Artificial Intelligence Technology Solutions Inc 10-Q for FY2023 Q1

Artificial Intelligence Technology Solutions Inc. (AITX)

10-Q 2022-07-12 For: 2022-05-31

Added on April 06, 2026

About this 10-Q

Artificial Intelligence Technology Solutions Inc filed this 10-Q on July 12, 2022, covering the quarter ended May 31, 2022 (FY2023 Q1).

Headline figures

Quarter ended May 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $385.16K; down 31.3% from $560.33K a year earlier
Net loss: $4.67M; compared with a net loss of $35.9M a year earlier
Diluted EPS: $0.00; compared with -$0.01 a year earlier

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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)

Large accelerated filer	[_]	Accelerated filer	[_]

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

		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of May 31, 2022 and February 28, 2022 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three Months Ended May 31, 2022 and 2021 (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended May 31, 2022 and 2021 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2022 and 2021 (Unaudited)	6

	Notes to the Consolidated Financial Statements (Unaudited)	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 4.	Controls and Procedures	30

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	31

ITEM 1A.	Risk Factors	31

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

ITEM 3.	Defaults Upon Senior Securities	31

ITEM 4.	Mine Safety Disclosures	31

ITEM 5.	Other Information	31

ITEM 6.	Exhibits	32

SIGNATURES		32


	May 31, 2022 (Unaudited)			February 28, 2022^*
ASSETS
Current assets:
Cash	$	921,629		$	4,648,146
Accounts receivable, net		364,720			429,469
Device parts inventory, net		1,609,248			1,530,657
Prepaid expenses and deposits		320,169			442,164
Total current assets		3,215,766			7,050,436
Operating lease asset		1,296,944			1,331,605
Revenue earning devices, net of accumulated depreciation of $506,075 and $434,661, respectively		811,750			709,063
Fixed assets, net of accumulated depreciation of $71,646 and $49,065, respectively		209,101			137,952
Trademarks		28,723			28,723
Security deposit		21,239			21,239
Total assets	$	5,583,523		$	9,279,018

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	1,070,410		$	968,853
Advances payable		1,594			1,594
Customer deposits		—			10,000
Current operating lease liability		250,168			254,027
Current portion of deferred variable payment obligation		388,227			325,600
Current portion of convertible notes payable, net of discount of $0 and $0, respectively		3,500			3,500
Loan payable - related party		196,796			193,556
Incentive compensation plan payable		641,000			479,500
Current portion of loans payable, net of discount of $0 and $14,745, respectively		—			1,004,708
Vehicle loan - current portion		38,522			38,522
Current portion of accrued interest payable		—			1,260,271
Derivative liability		7,587			7,587
Total current liabilities		2,597,804			4,547,718
Non-current operating lease liability		1,031,392			1,057,579
Loans payable, net of discount of $4,504,793 and $4,905,076, respectively		20,066,853			20,309,069
Deferred variable payment obligation		2,525,000			2,525,000
Accrued interest payable		3,365,296			1,816,009
Total liabilities		29,586,345			30,255,375

Commitments and Contingencies
Stockholders’ deficit:
Preferred Stock, undesignated; 15,545,650 shares authorized; no shares issued and outstanding at May 31, 2022 and February 28, 2022, 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; 2,532 and 2,532 shares issued and outstanding, respectively		2,532			2,532
Series G Preferred Stock, $0.001 par value; 4,350,000 shares authorized, no shares issued and outstanding at May 31, 2022 and February 28, 2022, respectively		—			—
Common Stock, $0.00001 par value; 5,000,000,000 shares authorized 4,869,091,936 and 4,735,210,360 shares issued and outstanding, respectively		48,692			47,353
Additional paid-in capital		74,659,458			73,015,576
Preferred stock to be issued		99,086			99,086
Accumulated deficit		(98,815,940)			(94,144,254	)
Total stockholders’ deficit		(24,002,822	)		(20,976,357	)
Total liabilities and stockholders’ deficit	$	5,583,523		$	9,279,018


	Three Months Ended May 31, 2022			Three Months Ended May 31, 2021

Revenues	$	385,157		$	560,334

Cost of Goods Sold		293,724			110,926

Gross Profit		91,433			449,408

Operating expenses:
Research and development (including related party charges of $1,001,734 (2021-$478,951))		1,023,735			634,645
General and administrative		2,400,392			1,899,792
Depreciation and amortization		93,995			37,643
Operating lease cost and rent		69,967			28,874
Total operating expenses		3,588,089			2,600,954

