Artificial Intelligence Technology Solutions Inc 10-Q for FY2022 Q3
Artificial Intelligence Technology Solutions Inc. (AITX)
About this 10-Q
Artificial Intelligence Technology Solutions Inc filed this 10-Q on January 19, 2022, covering the quarter ended November 30, 2021 (FY2022 Q3).
Headline figures
Quarter ended November 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $373.9K
- up 212.4% from $119.7K a year earlier
- Net loss
- $7.09M
- compared with net income of $3.41M a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
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:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | (Zip code) |
(
(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.
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).
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 | [_] | |
| [X] | Smaller reporting company | |||
| 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 [_]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock were issued and outstanding as of January 14, 2022.
| PAGE | ||
| PART I | FINANCIAL INFORMATION | |
| ITEM 1. | Financial Statements | 3 |
| Condensed Consolidated Balance Sheets as of November 30, 2021 and February 28, 2021 (Unaudited) | 3 | |
| Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 4 | |
| Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 5-6 | |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 7 | |
| Notes to the Consolidated Financial Statements (Unaudited) | 8 | |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 |
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 |
| ITEM 4. | Controls and Procedures | 39 |
| PART II | OTHER INFORMATION | |
| ITEM 1. | Legal Proceedings | 39 |
| ITEM 1A. | Risk Factors | 40 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 |
| ITEM 3. | Defaults Upon Senior Securities | 40 |
| ITEM 4. | Mine Safety Disclosures | 40 |
| ITEM 5. | Other Information | 40 |
| ITEM 6. | Exhibits | 40 |
| SIGNATURES | 41 | |
- 2 -
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| November 30, 2021 (Unaudited) |
February
28, 2021* |
||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash | $ | $ | |||||
| Accounts receivable, net of allowance | |||||||
| Share proceeds receivable | |||||||
| Prepaid expenses | |||||||
| Device parts inventory | |||||||
| Total current assets | |||||||
| Operating lease asset | |||||||
| Revenue earning devices, net of accumulated depreciation
of $ |
|||||||
| Fixed assets, net of accumulated depreciation of $ |
|||||||
| Trademarks | |||||||
| Security deposit | |||||||
| Total assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | $ | |||||
| Advances payable | |||||||
| Balance owed WeSecure | |||||||
| Customer deposits | |||||||
| Current operating lease liability | |||||||
| Current portion of deferred variable payment obligation | |||||||
| Current portion of convertible notes payable, net of
discount of $ |
|||||||
| Incentive compensation plan payable | |||||||
| Loan payable - related party | |||||||
| Current portion of loans payable, net of discount of
$ |
|||||||
| Vehicle loan - current portion | |||||||
| Current portion of accrued interest payable | |||||||
| Derivative liability | |||||||
| Total current liabilities | |||||||
| Non-current operating lease liability | |||||||
| Loans payable, net of discount of $ |
|||||||
| Deferred variable payment obligation | |||||||
| Accrued interest payable | |||||||
| Total liabilities | |||||||
| Commitments and Contingencies | |||||||
| Stockholders’ deficit: | |||||||
| Preferred Stock, undesignated; shares authorized; shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | |||||||
| Series E Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | |||||||
| Series F Convertible Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | |||||||
| Series G Preferred Stock, $ par value; shares authorized, shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | |||||||
| Common Stock, $ par value; shares authorized and shares issued and outstanding, respectively | |||||||
| Additional paid-in capital | |||||||
| Preferred stock to be issued | |||||||
| Accumulated deficit | ( |
) | ( |
) | |||
| Total stockholders’ deficit | ( |
) | ( |
) | |||
| Total liabilities and stockholders’ deficit | $ | $ |
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 3 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended November 30, 2021 |
Three Months Ended November 31, 2020 |
Nine Months Ended November 30, 2021 |
Nine Months Ended November 30, 2020 |
||||||||||
| Revenues | $ | $ | $ | $ | |||||||||
| Cost of Goods Sold | |||||||||||||
| Gross Profit | |||||||||||||
| Operating expenses: | |||||||||||||
| Research and development | |||||||||||||
| General and administrative | |||||||||||||
| Depreciation and amortization | |||||||||||||
| Operating lease cost and rent | |||||||||||||
| (Gain) loss on disposal of fixed assets | ( |
) | |||||||||||
| Total operating expenses | |||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | |||||
| Other income (expense), net: | |||||||||||||
| Change in fair value of derivative liabilities | |||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | |||||
| Gain (loss) on settlement of debt | ( |
) | ( |
) | |||||||||
| Total other income (expense), net | ( |
) | ( |
) | ( |
) | |||||||
