION  
     
ITEM 1. Financial Statements 3
     
  Condensed Consolidated Balance Sheets as of August 31, 2023 and February 28, 2023 (Unaudited) 3
     
  Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended August 31, 2023 and 2022 (Unaudited) 4
     
  Condensed Consolidated Statements of Stockholders’ Deficit for the Six Months Ended August 31, 2023 and 2022 (Unaudited) 5-6
     
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended August 31, 2023 and 2022 (Unaudited) 7
     
  Notes to the Consolidated Financial Statements (Unaudited) 8-25
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
     
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 31
     
ITEM 4. Controls and Procedures 31
     
PART II OTHER INFORMATION  
     
ITEM 1. Legal Proceedings 32
     
ITEM 1A. Risk Factors 32
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
     
ITEM 3. Defaults Upon Senior Securities 32
     
ITEM 4. Mine Safety Disclosures 32
     
ITEM 5. Other Information 32
     
ITEM 6. Exhibits 33
     
SIGNATURES 33

 

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Table of Contents

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

               
    August 31, 2023   February 28, 2023*  
ASSETS              
Current assets:              
Cash   $ 1,512,112   $ 939,759  
Accounts receivable, net     260,671     265,024  
Device parts inventory, net     1,689,930     1,637,899  
Prepaid expenses and deposits     675,258     596,310  
Total current assets     4,137,971     3,438,992  
Operating lease asset     1,148,682     1,208,440  
Revenue earning devices, net of accumulated depreciation of $1,044,294 and $779,839, respectively     1,756,228     1,235,219  
Fixed assets, net of accumulated depreciation of $276,530 and $182,002, respectively     328,591     315,888  
Trademarks     27,080     27,080  
Investment at cost     50,000     50,000  
Security deposit     21,239     21,239  
Total assets   $ 7,469,791   $ 6,296,858  
LIABILITIES AND STOCKHOLDERS' DEFICIT              
Current liabilities:              
Accounts payable and accrued expenses   $ 1,276,960   $ 1,343,379  
Advances payable- related party     1,594     1,594  
Customer deposits     34,698     9,900  
Current operating lease liability     239,669     248,670  
Current portion of deferred variable payment obligation     667,634     542,177  
Loan payable - related party     260,746     206,516  
Incentive compensation plan payable     1,104,000     979,000  
Current portion of loans payable, net of discount of $966,767 and $1,651,597     19,403,219     9,918,389  
Vehicle loan - current portion     38,522     38,522  
Current portion of accrued interest payable     5,726,894     2,761,446  
Total current liabilities     28,753,936     16,049,593  
Non-current operating lease liability     901,321     950,541  
Loans payable, net of discount of $4,654,370 and $4,130,291, respectively     7,175,990     15,554,069  
Deferred variable payment obligation     2,525,000     2,525,000  
Accrued interest payable     2,061,093     3,060,656  
Total liabilities     41,417,340     38,139,859  
               
Commitments and Contingencies              
Stockholders' deficit:              
Preferred Stock, undesignated; 15,545,650 shares authorized; no shares issued and outstanding at August 31, 2023 and February 28, 2023, respectively          
Series G Convertible Preferred Stock. $0.001 par value; 100,000 shares authorized, no shares issued and outstanding at August 31, 2023 and February 28, 2023, respectively          
Series E Preferred Stock, $0.001 par value; 4,350,000 shares authorized; 3,350,000 and 3,350,000 shares issued and outstanding, respectively     3,350     3,350  
Series F Convertible Preferred Stock, $1.00 par value; 4,350 shares authorized; 2,533 and 2,533 shares issued and outstanding, respectively     2,533     2,533  
Common Stock, $0.00001 par value; 10,000,000,000 shares authorized 7,039,806,793 and 5,848,741,599 shares issued, issuable and outstanding, respectively     70,399     58,489  
Additional paid-in capital     87,445,715     80,247,252  
Preferred stock to be issued     99,086     99,086  
Accumulated deficit     (121,568,632 )   (112,253,711 )
Total stockholders' deficit     (33,947,549 )   (31,843,001 )
Total liabilities and stockholders' deficit   $ 7,469,791   $ 6,296,858  

 

* Derived from audited information

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

                           
    Three Months
Ended
  Three Months
Ended
  Six Months
Ended
  Six Months
Ended
 
    August 31, 2023   August 31, 2022   August 31, 2023   August 31, 2022  
                           
Revenues   $ 386,363   $ 267,484   $ 771,571   $ 652,641  
                           
Cost of Goods Sold     89,014     34,214     180,525     327,938  
                           
Gross Profit     297,349     233,270     591,046     324,703  
                           
Operating expenses:                          
Research and development (Note 10)     794,548     963,786     1,686,305     1,987,521  
General and administrative     2,294,471     2,238,442     4,414,902     4,638,834  
Depreciation and amortization     191,041     145,793     358,983     239,788  
Operating lease cost and rent     62,541     63,681     125,083     133,648  
Total operating expenses     3,342,601     3,411,702     6,585,273     6,999,791  
                           
Loss from operations     (3,045,252 )   (3,178,432 )   (5,994,227 )   (6,675,088 )
                           
Other income (expense), net:                          
Change in fair value of derivative liabilities         3,595         3,595  
Interest expense     (1,753,216 )   (1,002,020 )   (3,359,432 )   (2,177,050 )
Gain (loss) on settlement of debt     38,740     3,992     38,740     3,992  
Total other expense net     (1,714,476 )   (994,433 )   (3,320,692 )   (2,169,463 )
                           
Net loss   $ (4,759,728 ) $ (4,172,865 ) $ (9,314,919 ) $ (8,844,551 )
                           
Net loss per share - basic   $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 )
                           
Net loss per share - diluted   $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 )
                           
Weighted average common share outstanding - basic     6,568,957,612     4,970,040,852     6,266,833,467     4,884,349,362  
                           
Weighted average common share outstanding - diluted     6,568,957,612     4,970,040,852     6,266,833,467     4,884,349,362  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT

(Unaudited)

                                                   
    Series E   Series F       Additional       Total  
    Preferred Stock   Preferred Stock   Common Stock   Paid-In   Accumulated   Stockholders’  
    Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit  
Balance at February 28, 2022   3,350,000   $ 3,350   2,532   $ 101,618   4,735,210,360   $ 47,353   $ 73,015,576   $ (94,144,254 ) $ (20,976,357 )
Issuance of shares, net of $117,157 issuance costs               133,881,576     1,339     1,643,883         1,645,222  
Rounding                       (1 )       (1 )
Net income                           (4,671,686 )   (4,671,686 )
Balance at May 31, 2022   3,350,000   $ 3,350   2,532   $ 101,618   4,869,091,936   $ 48,692   $ 74,659,458   $ (98,815,940 ) $ (24,002,822 )
Issuance of shares, net of $95,293 issuance costs               191,691,135     1,917     1,889,350         1,891,267  
Cashless exercise of warrants               9,688,179     97     (97 )        
Relative fair value of warrants issued with debt                       404,374         404,374  
Cancelled shares               (17,116,894 )   (171 )   171          
Exchange of 955,000,000 warrants for debt                       (2,960,500 )         (2,960,500 )
Shares as payment for services               10,000,000     100     118,400         118,500  
Net income                           (4,172,865 )   (4,172,865 )
Balance at August 31, 2022   3,350,000   $ 3,350   2,532   $ 101,618   5,063,354,356   $ 50,635   $ 74,111,156   $ (102,988,805 ) $ (28,722,046 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT

(Unaudited)