Loss from operations		(3,496,656	)		(2,151,546	)

Other income (expense), net:
Change in fair value of derivative liabilities		—			179,439
Interest expense		(1,175,030	)		(948,450	)
(Loss) on settlement of debt		—			(32,984,361	)
Total other income (expense), net		(1,175,030	)		(33,753,372	)

Net income (loss)	$	(4,671,686	)	$	(35,904,918	)

Net income (loss) per share - basic	$	(0.00	)	$	(0.01	)

Net income (loss) per share - diluted	$	(0.00	)	$	(0.01	)

Weighted average common share outstanding - basic		4,798,657,871			3,489,517,478

Weighted average common share outstanding - diluted		4,798,657,871			3,489,517,478


	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, 2021	4,350,000	$	4,350	2,799		$	176,869		3,229,426,884	$	32,294	$	16,764,554		$	(31,521,754	)	$	(14,543,687	)
Issuance of shares, net of $117,157 issuance costs
Issuance of shares, net of $117,157 issuance costs (in shares)
Rounding
Series F preferred shares and warrants issued with deferred variable payment obligation amendment agreement	—		—	40			40		—		—		33,015,174			—			33,015,214
Series F preferred shares cancelled in exchange for promissory notes	—		—	(83	)		(83	)	—		—		(6,732,752	)		—			(6,732,835	)
Series F preferred shares issued on exercise of warrants	—		—	38			38		—		—		(38	)		—			—
Series F preferred shares converted to common shares	—		—	(78	)		(78	)	316,345,998		3,164		(3,086	)		—			—
Warrants issued as part of a debt issuance	—		—	—			—		—		—		4,749,006			—			4,749,006
Stock based compensation	—		—	—			—		—		—		69,350			—			69,350
Net income	—		—	—			—		—		—		—			(35,904,918	)		(35,904,918	)
Balance at May 31, 2021	4,350,000	$	4,350	2,716		$	176,786		3,545,772,882	$	35,458	$	47,862,208		$	(67,426,672	)	$	(19,347,870	)


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	)


	Three Months Ended May 31, 2022			Three Months Ended May 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(4,671,686	)	$	(35,904,918	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		93,995			37,643
Revenue earning device sold and expensed in cost of sales		—			3,411
Bad debts expense		105,000			—
Inventory provision		25,000			—
Reduction of right of use asset		30,046			15,822
Accretion of lease liability		36,355			13,052
Stock based compensation		161,500			69,350
Change in fair value of derivative liabilities		—			(179,439	)
Amortization of debt discounts		415,029			317,269
(Gain) loss on settlement of debt		—			32,984,361
Increase in related party accrued payroll and interest		3,240			80,760
Changes in operating assets and liabilities:
Accounts receivable		(40,251	)		(466,887	)
Prepaid expenses and deposits on inventory		126,610			(80,000	)
Device parts inventory		(283,209	)		(253,762	)
Accounts payable and accrued expenses		101,557			(225,006	)
Customer deposits		(10,000	)		—
Accrued expense, related party		—			20,998
Operating lease liability payments		(66,401	)		(28,874	)
Balance owed WeSecure		—			(122,000	)
Current portion of deferred variable payment obligations for payments		62,627			131,428
Accrued interest payable		289,016			546,016
Net cash used in operating activities		(3,621,572	)		(3,040,776	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(88,214	)		(15,362	)
Cash paid for security deposit		—			(15,880	)
Net cash used in investing activities		(88,214	)		(31,242	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Share proceeds net of issuance costs		1,645,222			—
Proceeds from loans payable		—			5,426,146
Repayment of loans payable		(1,661,953	)		(264,189	)
Repayment of convertible debt		—			(65,000	)
Net borrowings(repayments) on loan payable - related party		—			(121,147	)
Net cash provided by financing activities		(16,731	)		4,975,810

Net change in cash		(3,726,517	)		1,903,792

Cash, beginning of period		4,648,146			1,044,418

Cash, end of period	$	921,629		$	2,948,210

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	342,138		$	114,710
Cash paid for income taxes	$	—		$	—

Noncash investing and financing activities:
Right of use asset for operating lease liability	$	—		$	1,275,970
Transfer from device parts inventory to fixed assets	$	179,,619		$	70,162
Exchange of notes payable for Series F preferred shares	$	—		$	6,732,835
Discount applied to face value of loans	$	—		$	6,162,945
Warrants issued as part of debt issuance	$	—		$	4,749,006
Series F preferred shares converted to common shares	$	—		$	3,086
Series F preferred shares issued on exercise of warrants	$	—		$	38

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

	●	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

	●	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.