| Net income (loss) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||
| Net income (loss) per share - basic | $ | $ | $ | ( |
) | $ | |||||||
| Net income (loss) per share - diluted | $ | $ | $ | ( |
) | $ | |||||||
| Weighted average common share outstanding - basic and diluted | |||||||||||||
| Weighted average common share outstanding - diluted | |||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 4 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S DEFICIT
(Unaudited)
| Series E | Series F | Series G | Additional | Total | ||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-In | Accumulated | Shareholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||
| Balance at February 28, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
| Rounding shares | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||
| Balance at May 31, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Contributed capital | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
| Cancellation of Series F Preferred Shares | — | ( |
) | ( |
) | — | — | |||||||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at August 31, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Contributed capital | — | — | — | — | ||||||||||||||||||||||||||
| Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
| Warrants issued with promissory notes | — | — | — | — | ||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||
| Balance at November 30, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
- 5 -
| Series E | Series F | Series G | Additional | Total | ||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-In | Accumulated | Shareholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||
| Balance at February 28, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
| Series F Preferred Shares issued with amendment agreement | — | — | ||||||||||||||||||||||||||||
| Series F Preferred Shares Warrants issued with amendment agreement | — | — | — | — | ||||||||||||||||||||||||||
| Series F Preferred Shares cancelled in exchange for promissory notes | — | ( |
) | ( |
) | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Series F preferred shares issued on exercise of warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
| Series F Preferred Shares converted to common shares | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
| Stock based compensation | — | — | — | |||||||||||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at May 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | — | — | |||||||||||||||||||||||||||
| Exercise of warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
| Cancellation of Series E Shares | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||
| Exchange of debt for common shares | — | — | ||||||||||||||||||||||||||||
| Stock based compensation on issuable shares | — | — | — | |||||||||||||||||||||||||||
| Exchange of Series F Preferred Shares for debt | — | ( |
) | ( |
) | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at August 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Issuance of shares, net of $ |
— | — | — | |||||||||||||||||||||||||||
| Cashless exercise of 100,000,000 warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
| Redemption of 19 Issuable Series F shares | — | — | ( |
) | — | — | ( |
) | ( |
) | ||||||||||||||||||||
| Issuance of Series G preferred as equity awards per employment agreement | — | — | — | |||||||||||||||||||||||||||
| Redemption of Series G shares as compensation payment | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at November 30, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 6 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended November 30, 2021 |
Nine Months Ended November 30, 2020 |
||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | |||||||
| (Gain) loss on disposal of fixed assets | ( |
) | |||||
| Bad debts expense | |||||||
| Revenue earning device sold and expensed in cost of sales | |||||||
| Reduction of right of use asset | |||||||
| Accretion of lease liability | |||||||
| Stock based compensation | |||||||
| Interest expense related to penalties from debt defaults | |||||||
| Change in fair value of derivative liabilities | ( |
) | ( |
) | |||
| Amortization of debt discounts | |||||||
| (Gain) loss on settlement of debt | ( |
) | |||||
| Increase (decrease) in related party accrued payroll and interest | |||||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | ( |
) | ( |
) | |||
| Prepaid expenses | ( |
) | |||||
| Deposit on right of use asset | ( |
) | |||||
| Device parts inventory | ( |
) | ( |
) | |||
| Accounts payable and accrued expenses | ( |
) | |||||
| Accrued expense, related party | ( |
) | ( |
) | |||
| Customer deposits | ( |
) | |||||
| Operating lease liability payments | ( |
) | |||||
| Balance owed WeSecure | ( |
) | ( |
) | |||
| Current portion of deferred variable payment obligations for Payments | |||||||
| Accrued interest payable | |||||||
| Net cash used in operating activities | ( |
) | ( |
) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchase of fixed assets | ( |
) | ( |
) | |||
| Acquisition of trademarks | ( |
) | |||||
| Cash paid for security deposit | ( |
) | |||||
| Proceeds on disposal of fixed assets | |||||||
| Net cash used in investing activities | ( |
) | ( |
) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Share proceeds net of issuance costs | |||||||
| Settlement of convertible debt | ( |
) | |||||
| Proceeds from deferred variable payment obligation | |||||||
| Proceeds from loans payable | |||||||
| Repayment of loans payable | ( |
) | ( |
) | |||
| Series G preferred shares redeemed as payment on incentive plan payable | ( |
) | |||||
| Dividend and redemption of cancelled issuable Series F shares | ( |
) | |||||
| Cash acquired on consolidation of RAD G | ( |
) | |||||
| Net borrowings(repayments) on loan payable - related party | ( |
) | ( |
) | |||
| Net cash provided by financing activities | |||||||
| Net change in cash | |||||||
| Cash, beginning of period | |||||||
| Cash, end of period | $ | $ | |||||
| Supplemental disclosure of cash and non-cash transactions: | |||||||
| Cash paid for interest | $ | $ | |||||
| Cash paid for income taxes | $ | $ | |||||
| Noncash investing and financing activities: | |||||||
| Right of use asset for lease liability | $ | $ | |||||
| Transfer from device parts inventory to fixed assets | $ | $ | |||||
| Net assets on consolidation of RAD G | $ | $ | |||||
| Conversion of convertible notes and interest to shares of common stock | $ | $ | |||||
| Release of derivative liability on conversion of convertible notes payable | $ | $ | |||||
| Derivative debt discount on revaluation of loan amendment | $ | $ | |||||
| Settlement of convertible notes payable to accounts payable and accrued expenses | $ | $ | |||||
| Exchange of notes payable for Series F preferred shares | $ | $ | |||||
| Discount applied to face value of loans | $ | $ | |||||
| Warrants issued as part of debt issuance | $ | $ | |||||
| Exercise of warrants | $ | $ | |||||
| Series F preferred shares issued for debt | $ | $ | |||||
| Cancellation of Series E preferred shares | $ | $ | |||||
| Issuance of Series G preferred shares as payment on incentive plan payable | $ | $ | |||||
| Series F preferred shares converted to common shares | $ | $ | |||||
| Series F preferred shares issued on exercise of warrants | $ | $ | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 7 -
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 an LLC. On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc., through the issuance of 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 shares of AITX Series E Preferred Stock and shares of Series F Convertible Preferred Stock. AITX’s prior business focus was transportation services, and AITX 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. As a result, 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.
AITX now fully owns three subsidiaries: 1 - Robotic Assistance Devices Inc (‘RAD’), currently the primary operating entity; 2 – Robotic Assistance Devices Group Inc (‘RAD-G’), a company developing technology to be used as an OEM by other companies as well as RAD; 3 – Robotic Devices Mobile Inc (‘RAD-M’), a company that develops mobile robotic solutions such as ROAMEO.
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 nine months ended November 30, 2021, the Company
had negative cash flow from operating activities of $(). As of November 30, 2021, the Company has an accumulated deficit of
$(), and negative working capital of $
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:
The company began raising money through it’s S-3 this quarter and made improvements in paying off debt, investing in inventory and at November 30, 2021 had $4.1 million of cash on hard. Management continues to raise money through the S-3 and expects to raise approximately another $5 million before the end of this fiscal year. 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 through to December 31, 2021 has raised approximately $8.5 million net of issuance costs through the sale of its common shares and $9.4 in proceeds from debt issuances.
- 8 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company is on track to achieve it’s 2022 fiscal year revenue projections of approximately 4 to 5 times greater than 2021 fiscal year’s revenues. The company again projects 2023 fiscal year revenues to achieve similar growth. This projection is based on the following factors: 1. A continuously improving sales pipeline that yields progressive quarterly sales increases; 2. Implementation of ‘quick ship’ options that allow some solutions to ship off the shelf in 24 hours; 3. Continued improvements in production, inventory handling, forecasting that allows more devices to be ready to ship in a quicker manner; 3. Continued significant improvements in device technology that streamlines deployments and ensures simple scalability; 4. Commercial release of several new solutions, specifically including: ‘RAD Light My Way™’, RAD’s first QUFV (‘robodog’), launch of RAD G’s OEM program, launch of the newly announced delivery vehicle. However, there can be no assurance that the revenues will increase to the extent projected or that the anticipated improvements will actually occur.
The company has, as forecast previously, achieved an employee count of 71 employees at the close of this reporting quarter. This expansion plan will require the Company to continue to increase SG&A/R&D expenses, including the hiring of additional staffing, which the Company expects to finish this next fiscal year with between 80 – 90 employees.