                                                   
    Series E   Series F       Additional       Total  
    Preferred Stock   Preferred Stock   Common Stock   Paid-In   Accumulated   Stockholders’  
    Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit  
Balance at February 28, 2023   3,350,000   $ 3,350   2,533   $ 101,619   5,848,741,599   $ 58,489   $ 80,247,252   $ (112,253,711 ) $ (31,843,001 )
Issuance of shares, net of $81,285 issuance costs               280,929,190     2,809     1,316,100         1,318,909  
Relative fair value of Series F warrants issued with loans payable                       947,447           947,447  
Stock based compensation                       52,721         52,721  
Net income                           (4,555,193 )   (4,555,193 )
Balance at May 31, 2022   3,350,000   $ 3,350   2,533   $ 101,619   6,129,670,789   $ 61,298   $ 82,563,520   $ (116,808,904 ) $ (34,079,117 )
Issuance of shares, net of $176,672 issuance costs               903,636,004     9,036     4,787,087         4,796,123  
Shares as payment for services               6,500,000     65     44,395         44,460  
Stock based compensation                       50,713         50,713  
Net income                           (4,759,728 )   (4,759,728 )
Balance at August 31, 2023   3,350,000   $ 3,350   2,533   $ 101,619   7,039,806,793   $ 70,399   $ 87,445,715   $ (121,568,632 ) $ (33,947,549 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

               
    Six Months Ended
August 31, 2023
  Six Months Ended
August 31, 2022
 
CASH FLOWS USED IN OPERATING ACTIVITIES:              
Net loss   $ (9,314,919 ) $ (8,844,551 )
Adjustments to reconcile net income to net cash used in operating activities:              
Depreciation and amortization     358,983     239,786  
Bad debts expense     24,730     145,000  
Inventory provision         70,000  
Reduction of right of use asset     58,220     56,854  
Accretion of lease liability     66,864     72,090  
Stock based compensation     228,434     343,000  
Change in fair value of derivative liabilities         (3,595 )
Amortization of debt discounts     1,258,198     671,594  
(Gain) loss on settlement of debt     (38,740 )   (3,992 )
Increase in related party accrued payroll and interest     54,230     6,480  
Changes in operating assets and liabilities:              
Accounts receivable     (20,377 )   (158,183 )
Prepaid expenses     (77,410 )   (23,984 )
Device parts inventory     (941,261 )   (632,760 )
Accounts payable and accrued expenses     16,775     351,014  
Customer deposits     24,798     (8,128 )
Operating lease liabilities     (125,083 )   (128,944 )
Current portion of deferred variable payment obligation for payments     125,457     106,120  
Accrued interest payable     1,965,885     987,737  
Net cash used in operating activities     (6,335,216 )   (6,754,462 )
               
CASH FLOWS USED IN INVESTING ACTIVITIES:              
Purchase of fixed assets     (3,463 )   (207,197 )
Net cash used in investing activities     (3,463 )   (207,197 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Share proceeds net of issuance costs     6,115,032     3,255,289  
Proceeds from loans payable     1,050,000     500,000  
Repayment of loans payable     (254,000 )   (1,697,953 )
Proceeds from convertible debt and warrants issued         619,250  
Net cash provided by financing activities     6,911,032     2,676,586  
               
Net change in cash     572,353     (4,285,073 )
               
Cash, beginning of period     939,759     4,648,146  
               
Cash, end of period   $ 1,512,112   $ 363,073  
               
Supplemental disclosure of cash and non-cash transactions:              
Cash paid for interest   $ 9,892   $ 405,117  
Cash paid for income taxes   $   $  
               
Noncash investing and financing activities:              
Transfer from device parts inventory to revenue earning devices   $ 889,230   $ 452,526  
Exchange of warrants for debt   $   $ 3,000,000  
Discount applied to face value of loans   $ 150,000   $ 39,500  
Exercise of warrants   $   $ 97  
Series F warrants issued as part of debt   $ 947,447   $  
Shares issued for services   $ 44,460   $  
Cancellation of Series E preferred shares and common shares   $   $ 171  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. GENERAL INFORMATION

 

Artificial Intelligence Technology Solutions Inc. (“AITX” or the “Company”) was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).

 

Robotic Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a Limited Liability Company. On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc., through the issuance of 10,000 common shares to its sole shareholder.

 

On August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock. AITX’s prior business focus was transportation services, and was exploring the on-demand logistics market by developing a network of logistics partnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, and AITX’s business going forward will consist of one segment activity, which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.

 

The Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill or other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.

 

2. GOING CONCERN

 

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

For the six months ended August 31, 2023, the Company had negative cash flow from operating activities of $6,335,216. As of August 31, 2023, the Company has an accumulated deficit of $121,568,632, and negative working capital of $24,615,965. Management does not anticipate having positive cash flow from operations in the near future. These factors raise a substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.

 

The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.

 

Management has plans to address the Company’s financial situation as follows:

 

Management is committed to raise either non-dilutive funds or minimally dilutive funds. There is no assurance that these funds will be able to be raised nor can we provide assurance that these possible raises may not have dilutive effects. In March 2023, the Company entered into an equity financing agreement whereby an investor will purchase up to $12,500,000 of the Company’s common stock at a discount over a two-year period.   In March and April 2023 the Company reduced personnel that were working on far-future solutions as well as other department reductions. Combined with other cost cutting measures management estimates it reduced the monthly expense burn by $ 200,000 - $ 300,000 with little impact on short and medium term operations. Management believes that it has the necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,equity proceeds and non-convertible debt. Management has had many recent conversations with the Company’s primary debt holder and believes that the non-convertible debt on the balance sheet will be extended. Management notes that non-convertible debt on the books has been extended by this debt holder twice in the past and notes that this debt holder has been a strong supporter of the Company.

 

Management is committed to raise either non-dilutive funds or minimally dilutive funds. There is no assurance that these funds will be able to be raised nor can we provide assurance that these possible raises may not have dilutive effects. The Company this fiscal quarter through to September 26, 2023 has raised an additional $5.2 million net of issuance costs through the sale of its common shares.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3. ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the condensing instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on June 14, 2023. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile, Inc., On the Move Experience, LLC and On the OMV Transports, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the six months ended August 31, 2023 are not necessarily indicative of the results that may be expected for the entire year.

 

Use of Estimates

 

In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value preferred stock and derivative liabilities.

 

Concentrations

Loans payable

 

At August 31, 2023 there were $32,200,345 of loans payable, $27,890,506 or 87% of these loans to companies controlled by one individual. At February 28, 2023 there were $31,254,345 of loans payable $26,540,506 or 85% of these loans to companies controlled by the same individual.

 

Cash

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.

 

Accounts Receivable

 

Accounts receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There was an allowance of $59,000 and $39,000 provided as of August 31, 2023 and February 28, 2023, respectively. For the three months ended August 31, 2023 , two customers account for 37% of total accounts receivable . For the three months ended August 31, 2022 , four customers account for 54% of total accounts receivable.

 

Device Parts Inventory

 

Device parts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a valuation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company uses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending on use, the Company will transfer the parts to the corresponding asset or expense if used in research and development.  A charge to income is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted. As of August 31, 2023 and February 28, 2023 there was a valuation reserve of $195,000 and $195,000, respectively.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Revenue Earning Devices

 

Revenue earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.

 

Fixed Assets

 

Fixed assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from two to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.

 Fixed assets consisted of the following:

Computer equipment and software   2 or 3 years
Office equipment   4 years
Manufacturing equipment   7 years
Warehouse equipment   5 years
Tooling   2 years
Demo Devices   4 years
Vehicles   3 years
Leasehold improvements   5 years, the life of the lease

 

The Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.

 

Research and Development

 

Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned. At August 31, 2023 and February 28, 2023, the Company had no deferred development costs.