			Fair Value Measurement Using
	Amount at Fair Value		Level 1		Level 2		Level 3
May 31, 2022
Liabilities
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares	$	641,000	$	—	$	—	$	641,000
Derivative liability – conversion features pursuant to convertible notes payable	$	7,587	$	—	$	—	$	7,587

February 28, 2022
Liabilities
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares	$	479,500	$	—	$	—	$	479,500
Derivative liability – conversion features pursuant to convertible notes payable	$	7,587	$	—	$	—	$	7,587

	Three Months Ended May 31, 2022		Three Months Ended May 31, 2021
Device rental activities	$	239,805	$	125,992
Direct sales of goods and services		145,352		434,342
	$	385,157	$	560,334

Leases	Classification	May 31, 2022		February 28, 2022
Assets
Operating	Operating Lease Assets	$	1,296,944	$	1,331,605
Liabilities
Current
Operating	Current Operating Lease Liability	$	250,168	$	254,027
Noncurrent
Operating	Noncurrent Operating Lease Liabilities		1,031,392		1,057,579
Total lease liabilities		$	1,281,560	$	1,311,606

	May 31, 2022			February 28, 2022
Revenue earning devices	$	1,317,825		$	1,143,724
Less: Accumulated depreciation		(506,075	)		(434,661	)
	$	811,750		$	709,063

	May 31, 2022			February 28, 2022
Automobile	$	84,880		$	84,880
Manufacturing equipment		16,800			16,800
Demo devices		22,056			16,539
Computer equipment and software		117,873			36,742
Office equipment		15,312			15,312
Warehouse equipment		11,415			11,415
Tooling		7,082			—
Leasehold improvements		5,329			5,329
		280,747			187,017
Less: Accumulated depreciation		(71,646	)		(49,065	)
	$	209,101		$	137,952

	(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.

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

*	This note was in default as of May 31, 2022. Default interest rate 22%
(1)	The conversion price is not subject to adjustment from forward or reverse stock splits.

						Annual
Date	Maturity	Description		Principal		Interest Rate
June 11, 2018	June 11, 2019	Promissory note	(2) (#)	$	—	25%
January 31, 2019	June 30, 2019	Promissory note	(1) (#)		—	15%
May 9, 2019	June 30, 2019	Promissory note	(3) (#)		—	15%
May 31, 2019	June 30, 2019	Promissory note	(4) (#)		—	15%
June 26, 2019	June 26, 2020	Promissory note	(5) (#)		—	15%
September 24, 2019	June 24, 2020	Promissory note	(6) (#)		—	15%
January 30, 2020	January 30, 2021	Promissory note	(7) (#)		—	15%
February 27, 2020	February 27, 2021	Promissory note	(8) (#)		—	15%
April 16, 2020	April 16, 2021	Promissory note	(9) (#)		—	15%
May 12, 2020	May 12, 2021	Promissory note	(11) (#)		—	15%
May 22, 2020	May 22, 2021	Promissory note	(12) (#)		—	15%
June 2, 2020	June 2, 2021	Promissory note	(13) (#)		—	15%
June 9, 2020	June 9, 2021	Promissory note	(14) (#)		—	15%
June 12, 2020	June 12, 2021	Promissory note	(15) (#)		—	15%
June 16, 2020	June 16, 2021	Promissory note	(16) (#)		—	15%
September 15, 2020	September 15, 2022	Promissory note	(17) (#)		—	10%
October 6, 2020	March 6, 2023	Promissory note	(18) (#)		—	12%
November 12, 2020	November 12, 2023	Promissory note	(19) (#)		—	12%
November 23, 2020	October 23, 2022	Promissory note	(20) (#)		—	15.5%
November 23, 2020	November 23, 2023	Promissory note	(21) (#)		—	15%
December 10, 2020	December 10, 2023	Promissory note	(22) (#)		—	12%
December 10, 2020	December 10, 2023	Promissory note	(23)		3,921,168	12%
December 10, 2020	December 10, 2023	Promissory note	(24)		3,054,338	12%
December 10, 2020	December 10, 2023	Promissory note	(25)		165,605	12%
December 14, 2020	December 14, 2023	Promissory note	(26)		310,375	12%
December 30, 2020	December 30, 2023	Promissory note	(27)		350,000	12%
December 31, 2021	December 31, 2024	Promissory note	(28)		25,000	12%
December 31, 2021	December 31, 2024	Promissory note	(29)		145,000	12%
January 14, 2021	January 14, 2024	Promissory note	(30)		550,000	12%
February 22, 2021	February 22, 2024	Promissory note	(31)		1,650,000	12%
March 1, 2021	March 1, 2024	Promissory note	(10)		6,000,000	12%
June 8, 2021	June 8, 2024	Promissory note	(32)		2,750,000	12%
July 12, 2021	July 26, 2026	Promissory note	(33)		4,000,160	7%
September 14, 2021	September 14, 2024	Promissory note	(34)		1,650,000	12%
				$	24,571,646
Less discount on loans payable					(4,504,793)
Loans payable				$	20,066,853