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 1, 2021. 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., and Robotic Assistance Devices Mobile, Inc. 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 nine months ended November 30, 2021 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.
Reclassifications
Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
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 credit losses. 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 $
- 9 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 both November 30, 2021 and February 28, 2021 there was no valuation reserve.
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 three 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.
| Computer equipment | ||
| Office equipment | ||
| Demo Devices | ||
| Vehicles | ||
| Leasehold improvements |
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 November 30, 2021 and February 28, 2021, 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.
- 10 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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:
| ● | 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. Refer to Note 4 – Revenue from Contracts with Customers for additional information.
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.
- 11 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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 CEO and 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 and 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).
- 12 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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:
| ● | 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:
| Amount at | Fair Value Measurement Using | ||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||
| November 30, 2021 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
| Derivative liability – conversion features pursuant to convertible notes payable | $ | $ | $ | $ | |||||||||
| February 28, 2021 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
| Derivative liability – conversion features pursuant to convertible notes payable | $ | $ | $ | $ | |||||||||
See Note 12 for specific inputs used in the multinomial lattice model used in determining fair value.
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.
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.
- 13 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Recently Issued Accounting Pronouncements
Accounting for Income Taxes
In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard will be effective for us beginning July 1, 2021, with early adoption permitted. The Company does not expect any material impact of this standard in our consolidated financial statements, including accounting policies, processes, and systems.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Company is currently assessing the impact this accounting standard will have on its financial statements and related disclosures. The Company adopted this on March 1, 2020.
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 November 30, 2021 |
Nine Months Ended November 30, 2021 |
||||||
| Device rental activities | $ | $ | |||||
| Direct sales of goods and services | |||||||
| $ | $ | ||||||
| Three Months Ended November 30, 2020 |
Nine Months Ended November 30, 2020 |
||||||
| Device rental activities | $ | $ | |||||
| Direct sales of goods and services | |||||||
| $ | $ | ||||||
- 14 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. REVENUE EARNING DEVICES
Revenue earning devices consisted of the following:
| November 30, 2021 | February 28, 2021 | ||||||
| Revenue earning devices | $ | $ | |||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| $ | $ | ||||||
During the nine months ended November 30, 2021, the
Company made total additions through inventory transfers to revenue earning devices of $
During the nine months ended November 30, 2021 the
Company sold a revenue earning device having a net book value of $
Depreciation expense was $
6. FIXED ASSETS
Fixed assets consisted of the following:
| November 30, 2021 | February 28, 2021 | ||||||
| Vehicles | $ | $ | |||||
| Demo devices | |||||||
| Computer equipment | |||||||
| Office equipment | |||||||
| Leasehold improvements | |||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| $ | $ | ||||||
During the three months and nine months ended November
30, 2021 the Company made additions of $
During the nine months ended November 30, 2021 the
Company sold a vehicle having a net book value of $ for fair value proceeds of $
During the nine months ended November 30, 2020, the
Company disposed of office equipment having an original cost of $
Depreciation expense was $
7. 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.
Most leases include one or more options to renew, with renewal terms that can extend the lease term by 10 years or more. The exercise of lease renewal options is at our sole discretion. 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.
- 15 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Below is a summary of our lease assets and liabilities at November 30, 2021 and February 28, 2021.
| Leases | Classification | November 30, 2021 | February 28, 2021 | ||||||
| Assets | |||||||||
| Operating | Operating Lease Assets | $ | $ | ||||||
| Liabilities | |||||||||
| Current | |||||||||
| Operating | Current Operating Lease Liability | $ | $ | ||||||
| Noncurrent | |||||||||
| Operating | Noncurrent Operating Lease Liabilities | ||||||||
| Total lease liabilities | $ | $ | |||||||
Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% based on the information available at commencement date in determining the present value of lease payments.
The weighted average remaining lease term is years.
CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
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 $
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 $
On May 9, 2019 the Company entered into two similar arrangements with two investors:
| (1) | The investor would pay up to $ | |
| (2) | The investor would pay up to $ |
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.