 

Contingencies

 

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

 

Sales of Future Revenues

 

The Company has entered into transactions, as more fully described in footnote 8, in which it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement constitutes a sale of future revenues or debt:

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

  Does the agreement purport, in substance, to be a sale
  Does the Company have continuing involvement in the generation of cash flows due the investor
  Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets
  Is the investors rate of return is implicitly limited by the terms of the agreement
  Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return
  Does the investor have recourse relating to payments due

 

In the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue method. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method. As of the date of these financial statements, the Company has determined that all such agreements are debt.

 

Revenue Recognition

 

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and industry specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company adopted Topic 606 on March 1, 2018, using the modified retrospective method. Under the modified retrospective method, prior period financial positions and results will not be adjusted. There was no cumulative effect adjustment recognized as a result of this adoption. Refer to Note 4 – Revenue from Contracts with Customers for additional information. For the six months ended August 31, 2023 , two customers accounted for 33% of total revenue (2022- 26%).

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending February 28, 2024, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements

 

Leases

 

Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.

 

Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.

 

Distinguishing Liabilities from Equity

 

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

 

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

 

Our Chief Executive Officer/ Chairman holds sufficient shares of the Company’s voting preferred stock that give sufficient voting rights under the articles of incorporation and bylaws of the Company such that the CEO/ Chairman can at any time unilaterally vote to increase the number of authorized shares of common stock of the Company, without the need to call a general meeting of common shareholders of the Company.

 

Initial Measurement

 

The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.

 

Subsequent Measurement – Financial Instruments Classified as Liabilities

 

The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other income (expenses).

 

Fair Value of Financial Instruments

 

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

 

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

 

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

  Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible 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. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
  Level 3 – Inputs that are unobservable for the asset or liability.

 

Measured on a Recurring Basis

 

The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:

 

        Fair Value Measurement Using  
    Amount at
Fair Value
  Level 1   Level 2   Level 3  
August 31, 2023                          
Liabilities                          
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares   $ 1,104,000   $   $   $ 1,104,000  
                           
February 28, 2023                          
Liabilities                          
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares   $ 979,000   $   $   $ 979,000  

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.

 

Earnings (Loss) per Share

 

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options and/or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.

 

Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Recently Issued Accounting Pronouncements

 

Recently Issued Accounting Standards Not Yet Adopted

 

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. The amendments in ASU 2020-06 are effective for public entities, excluding smaller reporting companies as defined, for fiscal years beginning after December 15, 2021. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. A reporting entity is not permitted to adopt the guidance in an interim period, other than the first interim period of its fiscal year. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Management is currently evaluating the effect of these provisions on the Company’s financial position and results of operations.

 

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Revenue is earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services are accounted for under Topic 606, and short-term rentals are accounted for under Topic 842 (which addresses lease accounting and was adopted on March 1, 2019).

 

As disclosed in the revenue recognition section of Note 3 – Accounting Polices, the Company adopted Topic 606 in accordance with the effective date on March 1, 2018. Note 3 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s financial statements. Revenue is recognized on direct sales of goods or services when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

 

After adopting Topic 842, also referred to above in Note 3, the Company is accounting for revenue earned from rental activities where an identified asset is transferred to the customer and the customer has the ability to control that asset. The Company recognizes revenue from its device rental activities when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction price is fixed or determinable and collection is reasonably assured. Performance obligations associated with device rental transactions are satisfied over the rental period. Rental periods are short-term in nature. Therefore, the Company has elected to apply the practical expedient which eliminates the requirement to disclose information about remaining performance obligations. Payments are due from customers at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected.

 

The following table presents revenues from contracts with customers disaggregated by product/service:

 

    Three Months
Ended
  Three Months
Ended
  Six Months
Ended
  Six Months
Ended
 
    August 31, 2023   August 31, 2022   August 31, 2023   August 31, 2022  
Device rental activities   $ 343,543   $ 228,214   $ 581,692   $ 468,019  
                           
Direct sales of goods and services     42,820     39,270     189,879     184,622  
Revenues   $ 386,363   $ 267,484   $ 771,571     652,641  

 

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

5. LEASES

 

We lease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.

 

There is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

 

Below is a summary of our lease assets and liabilities at August 31, 2023 and February 28, 2023.

 

Leases   Classification   August 31, 2023   February 28, 2023  
Assets                  
Operating   Operating Lease Assets   $ 1,148,682   $ 1,208,440  
Liabilities                  
Current                  
Operating   Current Operating Lease Liability   $ 239,669   $ 248,670  
Noncurrent                  
Operating   Noncurrent Operating Lease Liabilities     901,321     950,541  
Total lease liabilities       $ 1,140,990   $ 1,199,211  

 

Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above was based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.

 

Rent expense and operating lease cost was $62,541 and $125,083 for the three and six months ended August 31, 2023, respectively, and $63,681 and $133,648 for the three and six months ended August 31, 2022, respectively.

 

6. REVENUE EARNING DEVICES

 

Revenue earning devices consisted of the following:

 

    August 31, 2023   February 28, 2023  
Revenue earning devices   $ 2,800,522   $ 2,015,058  
Less: Accumulated depreciation     (1,044,294 )   (779,839 )
Total   $ 1,756,228   $ 1,235,219  

 

During the three and six months ended August 31, 2023 the Company made total additions to revenue earning devices of $341,042 and $785,464, respectively, which were transfers from inventory. During the three and six months ended August 31, 2022 the Company made total additions to revenue earning devices of $251,946 and $426,047, respectively, which were transfers from inventory.

 

Depreciation expense was $141,614 and $264,455 for the three and six months ended August 31, 2023, respectively, and $116,125 and $187,539 for the three and six months ended August 31, 2022, respectively.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

7. FIXED ASSETS

 

Fixed assets consisted of the following:

 

    August 31, 2023   February 28, 2023  
Automobile   $ 101,680   $ 101,680  
Demo devices     172,778     69,010  
Tooling     101,322     101,322  
Machinery and equipment     8,825     8,825  
Computer equipment     150,387     150,387  
Office equipment     15,312     15,312  
Furniture and fixtures     21,225     21,225  
Warehouse equipment     14,561     14,561  
Leasehold improvements     19,031     15,568  
      605,121     497,890  
Less: Accumulated depreciation     (276,530 )   (182,002 )
    $ 328,591   $ 315,888  

 

During the three months ended August 31, 2023, the Company made additions of $75,057 which were transfers from inventory. During the six months ended August 31, 2023, the Company made additions of $107,230 of which $103,767 were transfers from inventory with remaining additions of $3,463. During the three months ended August 31, 2022, the Company made additions of $139,946 of which $20,693 were transfers from inventory with remaining additions of $118,983. During the six months ended August 31, 2022, the Company made additions of $233,676 of which $26,479 were transfers from inventory with remaining additions of $207,197.

 

Depreciation expense was $49,427 and $94,528 for the three and six months ended August 31, 2023, respectively, and $29,668 and $52,249 for the three and six months ended August 31, 2022, respectively.

 

8. DEFERRED VARIABLE PAYMENT OBLIGATION

 

On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 in exchange for a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues). At February 29, 2020 the investor has advanced the full $900,000.

 

On May 9, 2019 the Company entered into two similar arrangements with two investors:

 

  (1) The investor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $400,000 has been paid to the Company.
     
  (2) The investor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $50,000 has been paid to the Company.

 

These variable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount.

 

In the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

On November 18, 2019, the Company entered into another similar arrangement with the (February 1, 2019) investor above whereby the investor would advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues (commencing on quarter ending May 31, 2020). At February 29, 2020, the investor has advanced $109,000 and the investor advanced the $116,000 remainder as of May 2020.