					Balance			Balance
		Interest	Conversion		May 31,			February 28,
Issued	Maturity	Rate	Rate per Share		2022			2022
July 18, 2016	July 18, 2017^*	10%	$0.003	⁽¹⁾		3,500			3,500
						3,500			3,500

Less: current portion of convertible notes payable						(3,500	)		(3,500	)
Less: discount on noncurrent convertible notes payable						—			—
Noncurrent convertible notes payable, net of discount					$	—		$	—

Current portion of convertible notes payable					$	3,500		$	3,500
Less: discount on current portion of convertible notes payable						—			—
Current portion of convertible notes payable, net of discount					$	3,500		$	3,500

(1)	Original $78,432 note may be pre-payable at any time. The note balance includes 33% original issue discount of $25,882 at issuance. The loan and accrued interest were fully paid in March 2022.

(2)	Repayable in 12 monthly instalments of $4,562 commencing August 11, 2018 and secured by revenue earning devices having a net book value of at least $48,000. The loan and accrued interest were fully paid in March 2022.

(3)	Original $7,850 note may be pre-payable at any time. The note balance includes 33% original issue discount of $2,590 at issuance. The loan and accrued interest were fully paid in March 2022.

(4)	Original $86,567 note may be pre-payable at any time. The note balance includes 33% original issue discount of $28,567 at issuance. The loan and accrued interest were fully paid in March 2022.

(5)	Original $79,104 note may be pre-payable at any time. The note balance includes 33% original issue discount of $26,104 at issuance. The loan and accrued interest were fully paid in March 2022.

(6)	Original $12,000 note may be pre-payable at any time. The note balance includes an original issue discount of $3,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(7)	Original $11,000 note may be pre-payable at any time. The note balance includes an original issue discount of $2,450 at issuance. The loan and accrued interest were fully paid in March 2022.

(8)	Original $5,000 note may be pre-payable at any time. The note balance includes an original issue discount of $1,200 at issuance. The loan and accrued interest were fully paid in March 2022.

(9)	Original $13,000 note may be pre-payable at any time. The note balance includes an original issue discount of $3,850 at issuance. The loan and accrued interest were paid in March 2022.

(10)	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. For the three months ended May 31, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $0 at May 31, 2022. 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.

(11)	Original $43,500 note may be pre-payable at any time. The note balance includes an original issue discount of $8,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(12)	Original $85,000 note may be pre-payable at any time. The note balance includes an original issue discount of $15,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(13)	Original $62,000 note may be pre-payable at any time. The note balance includes an original issue discount of $12,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(14)	Original $31,000 note may be pre-payable at any time. The note balance includes an original issue discount of $6,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(15)	Original $50,000 note may be pre-payable at any time. The note balance includes an original issue discount of $10,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(16)	Original $42,000 note may be pre-payable at any time. The note balance includes an original issue discount of $7,000 at issuance. The loan and accrued interest were fully paid in March 2022.