- 16 -
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 $
On December 30, 2019 the Company entered into another
similar arrangement with a new investor whereby the investor would advance up to $
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 $
On July 1, 2020 the Company entered into a similar
agreement with the first investor whereby the investor would pay up to $
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 $
In summary of all agreements mentioned above if in
the event that at least
On March 1, 2021 the first investor referred to above whose aggregate investment
is $
| 1) | The rate payment was reduced from | |
| 2) | The asset disposition % (see below) was reduced from |
In consideration for the above changes, the investor
received 40 Series F Convertible Preferred Stock and a warrant to purchase
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 November 30, 2021, the Company has not yet completed
its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these
agreements. The Company expects to have completed its analysis of the expected cash flows prior to the filing of the year end February
28, 2023 filing. As of November 30, 2021, and February 28, 2021, the balances under these agreements were $
- 17 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For the three months ended November 30, 2021, the
Company has received $0 related to the deferred payment obligation as the balance remains $
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 November 30, 2021, the Company has accrued $
9. CONVERTIBLE NOTES PAYABLE
Convertible notes payable consisted of the following:
| Balance | Balance | |||||||||||||
| Interest | Conversion | November 30, | February 28, | |||||||||||
| Issued | Maturity | Rate | Rate per Share | 2021 | 2021 | |||||||||
| 10% | $ |
(2) | ||||||||||||
| 8% | 35% discount | (1) | ||||||||||||
| 12% | $ |
|||||||||||||
| 10% | $ |
(3) | ||||||||||||
| Less: current portion of convertible notes payable | ( |
) | ( |
) | ||||||||||
| Less: discount on noncurrent convertible notes payable | ||||||||||||||
| Noncurrent convertible notes payable, net of discount | $ | $ | ||||||||||||
| Current portion of convertible notes payable | $ | $ | ||||||||||||
| Less: discount on current portion of convertible notes payable | ( |
) | ||||||||||||
| Current portion of convertible notes payable, net of discount | $ | $ | ||||||||||||
__________
| * | |
| (1) | |
| (2) | |
| (3) |
During both the three months ended November 30, 2021 and 2020, the Company incurred original issue discounts of $0, and debt discounts from derivative liabilities of $438,835 and $0, respectively related to new or re-valued convertible notes payable. During the three months ended November 30, 2021 and 2020, the Company recognized interest expense related to the amortization of debt discount of $694,855 and $23,957, respectively. The Company recorded penalty interest of $0 and $494,428 during the three months ended November 30, 2021 and November 30, 2020, respectively.
- 18 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During both the nine months ended November 30, 2021 and 2020, the Company incurred original issue discounts of $0 and debt discounts from derivative liabilities of $438,835 and $0, respectively related to new or re-valued convertible notes payable. During the nine months ended November 30, 2021 and 2020, the Company recognized interest expense related to the amortization of debt discount of $775,986 and $23,957, respectively. The Company recorded penalty interest of $0 and $939,705 during the nine months ended November 30, 2021 and November 30, 2020, respectively.
All the notes above are unsecured. As of November 30, 2021 and February 28, 2021, the Company had total accrued interest payable of $27,686 and $49,764, respectively, all of which is classified as current.
During the nine months ended November 30, 2021, the Company also had the following convertible note activity:
| ● | the Company amended the January 27, 2021 agreement with the lender whereby the conversion rate was changed from $0.10 to $0.03 as a result of a dilutive issuance. This resulted a derivative discount of $438,835 and a loss on extinguishment of $360,125. |
| ● |
holders of certain convertible notes payable elected to convert a total of $825,000 of principal and $71,955 accrued interest, and $1,750 of fees into 31,042,436 shares of common stock. No gain or loss was recognized on conversions as these conversions occurred within the terms of the agreement that provided for conversion.