 

On December 30, 2019, the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020). At February 29, 2020, the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020. If the total investor advances turns out to be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.

 

On April 22, 2020, the Company entered into another similar arrangement with the (first May 9, 2019) investor above whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues. At May 31, 2020, the investor has fully funded this commitment.

 

On July 1, 2020, the Company entered into a similar agreement with the first investor whereby the investor would pay up to $800,000 in exchange for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue. These Payments are to be made 90 days after the fiscal quarter with the first payment being due no later than May 31, 2021. If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the first payment due July 2020 and the final payment no later than February 28, 2021. As at August 31, 2020 the investor had fully funded the $800,000 commitment.

 

On August 27, 2020, the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for $900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $1,925,000. This new agreement is for similar terms as the above agreements save for the following: the rate payment is revised to 14.25% payable on revenues commencing the quarter ended August 31, 2020. Upon an event of default that we are unable to cure in the time allotted under the agreements, these Payments may be secured with a priority lien by UCC filing against all of our assets, but is subordinated to equipment financing or leasing agreements on the products the Company leases to its customers.

 

In summary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted below. This aggregate asset disposition % was reduced from 43.77 % to 33.77%.

 

The Payments first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and accrue every quarter thereafter. As of August 31, 2023, the Company has accrued $667,634 in Payments of which $431,719 are in arrears. As of February 28, 2023, the Company has accrued $542,177 in Payments of which $325,600 are in arrears. No notices have been sent to the Company.

 

On March 1, 2021, the first investor referred to above whose aggregate investment is $1,925,000 revised his agreements as follows:

 

  1) The rate payment was reduced from 14.25 % to 9.65 %
  2) The asset disposition % (see below) was reduced from 31 % to 21%

 

In consideration for the above changes, the investor received 40 Series F Convertible Preferred Stock and a warrant to purchase 367 shares of its Series F Convertible Preferred Stock with a five-year term and an exercise price of $1.00. During the three months ended May 31, 2021, the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred Stock. The Company attributed a fair value based on recent transactions for the Series F Preferred stock and warrants of $33,015,214 and recorded a loss on settlement of debt with a corresponding adjustment to paid in capital.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements. As of August 31, 2023, and February 28, 2023, the long-term balances other than Payments already owed is the cash received of $2,525,000 and $2,525,000, respectively.

 

For both the three months and six months ended August 31, 2023 and year ended February 28, 2023, the Company has received $0 related to the deferred payment obligation since there were no new agreements during this period. The balance remains $2,525,000 at both August 31, 2023 and February 28, 2023.

 

9. RELATED PARTY TRANSACTIONS

 

For both the three months ended August 31, 2023 and August 31, 2022 , the Company had no repayments of net advances from its loan payable-related party At August 31, 2023, the loan payable-related party was $260,746 and $206,516 at February 28, 2023. Included in the balance due to the related party at August 31, 2023 is $172,265 of deferred salary and interest, $145,500 of which bears interest at 12%. At February 28, 2023, included in the balance due to the related party is $108,000 of deferred salary with $108,000 bearing interest at 12%. The accrued interest included in loan at August 31, 2023 and February 28, 2023 was $23,515 and $15,660 respectively.

 

Pursuant to the amended Employment Agreement with its Chief Executive Officer, for the three months and six ended August 31, 2023, the Company accrued $62,000 (2022-$63,000) and $125,000 (2022-$224,500) of incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. At August 31, 2023 and February 28, 2023 there was $1,104,000 and $979,000 of incentive compensation payable.

 

During the three months ended August 31, 2023 and 2022, the Company was charged $777,260 and $957,395, respectively for fees for research and development from a company partially owned by a principal shareholder.

 

During the six months ended August 31, 2023 and 2022, the Company was charged $1,659,275 and $1,959,129, respectively for fees for research and development from a company partially owned by a principal shareholder.

 

10. OTHER DEBT – VEHICLE LOAN

 

In December 2016, RAD entered into a vehicle loan for $47,704 secured by the vehicle. The loan is repayable over 5 years maturing November 9, 2021, and repayable $1,019 per month including interest and principal. In November 2017, RAD entered into another vehicle loan secured by the vehicle for $47,661. The loan is repayable over 5 years, maturing October 24, 2022 and repayable at $923 per month including interest and principal. The principal repayments made were $0 for both the year ended February 28, 2022 and February 28, 2021. Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was subsequently sold by the lender for proceeds of $21,907 which went to reduce the outstanding balance of the loan. A loss of $3,257 was recorded as well. A balance of $21,578 remains on this vehicle loan at both February 28, 2021 and February 29, 2020. For the first vehicle loan, the vehicle was retired in 2020, the proceeds of the disposal of $18,766 was applied against the balance of the loan with a $5,515 gain on the remaining asset value of $13,251. A balance of $16,944 remains on this vehicle loan at both February 28, 2022 and February 28, 2021. The remaining total balances of the amounts owed on the vehicle loans were $38,522 and $38,522 as of August 31, 2023 and February 28, 2023, respectively, of which all were classified as current.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. LOANS PAYABLE

 

Loans payable at August 31, 2023 consisted of the following:

                Annual  
Date   Maturity   Description   Principal   Interest Rate  
July 18, 2016   July 18, 2017   Promissory note (1) * $ 3,500   22%  
December 10, 2020   December 10, 2023   Promissory note (2)   3,921,168   12%  
December 10, 2020   December 10, 2023   Promissory note (3)   3,054,338   12%  
December 10, 2020   December 10, 2023   Promissory note (4)   165,605   12%  
December 14, 2020   December 14, 2023   Promissory note (5)   310,375   12%  
December 30, 2020   December 30, 2023   Promissory note (6)   350,000   12%  
January 1, 2021   January 1, 2024   Promissory note (7)   25,000   12%  
January 1, 2021   January 1, 2024   Promissory note (8)   145,000   12%  
January 14, 2021   January 14, 2024   Promissory note (9)   550,000   12%  
February 22, 2021   February 22, 2024   Promissory note (10)   1,650,000   12%  
March 1, 2021   March 1, 2024   Promissory note (11)   6,000,000   12%  
June 8, 2021   June 8, 2024   Promissory note (12)   2,750,000   12%  
July 12, 2021   July 26, 2026   Promissory note (13)   3,830,360   7%  
September 14, 2021   September 14, 2024   Promissory note (14)   1,650,000   12%  
July 28, 2022   July 28, 2023   Promissory note (15)     15%  
August 30, 2022   August 30,2024   Promissory note (16)   3,000,000   15%  
September 7, 2022   September 7, 2023   Promissory note (17)   370,000   15%  
September 8, 2022   September 8, 2023   Promissory note (18)   475,000   15%  
October 13, 2022   October 13, 2023   Promissory note (19)   350,000   15%  
October 28, 2022   October 31, 2026   Promissory note (20)   400,000   15%  
November 9, 2022   October 31, 2026   Promissory note (20)   400,000   15%  
November 10, 2022   October 31, 2026   Promissory note (20)   400,000   15%  
November 15, 2022   October 31, 2026   Promissory note (20)   400,000   15%  
January 11, 2023   October 31,2026   Promissory note (20)   400,000   15%  
February 6, 2023   October 31, 2026   Promissory note (20)   400,000   15%  
April 5. 2023   October 31, 2026   Promissory note (20)   400,000   15%  
April 20, 23   October 31, 2026   Promissory note (20)   400,000   15%  
May 11, 2023   October 31, 2026   Promissory note (20)   400,000   15%  
        $ 32,200,346      
                 
Less: current portion of loans payable     (20,369,986 )    
Less: discount on non-current loans payable     (4,654,370 )    
Non-current loans payable, net of discount   $ 7,175,990      
             
Current portion of loans payable   $ 20,369,986      
Less: discount on current portion of loans payable     (966,767 )    
Current portion of loans payable, net of discount   $ 19,403,219      

 

* In default

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

(1) This note was transferred from convertible notes payable because in August 2022 it was no longer convertible due to restrictions placed on the lender.
   