(17)	Original $300,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Interest payable monthly, principal due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The loan and accrued interest were fully paid in March 2022. For the three months ended May 31, 2022, the Company recorded amortization expense of $14,745 with an unamortized discount of $0 at May 31, 2022.

(18)	Original principal of $150,000 and interest repayable in 28 monthly instalments commencing December 6, 2020, the first 6 months at $2,000 per month, the remaining 22 payments at $ 8,500 per month. Secured by revenue earning devices. The loan and accrued interest were fully paid in March 2022.

(19)	Original $110,000 note may be pre-payable at any time. The note balance includes an original issue discount of $10,000 and was issued with a warrant to purchase 70,000,000 shares at an exercise price of $0.00165 per share, with a 3-year term and having a relative fair value of $41,176. 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 $41,176 with a corresponding adjustment to paid in capital. The loan and accrued interest were fully paid in March 2022. For the three months ended May 31, 2022, the Company recorded amortization expense of $36,290 with an unamortized discount of $0 at May 31, 2022.

(20)	Original principal of $65,000 and interest repayable in 21 monthly instalments of $4,060 commencing February 23, 2021. Secured by revenue earning devices. The loan and accrued interest were fully paid in March 2022.

(21)	Original $300,000 note may be pre-payable at any time. The note balance includes an original issue discount of $25,000 and was issued with a warrant to purchase 230,000,000 shares at an exercise price of $0.00165 per share with a 3-year term and having a relative fair value of $125,814. 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 $125,814 with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022. For the three months ended May 31, 2022, the Company recorded amortization expense of $109,977 with an unamortized discount of $0 at May 31, 2022

(22)	Original $82,500 note may be pre-payable at any time. The note balance includes an original issue discount of 7,500 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.002 per share with a 3-year term and having a relative fair value of $54,545. 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 $54,545 with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022. For the three months ended May 31, 2022 the Company recorded amortization expense of $50,714 with an unamortized discount of $0 at May 31, 2022.

(23)	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.

(24)	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.

(25)	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.

(26)	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.

(27)	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 months ended May 31, 2022, the Company recorded amortization expense of $13,060 with an unamortized discount of $263,793 at May 31, 2022.

(28)	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.

(29)	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.

(30)	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 months ended May 31, 2022, the Company recorded amortization expense of $23,238 with an unamortized discount of $343,995 at May 31, 2022.

(31)	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. For the three months ended May 31, 2022, the Company recorded amortization expense of $42,874 with an unamortized discount of $1,368,957 at May 31, 2022. 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.

(32)	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. For the three months ended May 31, 2022, the Company recorded amortization expense of $92,711 with an unamortized discount of $1,157,035 at May 31, 2022. 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.

(33)	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.

(34)	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 using Black-Scholes with assumptions described in note 14. 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 months ended May 31, 2022, 2022, the Company recorded amortization expense of $31,420 with an unamortized discount of $1,371,013 at May 31, 2022.

	Number of Series C Preferred Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2022	329	$1.00	4.50
Issued	—	—	—
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at May 31, 2022	329	$1.00	4.25

	Number of Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2022	1,216,845,661	$0.07	2.38
Issued	—	—	—
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at May 31, 2022	1,216,845,661	$0.07	2.12

	—	A stock option award (option 1) will be granted to the employee to purchase 10,000,000 shares at an exercise price of $ $0.15 per share if the trading share price of the Company reaches an average of $0.30 per share for ten days over a 30 day trading period.

	—	A stock option award (option 2) will be granted to the employee to purchase 30,000,000 shares at an exercise price of $ $0.25 per share if the trading share price of the Company reaches an average of $0.50 per share for ten days over a 30 day trading period.

	—	the Company will pay Ghost a non refundable marketing fee of $500,000 with $100,000 payable September 1, 2021 with the remaining $400,000 to be paid in instalments of $40,000 per month over the following 10 months commencing October 1, 2021.

	—	the Company will purchase $85,000 of other Ghost products for research and development purposes. This amount will be credited against future purchases of 6 V50’s that the Company will modify and resell.

	—	Ghost agrees not to sell its V50 to three specific customers for a three-year period commencing after the first commercial sales of the V50.

	—	the Company will re-brand their modified version of the V50 and be responsible for its testing and support.