|
| ● | the conversion rate of the January 19, 2021 note included above was reduced to $0.027 due to the dilutive issuance provision in the January 19, 2021 agreement. |
10. RELATED PARTY TRANSACTIONS
For the nine months ended November 30, 2021, the Company
repaid net advances of $
Pursuant to the amended Employment Agreement with
its Chief Executive Officer in Note 14, the Company accrued $
During the three and nine months ended November
30, 2021 the Company was charged $
11. OTHER DEBT – VEHICLE LOAN
In December 2016, RAD entered into a vehicle loan
for $
- 19 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12. LOANS PAYABLE
Loans payable at November 30, 2021 consisted of the following:
Schedule of loans payable
| Annual | ||||||||||
| Date | Maturity | Description | Principal | Interest Rate | ||||||
| June 11, 2019 | Promissory note | (3) | $ | 25% | * | |||||
| September 1, 2018 | Promissory note | (4) | — | 25% | ||||||
| August 16, 2019 | Promissory note | (1) | — | 25% | ||||||
| October 1, 2018 | Promissory note | (4) | — | 25% | ||||||
| October 11, 2019 | Promissory note | 20% | * | |||||||
| June 30, 2019 | Promissory note | (2) | 15% | * | ||||||
| January 24, 2021 | Loan | (8) | — | 11% | * | |||||
| June 30, 2019 | Promissory note | (5) | 15% | * | ||||||
| June 30, 2019 | Promissory note | (6) | 15% | * | ||||||
| June 26, 2020 | Promissory note | (9) | 15% | * | ||||||
| June 24, 2020 | Promissory note | (13) | 15% | * | ||||||
| January 30, 2021 | Promissory note | (15) | 15% | * | ||||||
| February 27, 2021 | Promissory note | (16) | 15% | * | ||||||
| April 16, 2021 | Promissory note | (17) | 15% | * | ||||||
| May 12, 2021 | Promissory note | (18) | 15% | * | ||||||
| May 22, 2021 | Promissory note | (19) | 15% | * | ||||||
| June 2, 2021 | Promissory note | (23) | 15% | * | ||||||
| June 9, 2021 | Promissory note | (24) | 15% | * | ||||||
| June 12, 2021 | Promissory note | (25) | 15% | * | ||||||
| June 16, 2021 | Promissory note | (26) | 15% | * | ||||||
| April 3, 2021 | Promissory note | (20) | 20% | * | ||||||
| August 13, 2021 | Promissory note | (22) | — | 20% | ||||||
| September 8, 2021 | Promissory note | (27) | — | 20% | ||||||
| September 15, 2022 | Promissory note | (28) | 10% | |||||||
| March 6, 2023 | Promissory note | (29) | 12% | |||||||
| November 12, 2023 | Promissory note | (30) | 12% | |||||||
| October 23, 2022 | Promissory note | (31) | 15.5% | |||||||
| November 23, 2023 | Promissory note | (32) | 15% | |||||||
| December 10, 2023 | Promissory note | (33) | 12% | |||||||
| December 10, 2023 | Promissory note | (34) | 12% | |||||||
| December 10, 2023 | Promissory note | (35) | 12% | |||||||
| December 10, 2023 | Promissory note | (36) | 12% | |||||||
| December 14, 2023 | Promissory note | (37) | 12% | |||||||
| December 14, 2023 | Promissory note | (38) | — | 12% | ||||||
| December 30, 2023 | Promissory note | (39) | 12% | |||||||
| December 31, 2024 | Promissory note | (40) | 12% | |||||||
| December 31, 2024 | Promissory note | (41) | 12% | |||||||
| January 14, 2024 | Promissory note | (42) | 12% | |||||||
| February 22, 2022 | Promissory note | (43) | 12% | |||||||
| March 1, 2022 | Promissory note | (10) | 12% | |||||||
| March 23, 2022 | Promissory note | (11) | — | 0% | ||||||
| March 23, 2022 | Promissory note | (12) | — | 0% | ||||||
| June 8, 2022 | Promissory note | (44) | 12% | |||||||
| July 26, 2026 | Promissory note | (45) | 7% | |||||||
| September 14, 2022 | Promissory note | (46) | 12% | |||||||
| $ | ||||||||||
| Less current portion of loans payable | ) | |||||||||
| Less discount on loans payable | ( |
) | ||||||||
| Loans payable | $ | |||||||||
| Current portion of loans payable | $ | |||||||||
| Less discount on loans payable | ( |
) | ||||||||
| Current portion of loans payable, net of discount | $ | |||||||||
- 20 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
__________
| * | Note is in default. No notice has been given by the note holder to the Company at the time of issuance of these financial statements. |
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (8) | |
| (9) | |
| (10) | |
| (11) | |
| (12) | |
| (13) |
- 21 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (15) | |
| (16) | |
| (17) | |
| (18) | |
| (19) | |
| (20) | |
| (21) | |
| (22) | |
| (23) | |
| (24) | |
| (25) | |
| (26) | |
| (27) | |
| (28) | |
| (29) | |
| (30) | |
| (31) |
- 22 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (32) | |
| (33) | |
| (34) | |
| (35) | |
| (36) | |
| (37) | |
| (38) | |
| (39) | |
| (40) | |
| (41) |
- 23 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (42) | |
| (43) | |
| (44) | |
| (45) | |
| (46) |
13. DERIVATIVE LIABILITIES
As of November 30, 2021, the Company revalued the fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible notes payable and determined that it had a total derivative liability of $7,299.