(2)

This promissory note was issued as part of a debt settlement whereby $2,683,357 in convertible notes and associated accrued interest of $1,237,811 totaling $3,921,168 was exchanged for this promissory note of $3,921,168, and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a relative fair value of $990,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

   
(3) This promissory note was issued as part of a debt settlement whereby $1,460,794 in convertible notes and associated accrued interest of $1,593,544 totaling $3,054,338 was exchanged for this promissory note of $3,054,338, and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a relative fair value of $550,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.
   
(4) This promissory note was issued as part of a debt settlement whereby $103,180 in convertible notes and associated accrued interest of $62,425 totaling $165,605 was exchanged for this promissory note of $165,605, and a warrant to purchase 80,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a fair value of $176,000.
   
(5) This promissory note was issued as part of a debt settlement whereby $235,000 in convertible notes and associated accrued interest of $75,375 totaling $310,375 was exchanged for this promissory note of $310,375, and a warrant to purchase 25,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a fair value of $182,500.
   
(6) The note, with an original principal amount of $350,000, may be pre-payable at any time. The note balance includes an original issue discount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of $271,250. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $52,756 and $92,660, respectively, with an unamortized discount of $100,855 at August 31, 2023.
   
(7) This promissory note was issued as part of a debt settlement whereby $9,200 in convertible notes and associated accrued interest of $6,944 totaling $16,144 was exchanged for this promissory note of $25,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.
   
(8) This promissory note was issued as part of a debt settlement whereby $79,500 in convertible notes and associated accrued interest of $28,925 totaling $108,425 was exchanged for this promissory note of $145,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.
   
(9) The note, with an original principal amount of $550,000, may be pre-payable at any time. The note balance includes an original issue discount of $250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of $380,174. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $380,174 with a corresponding adjustment to paid in capital. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $62,143 and $113,188 respectively, with an unamortized discount of $126,148 at August 31, 2023.
   
(10) The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $1,342,857. The discount and warrant are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. The maturity date was extended from February 22, 2022 to February 22, 2024 on February 28, 2022 in exchange for warrants to purchase 50,000,000 at an exercise price of $.0164 and a 3-year term. These warrants have a fair value of $950,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $220,757 and $379,821 respectively, with an unamortized discount of $732,440 at August 31, 2023.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

(11) The unsecured note may be pre-payable at any time. Cash proceeds of $5,400,000 were received. The note balance of $6,000,000 includes an original issue discount of $600,000 and was issued with a warrant to purchase 300,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $4,749,005 with a corresponding adjustment to paid in capital for the relative value of the warrant.. The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase 150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $2,850,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. This note has been fully amortized.
   
(12) The note, with an original principal balance of $2,750,000, may be pre-payable at any time. The note balance includes an original issue discount of $50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $0.064 per share with a 3-year term and having a relative fair value of $2,035,033. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $2,035,033 with a corresponding adjustment to paid in capital. The maturity date was extended from June 8, 2022 to June 8, 2024 on February 28, 2022 in exchange for warrants to purchase 85,000,000 at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $1,615,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $175,789 and $330,699 respectively, with an unamortized discount of $463,519 at August 31, 2023.
   
(13) This loan, with an original principal balance of $4,000,160, was in exchange for 184 Series F preferred shares from a former director. The interest and principal are payable at maturity. The loan is unsecured. For the three and six months ended August 31, 2023 there were repayments of  $27,000 and $54,000 . respectively on the note.
   
(14) The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $0.037 per share with a 3-year term and having a relative fair value of $1,284,783, The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,284,783 with a corresponding adjustment to paid in capital. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $115,344 and $202,274 respectively, with an unamortized discount of $1,27,501 at August 31, 2023.
   
(15) Original $170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $20,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $3,739 and $9,026 respectively, with an unamortized discount of $0 at August 31, 2023. This loan has been fully repaid.
   
(16) A warrant holder exchanged 955,000,000 warrants for a promissory note of $3,000,000, bearing interest at 15% with a two year maturity. The fair value of the warrants was determined to be $2,960,500 with a corresponding adjustment to paid-in capital and a debt discount of $39,500 which will be amortized over the term of the loan. Principal and interest due at maturity. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $4,736 and $9,293 respectively, with an unamortized discount of $21,576 at August 31, 2023.
   
(17) Original $400,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000.  Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $15,479 and $27,821 respectively, with an unamortized discount of $0 at August 31, 2023.
   
(18) Original $475,000 note may be pre-payable at any time. The note balance includes an original issue discount of $75,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $17,799 and $36,729 respectively, with an unamortized discount of $0 at August 31, 2023.
   
(19) Original $350,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest due at maturity. Secured by a general security charging all of the Company’s s present and after-acquired property. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $13,295 and $25,585 respectively, with an unamortized discount of $7,325 at August 31, 2023.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

(20) On October 28, 2022 the Company entered into an loan facility with a lender for up to $4,000,000 including an original issue discount of $500,000. In exchange the Company will issue one series F Preferred Share, extended 329 series F warrants with a March 1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10 tranches with each tranche of $400,000, with cash proceeds of $350,000 an original issue discount of $50,000, October 31, 2026 maturity, and 61 Series F warrants with a October 31, 2033 maturity. Secured by a general security charging all of the Company’s present and after-acquired property. At November 30, 2022 the Company has issued 6 tranches as follows:

October 28, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $299,399. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,472 and $4,338 respectively, with an unamortized discount of $343,685 at August 31, 2023.

November 9, 2022, $400,000 loan, original issue discount of $50,000 , 61 Series F Preferred Share warrants having a relative fair value of $299,750. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,438 and $4,276 respectively, with an unamortized discount of $344,162 at August 31, 2023.

November 10, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $302,020. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,233 and $3,900 respectively, with an unamortized discount of $346,981 at August 31, 2023.

November 15, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,489 and $4,370 respectively, with an unamortized discount of $343,445 at August 31, 2023.

January 11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,541 and $4,565 respectively, with an unamortized discount of $342,724 at August 31, 2023.

February 6, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,436 and $4,272 respectively, with an unamortized discount of $344,154 at August 31, 2023.

April 5, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $296,245. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,523 and $3,274 respectively, with an unamortized discount of $342,971 at August 31, 2023.

April 20, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $302,219. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $2,010 and $2,206 respectively, with an unamortized discount of $350,013 at August 31, 2023.

May 11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $348,983. For the three and six months ended August 31, 2023, the Company recorded amortization expense of $0 and $0 respectively, with an unamortized discount of $398,983 at August 31, 2023.

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

13. STOCKHOLDERS’ EQUITY (DEFICIT)

 

Summary or Preferred Stock Activity

 

No preferred stock activity during the period.

 

Summary of Preferred Stock Warrant Activity

 

    Number of Series F Preferred Warrants   Weighted Average Exercise Price   Weighted Average Remaining Years
Outstanding at March 1, 2023   695   $1.00   10.00
Issued   183   1.00   9.88
Exercised      
Forfeited and cancelled      
Outstanding at August 31, 2023   878   $1.00   9.75

 

During the six months ended August 31, 2023, as part of debt issuance the Company issued 183 Series F Preferred Warrants to a lender for a relative fair value of $947,447. (see Note 11)

 

Summary of Common Stock Activity

 

The Company increased authorized common shares from 7,225,000,000 to 10,000,000,000 on August 30, 2023.