Maturity of Lease Liabilities	Operating Leases
May 31, 2023	$	250,169
May 31, 2024		244,169
May 31, 2025		213,711
May 31, 2026		207,558
May 31, 2027		207,558
May 31, 2028 and after		812,935
Total lease payments		1,936,100
Less: Interest		(654,540	)
Present value of lease liabilities	$	1,281,560


	For the Year Ended
	May 31, 2022			May 31, 2021
Numerator:
Net income (loss) available to common shareholders	$	(4,671,686	)	$	(35,904,918	)

Effect of common stock equivalents
Add: interest expense on convertible debt		194			24,954
Add (less) loss (gain) on change of derivative liabilities		—			(179,439	)
Net income (loss) adjusted for common stock equivalents		(4,671,492	)		(36,059,403	)

Denominator:
Weighted average shares – basic		4,798,657,871			3,489,517,478

Net income (loss) per share – basic	$	(0.00	)	$	(0.01	)

Denominator:
Weighted average shares – diluted		4,798,657,871			3,489,517,478

Net income (loss) per share – diluted	$	(0.00	)	$	(0.01	)

	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.

	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.

	Period
	Three Months Ended			Three Months Ended			Change
	May 31, 2022			May 31, 2021			Dollars			Percentage
Revenues	$	385,157		$	560,334		$	(175,177	)	(31%	)
Gross profit		91,433			449,408			(357,975	)	(80%	)
Operating expenses		3,588,089			2,600,954			987,135		38%
Loss from operations		(3,496,656	)		(2,151,546	)		(1,345,110	)	63%
Other income (expense), net		(1,175,030	)		(33,753,372	)		32,578,342		97%
Net loss	$	(4,671,686	)	$	(35,904,918	)	$	31,233,232		87%

●	General and administrative expenses increased by $500,600. In comparing the three months ended May 31, 2022 and May 31, 2021 this increase was primarily due to increases in wages and salaries of $587,855 due to staffing of new manufacturing facility and increases in office and management staff , stock based compensation of $92,150, insurance of $102,815 due to health plan for new employees and increased liability and property insurance due to new manufacturing facility, office expenses of $35,947, travel $175,538 and advertising , marketing of $55,604 and bad debts expense due to a general provision of $105,000 on slow payers due to present economic factors. These increases were partially offset by decreases in production supplies by $183,904 due to better inventory management, professional fees of $292,374 mostly due to the severance costs of a former director in the prior year’s quarter, software and technology costs of $50,642 and subcontractor fees of $117,228 due to increase in staffing.

●	Research and development increased by $389,090 due to funding development of new products as well as upgrades of existing products.

●	Depreciation and amortization increased by $56,352 due to the acquisition of ERP computer software, and computer equipment and 34 new revenue earning devices.

●	Operating lease cost and rent increased by $41,093 due to a new office lease for the 3 months ended May 31, 2022 leases and only one month of the new manufacturing facility for the three months ended May 31, 2021 as compared to a three full months for the three months ended May 31, 2022.

●	In comparing the three months ended May 31, 2022 and the three months ended May 31, 2021, the change in fair value of derivative liabilities decreased by $179,439. This represents the change in fair value for the three months ended May 31, 2021. There was no change in fair value of derivative liabilities for the three months ended May 31, 2022 as most of the underlying convertible debt has been repaid with only $3,500 remaining. The change in fair value of derivative liabilities in 2021 was due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock.

●	Interest expense increased by $226,580 due to an increase in both debt amortization expense and interest expense because of increases in loans payable

●	Loss on settlement of debt was $32,984,361 the quarter ended May 31, 2021 and nil in the quarter ended May 31, 2022. The amendment of the deferred variable payment obligation during the prior year’s quarter led to a $33,015,215 loss which was partially offset by gains from accrued liabilities settlements. This loss on settlement of debt was non-cash and had no effect on the cash flows of the Company.

	May 31, 2022		February 28, 2022
Current assets	$	3,215,766	$	7,050,436
Current liabilities		2,597,804		4,547,718
Working capital	$	617,972	$	2,502,718

	Three Months Ended May 31, 2022			Three Months Ended May 31, 2022
Net cash used in operating activities	$	(3,621,572	)	$	(3,040,776	)
Net cash used in investing activities	$	(88,214	)	$	(31,242	)
Net cash (used in) provided by financing activities	$	(16,731	)	$	4,975,810

	1.	As of May 31, 2022, 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 May 31, 2022, 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.

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.