 

For the three months ended August 31, 2023, the Company issued 903,636,004 common shares with gross proceeds of $4,972,795 and net proceeds of $4,796,193 after issuance costs of $176,672. For the six months ended August 31, 2023, the Company issued 1,184,565,194 common shares with gross proceeds of $6,372,989 and net proceeds of $6,115,032 after issuance costs of $257,956. In addition for the three and six months ended the Company issued 6,500,000 shares with a fair value of $ 44,460 as payment for services of $ 83,200. A gain on settlement of debt of $38,640 has been recorded. The Company also issued 12,100,000 previously recorded as issuable shares pursuant to agreements.

 

The table below represent the common shares issued, issuable and outstanding at August 31, 2023 and February 28, 2023:

 

Common shares   August 31, 2023   February 28, 2023  
Issued     7,039,806,793     5,836,641,599  
Issuable         12,100,000  
Issued, issuable and outstanding     7,039,806,793     5,848,741,599  

 

Summary of Common Stock Warrant Activity

 

For the three months and six months ended August 31, 2023 and August 31, 2022, the Company recorded a total of $50,713 and $0, and $103,434 and $0 respectively, to stock-based compensation for options and warrants with a corresponding adjustment to additional paid-in capital.

 

    Number of Warrants   Weighted Average Exercise Price   Weighted Average Remaining Years
Outstanding at February 28, 2023   314,217,451   $0.114   1.95
Issued      
Exercised      
Forfeited and cancelled      
Outstanding at August 31, 2023   314,217,451   $0.114   1.45

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Summary of Common Stock Option Activity -Employee Stock Options

 

    Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Years
Outstanding at February 28 , 2023   95,725,000   $0.02   4.75 
Issued       — 
Exercised       — 
Forfeited, extinguished and cancelled   (13,025,000 ) $0.02   (4.75)
Outstanding at August 31, 2023   82,700,000   $0.02   4.25 

 

15. COMMITMENTS AND CONTINGENCIES

 

Litigation

 

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

 

The related legal costs are expensed as incurred.

 

Operating Lease

 

On December 18, 2020, the Company entered into a 15-month lease agreement for office space at 18009 Sky Park Circle Suite E, Irvine CA, 92614, commencing on December 18, 2020 through to March 31, 2022 with a minimum base rent of $3,859 per month. The Company paid a security deposit of $3,859.

 

On March 10, 2021, the Company entered into a 10 year lease agreement for q manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent of $15,880 per month. The base rent increase by 3% per annum commencing May 1, 2024. The Company paid a security deposit of $15,880.

 

On September 30, 2021, the Company entered into a 3-year lease agreement for a vehicle commencing September 30, 2021 through to April 30, 2031 with a minimum base rent of $1,538 per month. The Company paid a down payment of $18,462.

 

On January 28, 2022, the Company entered into a 2-year lease agreement for office space at 1516 E Edinger, Santa Ana, California, 92705, commencing on February 1, 2022 through to January 31, 2024 with a minimum base rent of $1,500 per month. The Company paid a security deposit of $1,500.

 

The Company’s leases are accounted for as operating leases. Rent expense and operating lease cost are recorded over the lease terms on a straight-line basis. Rent expense and operating lease cost was $62,541 and $125,083 for the three and six months ended August 31, 2023, respectively, and $63,681 and $133,648 for the three and six months ended August 31, 2022, respectively.

 

Maturity of Lease Liabilities Operating
Leases
 
August 31, 2024 $ 239,669  
August 31, 2025   207,558  
August 31, 2026   207,558  
August 31, 2027   207,558  
August 31, 2028   207,558  
August 31, 2029 and after   553,488  
Total lease payments   1,623,389  
Less: Interest   (482,399 )
Present value of lease liabilities $ 1,140,990  

 

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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

16. EARNINGS (LOSS) PER SHARE

 

The net income (loss) per common share amounts were determined as follows:

                           
    For the Three Months Ended   For the Six Months Ended  
    August 31,   August 31,  
    2023   2022   2023   2022  
Numerator:                          
Net income (loss) available to common shareholders   $ (4,759,728 ) $ (4,172,865 ) $ (9,314,919 ) $ (8,844,551 )
                           
Effect of common stock equivalents                          
Add: interest expense on convertible debt         8,543         8,737  
Add (less) loss (gain) on settlement of debt         (3,992 )       (3,992 )
Add (less) loss (gain) on change of derivative liabilities         (3,595 )       (3,595 )
Net income (loss) adjusted for common stock equivalents     (4,759,728 )   (4,171,909 )   (9,314,919 )   (8,843,401 )
                           
Denominator:                          
Weighted average shares – basic     6,568,957,612     4,970,040,852     6,266,833,467     4,884,349,362  
                           
Net income (loss) per share – basic   $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
                           
Dilutive effect of common stock equivalents:                          
Convertible Debt                  
Preferred shares                  
Warrants                  
                   
Denominator:                          
Weighted average shares – diluted     6,568,957,612     4,970,040,852     6,266,833,467     4,884,349,362  
                           
Net income (loss) per share – diluted   $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )

 

The anti-dilutive shares of common stock equivalents for the three and six months ended August 31, 2023 and 2022 were as follows:

                           
    For the Three Months Ended   For the Six Months Ended  
    August 31,   August 31,  
    2023   2022   2023   2022  
                           
Convertible notes and accrued interest         836,425,685         836,425,685  
Convertible Series F Preferred Shares     24,286,988,436         24,286,988,436      
Stock options and warrants     433,767,451     401,217,451     433,767,451     401,217,451  
Total     24,720,755,887     1,237,643,136     24,720,755,887     1,237,643,136  

 

* On August 23, 2021, the Company filed amended Series F preferred shares such that Series F preferred shares are not convertible into common stock by a holder until (A) August 23, 2023 or (B) the date on which such a conversion may be required for the purpose of (i) uplisting the Company to a new stock exchange, or (ii) selling more than 50% of the Company’s assets. Had these Series F preferred shares been convertible at August 31, 2023 and 2022 the dilutive effects would be as follows:

 

    For the Three and Six Months Ended
    August 31, 2023   August 31, 2022
Convertible Series F Preferred Shares     17,375,422,528

 

17. SUBSEQUENT EVENTS

 

Subsequent to August 31, 2023 through to October 12, 2023:

 

—   The Company issued 120,905,263 common shares pursuant to a share purchase agreement for gross proceeds of $377,224, issuance costs of $8,569 and net proceeds of $368,655.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The following discussion of our financial condition and results of operations for the three and six months ended August 31, 2023 and August 31, 2022 should be read in conjunction with our unaudited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 28, 2023, as filed on June 14, 2023 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Unless expressly indicated or the context requires otherwise, the terms “AITX”, the “Company”, “we”, “us”, and “our” refer to Artificial Intelligence Technology Solutions Inc.

 

Overview

 

AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’s fiscal year end is February 28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave., Ferndale Michigan, 48220, and our telephone number is 877-767-6268.

 

AITX’s mission is to apply Artificial Intelligence (AI) technology to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of the client organization.

 

A short list of basic examples include:

 

  1. Typical security guard-related functions such as monitoring a parking lot during and after hours and responding appropriately. This scenario applies to perimeters, interior yard areas, and related similar environments.
     
  2. Integrated hardware/software with AI-driven responses, simulating and expanding on what legacy or manned solutions could perform.
     
  3. Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today.

 

RAD solutions are unique because they:

 

  1. Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed.
     
  2. Use unique hardware purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new functionality.
     
  3. Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms.

 

We encourage everyone to ensure they have the most up to date news by visiting AITX at AITX News - AITX - Artificial Intelligence Technology Solutions.

 

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Table of Contents

 

Management Discussion and Analysis

 

Results of Operations for the Three Months Ended August 31, 2023 and 2022

 

The following table shows our results of operations for the three months ended August31, 2022 and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

    Period      
    Three Months
Ended
  Three Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Revenues   $ 386,363   $ 267,484   $ 118,879   44%  
Gross profit     297,349     233,270     64,079   27%  
Operating expenses     3,342,601     3,411,702     (69,101 ) (2% )
Loss from operations     (3,045,252 )   (3,178,432 )   133,180   (4% )
Other income (expense), net     (1,714,476 )   (994,433 )   (720,043 ) 72%  
Net Loss   $ (4,759,728 ) $ (4,172,865 ) $ (586,863 ) 14%  

 

Revenue

 

The following table presents revenues from contracts with customers disaggregated by product/service:

 

    Three Months
Ended
  Three Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Device rental activities   $ 343,543   $ 228,214   $ 115,329   51%  
Direct sales of goods and services     42,820     39,270     3,550   9%  
    $ 386,363   $ 267,484   $ 118,879   44%  

 

Total revenue for the three-month period ended August 31, 2023 was $386,363 which represented an increase of $118,879 compared to total revenue of $267,484 for the three months ended August 31, 2022. This increase is a result of higher rental sales in the current year’s quarter. Rental activities increased by 51% over the prior year’s quarter as the Company continues to grow its core business.

 

Gross profit

 

Total gross profit for the three-month period ended August 31, 2023 was $297,349, which represented an increase of $64,079 compared to gross profit of $233,270 for the three months ended August 31, 2022. The gross profit increased due to the higher sales.. The gross profit % of 77% for the three-month period ended August 31, 2023 was lower than the gross profit % of 87% for the prior year’s corresponding period.

 

Operating Expenses

 

    Period      
    Three Months
Ended
  Three Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Research and development   $ 794,548   $ 963,786   $ (169,238 ) (18% )
General and administrative     2,294,471     2,238,442     56,029   3%  
Depreciation and amortization     191,041     145,793     45,248   31%  
Operating lease cost and rent     62,541     63,681     (1,140 ) (2% )
Operating expenses   $ 3,342,601   $ 3,411,702   $ (69,101 ) (2% )

 

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Table of Contents

 

Our operating expenses were comprised of general and administrative expenses, research and development, and depreciation. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the three-month period ended August 31, 2023 and August 31, 2022, were $3,342,601 and $3,411,702, respectively. The overall decrease of $69,101 was primarily attributable to the following changes in operating expenses of:

 

General and administrative expenses increased by $56,029. In comparing the three months ended August 31, 2023 and August 31, 2022 the decrease in G&A was primarily due to decreases in wages and salaries of $130,629 due to reduction in force, stock-based compensation of $68,727, office expenses of $12,885, travel $43,876, and bad debts expense of $31,270 due to fewer slow payers. These decreases were partially offset by an increase in professional fees of $173,170 mostly due compliance and audit fees increase and other G&A increases.
   
Research and development decreased by $169,238 due to a reduction in funding on development of future products.
   
Depreciation and amortization increased by $45,248 due to large increases in revenue earning devices, demo devices, tooling and computer equipment.
   
Operating lease cost and rent decreased by $1,140.

 

Other Income (Expense)

 

Other income (expense) consisted of interest. Other income (expense) during the three months ended August 31, 2023 and August 31, 2022, was ($1,714,476) and ($994,433), respectively. The $720,043 increase in other expense was primarily attributable to the increase in interest and amortization of debt due to higher loans.

 

Net loss

 

We had a net loss of $4,759,728 for the three months ended August 31, 2023, compared to a net loss of $4,172,865 for the three months ended August 31, 2022. The increase in net loss of $586,863 is primarily a result of higher other expenses consisting of interest and debt amortization costs. This increase was partially offset by higher gross profit and lower operating expenses.

 

Results of Operations for the Six Months Ended August 31, 2023 and 2022

 

The following table shows our results of operations for the six months ended August 31, 2023 and 2022. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

Revenue

 

    Period      
    Six Months
Ended
  Six Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Revenues   $ 771,571   $ 652,641   $ 118,930   18%  
Gross profit     591,046     324,703     266,343   82%  
Operating expenses     6,585,273     6,999,791     (414,518 ) (6% )
Loss from operations     (5,994,227 )   (6,675,088 )   680,681   (10% )
Other income (expense), net     (3,320,692 )   (2,169,463 )   (1,151,229 ) 53%  
Net loss   $ (9,314,919 ) $ (8,844,551 ) $ (470,368 ) 5%  

 

The following table presents revenues from contracts with customers disaggregated by product/service:

 

    Six Months
Ended
  Six Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Device rental activities   $ 581,692   $ 468,019   $ 113,673   24%  
Direct sales of goods and services     189,879     184,622     5,257   3%  
    $ 771,571   $ 652,641   $ 118,930   18%  

 

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Table of Contents

 

Total revenue for the six-month period ended August 31, 2023 was $771,571 which represented an increase of $118,930 compared to total revenue of $652,641 for the six months ended August 31, 2022. This increase is a result of higher rental sales as the Company deployed 81more units when comparing these periods.

 

Gross profit

 

Total gross profit for the six-month period ended August 31, 2023 was $591,046 which represented an increase of $266,343, compared to gross profit of $324,703 for the six months ended August 31, 2022. The gross profit increased due to the higher sales and higher margin sales. The gross profit % of 77% for the six month period ended August 31, 2023 was higher than the gross profit % of 50% for the prior year’s corresponding period. The direct sales for the six months ended August 31, 2023 consisted of higher proportion of training revenue at higher gross profit vs unit sales for the six months ended August 31, 2022. The gross profit % of 77% for the six month period ended August 31, 2023 was higher than the gross profit % of 50% for the prior year’s corresponding period.

 

Operating Expenses

 

    Period      
    Six Months
Ended
  Six Months
Ended
  Change  
    August 31, 2023   August 31, 2022   Dollars   Percentage  
Research and development   $ 1,686,305   $ 1,987,521   $ (301,216 ) (15% )
General and administrative     4,414,902     4,638,834     (223,932 ) (5% )
Depreciation and amortization     358,983     239,788     119,195   50%  
Operating lease cost and rent     125,083     133,648     (8,565 ) (6% )
Operating expenses   $ 6,585,273   $ 6,999,791   $ (414,518 ) (6% )

 

General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the six-month period ended August 31, 2023 and August 31, 2022, were $6,585,273 and $6,999,791, respectively. The overall decrease of $414,518 was primarily attributable to the following changes in operating expenses of:

 

General and administrative expenses decreased by $223,932. In comparing the six months ended August 31, 2023 and August 31, 2022 the decrease may be partially explained by the following decreases: wages and salaries by $181,156, stock based compensation by $114,506, subcontractors by $26,541, sales and marketing by $49,346, travel by $39,971, investor relations stock agents and regulatory expenses by $35,772, bad debts expense $120,270 and office expense by $19,972. These were partially offset by increases in the following account: professional fees by $259,677 and other G& A increases.
   
Research and development decreased by $301,216 due to a reduction in funding on development of future products.
   
Depreciation and amortization increased by $119,195 due to the acquisition of ERP computer software, computer equipment tooling, and 81 new revenue earning devices.
   
Operating lease cost and rent decreased by $8,565 due to one less lease in the current period.

 

Other Income (Expense)

 

Other income (expense) during the six months ended August 31, 2023 and August 31, 2022, was ($3,320,692) and ($2,169,463), respectively. The $1,151,229 increase in other expense was primarily attributable to the increase in interest and debt amortization expense which is a result of higher loans in 2023.

 

Net loss

 

We had a net loss of 9,314,919 for the six months ended August 31, 2023, compared to a net loss of $8,844,551 for the six months ended August 31, 2022. The increase in net loss of $470,368 is primarily a result of higher other expenses consisting of interest and debt amortization costs. This increase was partially offset by higher gross profit and lower operating expenses

 

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Table of Contents

 

Liquidity, Capital Resources and Cash Flows

 

Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.

 

As of August 31, 2023, we had a cash balance of $1,512,112, accounts receivable of $260,671, device parts inventory of $1,689,930 and $28,753,936 in current liabilities. At the current cash consumption rate, we will need to consider additional funding sources going forward. We are taking proactive measures to reduce operating expenses and drive growth in revenue.

 

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

 

Capital Resources

 

The following table summarizes total current assets, liabilities and working capital (deficit) for the periods indicated:

 

    August 31, 2023   February 28, 2023  
Current assets   $ 4,137,971   $ 3,438,992  
Current liabilities     28,753,936     16,049,593  
Working capital   $ (24,615,965 ) $ (12,610,601 )

 

As of August 31, 2023 and February 28, 2023, we had a cash balance of $1,512,112 and $939,759, respectively.

 

Summary of Cash Flows

 

Summary of Cash Flows   Six Months
Ended
August 31, 2023
  Six Months
Ended
August 31, 2022
 
Net cash used in operating activities   $ (6,335,216 ) $ (6,754,462 )
Net cash used in investing activities   $ (3,463 ) $ (207,197 )
Net cash provided by financing activities   $ 6,911,032   $ 2,676,586  

 

Net cash used in operating activities.

 

Net cash used in operating activities for the six months ended August 31, 2023 was $6,335,216 which included a net loss of $9,314,919, non-cash activity such as the bad debts expense of $24,730, reduction of right of use asset of $58,220, accretion of lease liability $66,864, stock based compensation of $228,434, gain on settlement of debt of ($38,740) , change in operating assets and liabilities of $968,783, amortization of debt discount of $1,258,198, increase in related party accrued payroll and interest of $54,230 and depreciation and amortization of $358,983 to derive the uses of cash in operations.

 

Net cash used in investing activities.

 

Net cash used in investing activities for the six months ended August 31, 2023 was $3,463, which was the purchase of fixed assets,

 

Net cash provided by financing activities.

 

Net cash provided by financing activities was $6,911,032 for the six months ended August 31, 2023. This consisted of share proceeds net of issuance costs of 6,115,032, proceeds from loans payable of $1,050,000, reduced by repayments on loans payable of $254,000.

 

Off-Balance Sheet Arrangements

 

None.

 

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Table of Contents

 

Critical Accounting Policies and Estimates

 

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended February 28, 2023, as filed on June 14, 2023.

 

Related Party Transactions

 

For both the three months ended August 31, 2023 and August 31, 2022 , the Company had no repayments of net advances from its loan payable-related party. At August 31, 2023, the loan payable-related party was $260,746 and $206,516 at February 28, 2023. Included in the balance due to the related party at August 31, 2023 is $172,265 of deferred salary and interest, $145,500 of which bears interest at 12%. At February 28, 2023, included in the balance due to the related party is $108,000 of deferred salary with $108,000 bearing interest at 12%. The accrued interest included in loan at August 31, 2023 and February 28, 2023 was $23,515 and $15,660 respectively.

 

Pursuant to the amended Employment Agreement with its Chief Executive Officer, for the three months and six ended August 31, 2023, the Company accrued $62,000 (2022-$63,000) and $125,000 (2022-$224,500) of incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. At August 31, 2023 and February 28, 2023 there was $1,104,000 and $979,000 of incentive compensation payable.

 

During the three months ended August 31, 2023 and 2022, the Company was charged $777,260 and $957,395, respectively for fees for research and development from a company partially owned by a principal shareholder.

 

During the six months ended August 31, 2023 and 2022, the Company was charged $1,659,275 and $1,959,129, respectively for fees for research and development from a company partially owned by a principal shareholder.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable for a smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Management’s Report on Internal Control over Financial Reporting

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of August 31, 2023, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

  1. As of August 31, 2023, we did not maintain effective controls over our control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
     
  2. As of August 31, 2023, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

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Table of Contents

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

This item is not applicable to smaller reporting companies.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Each issuance of securities was issued without registration in reliance of the exemption from registration Section 3(a)9 of the Securities Act of 1933.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

The Company has not defaulted upon senior securities.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable to the Company.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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Table of Contents

 

ITEM 6. EXHIBITS

 

Exhibit No. Description of Document
   
3.1 Articles of Incorporation (1)
   
3.2 Bylaws (2)
   
14 Code of Ethics (2)
   
21 Subsidiaries of the Registrant (3)
   
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. (3)
   
31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. (3)
   
32.1 Section 1350 Certification of principal executive officer. (3)
   
32.2 Section 1350 Certification of principal financial accounting officer. (3)
   
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (3)
101.SCH Inline XBRL Taxonomy Extension Schema Document (3)
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (3)
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (3)
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (3)
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (3)
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (3)

__________

(1) Incorporated by reference to our Form 10-KT file with the Securities and Exchange Commission on March 12, 2018.
   
(2) Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010.
   
(3) Filed or furnished herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Artificial Intelligence Technology Solutions Inc.
   
   
Date: October 12, 2023 BY: /s/ Steven Reinharz
  Steven Reinharz
  President, Chief Executive Officer (principal executive officer)
   
   
Date: October 12, 2023 BY: /s/ Anthony Brenz
  Anthony Brenz
  Chief Financial Officer (principal financial officer)

 

- 33 -


 

Exhibit 21.1

 

Artificial Intelligence Technology Solutions Inc.

 

Subsidiaries

 

     
Name   Jurisdiction of Incorporation
Robotic Assistance Devices, Inc.   Nevada
Robotic Assistance Devices Group, Inc.   Nevada
Robotic Assistance Devices Mobile, Inc.   Nevada

 


 

Exhibit 31.1

 

RULE 13A-14(A)/15D-14(A) CERTIFICATION

 

I, Steven Reinharz, certify that:

 

1. I have reviewed this Form 10-Q for the period ended August 31, 2023 of Artificial Intelligence Technology Solutions Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Date: October 12, 2023 BY: /s/ Steven Reinharz
  Steven Reinharz
  President, Chief Executive Officer (principal executive officer)

 


 

Exhibit 31.2

 

RULE 13A-14(A)/15D-14(A) CERTIFICATION

 

I, Anthony Brenz, certify that:

 

1. I have reviewed this Form 10-Q for the period ended August 31, 2023 of Artificial Intelligence Technology Solutions Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Date: October 12, 2023 BY: /s/ Anthony Brenz
  Anthony Brenz
  Chief Financial Officer (principal financial officer)

 


 

Exhibit 32.1

 

SECTION 1350 CERTIFICATION

 

In connection with the quarterly report of Artificial Intelligence Technology Solutions Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Steven Reinharz, President of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

   
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

   
Date: October 12, 2023 BY: /s/ Steven Reinharz
  Steven Reinharz
  President, Chief Executive Officer (principal executive officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 


 

Exhibit 32.2

 

SECTION 1350 CERTIFICATION

 

In connection with the quarterly report of Artificial Intelligence Technology Solutions Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Anthony Brenz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

   
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

   
Date: October 12, 2023 BY: /s/ Anthony Brenz
  Anthony Brenz
  Chief Financial Officer (principal financial officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 


v3.23.3
Cover - shares
6 Months Ended
Aug. 31, 2023
Sep. 26, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Aug. 31, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024