The Company estimated the fair value of the derivative liabilities using the multinomial lattice model using the following key assumptions during the three months ended November 30, 2021:
Schedule of derivative liabilities using the Monte-Carlo
| Strike price | $ - $ |
| Fair value of Company common stock | $ - $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) | - |
During the three months ended November 30, 2021, and
2020, the Company released $
During the nine months ended November 30, 2021, and
2020, the Company released $
- 24 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The changes in the derivative liabilities (Level 3 financial instruments) measured at fair value on a recurring basis for the nine months ended November 30, 2021 were as follows:
Schedule of level 3 financial instruments
| Balance as of February 28, 2021 | $ | ||
| Reduction of derivative liability due to debt settlement | ( |
) | |
| Derivative discount on loan amendment | |||
| Change in fair value of derivative liabilities | ( |
) | |
| Balance as of November 30, 2021 | $ |
14. STOCKHOLDERS’ EQUITY (DEFICIT)
Summary of Preferred Stock Activity
Series E Preferred Stock
During the nine months ended November 30, 2021 Series E shareholders had the following activity:
| - | A shareholder cancelled 1,000,000 Class E shares. The company recorded an adjustment to paid in capital. |
Series F Preferred Stock
During the nine months ended November 30, 2021 Series F shareholders had the following activity:
| - | 40 Series F Preferred Shares and a warrant to purchase 367 Series F Preferred Shares with a five-year term and an exercise price of $1.00 were issued to an investor in exchange for amending their deferred variable payment obligation agreement as disclosed in Note 8. 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. | |
| - | The warrant holder exercised warrant to acquire 38 Series F Preferred Shares. | |
| - | The shareholder above converted 78 Series F Preferred Shares into 316,345,908 common shares. | |
| - | Two Series F Preferred shareholders exchanged 83 Series F Preferred Shares for two promissory notes as disclosed in point (11) and (12) in Note 12 on March 23, 2021. The notes are non-interest bearing, have a one-year maturity and total $7,546,775. These notes were subsequently exchanged on June 2, 2021 for a total of 116,104.232 common shares. | |
| - | On July 12, 2021, the former director agreed to surrender his remaining 184 Series F preferred shares in exchange for a note payable from the Company of $4,000,160 bearing interest at 7% per annum with a 5 year term, maturing July 12, 2026. | |
| - | On August 24, 2021the Series F preferred warrant holder agreed to not exercise his warrant privileges on his remaining 329 warrant shares before September 1, 2023. |
Summary of Preferred Stock Warrant Activity
| Number of Series F Preferred Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at March 1, 2021 | — | |||||
| Issued | $ |
|||||
| Exercised | ( |
) | $ |
|||
| Forfeited and cancelled | — | — | — | |||
| Outstanding at November 30, 2021 | $ |
- 25 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
On July 22, 2020 the board of directors passed a resolution whereby the sole director agreed to return for cancellation, 816 of his 1000 Series F preferred shares to the Company.
On December 1, 2020 the company issued 110 Series F shares having a fair value of $362,084 to a consultant for services previously rendered which was recorded as professional fees with a corresponding adjustment to accrued liabilities.
Unissued Series F Preferred Stock
During the quarter ending November 30, 2021 the Company redeemed (through cancellation) 19 shares of issuable Series F preferred stock having a value of $ 74,984 for $500,000, with the difference of $425,016 recorded as a dividend. At November 30, 2021 there remains 46 issuable Series F preferred stock at a value of $99,086. At February 28, 2021 there was 65 issuable Series F preferred stock at a value of $174,070.
Series G Preferred Stock
| - | ||
| - |
Summary of Common Stock Activity
During the nine months ended November 30, 2021 common shareholders had the following activity:
| - | ||
| - | holders of certain convertible notes payable elected to convert a total of $ | |
| - | in June 2021, lenders (see note 12) exchanged debt having a face value of $ | |
| - | the Company entered into an investor relations contract whereby shares are issuable as of November 30, 2021. Stock based compensation of $ was recorded in the period ended November 30, 2021. | |
| - | the Company issued common shares with gross proceeds of $ | |
| - | warrant holders exercised warrants to acquire 411,000,000 shares on a cashless basis for 395,022,447 common shares with a corresponding adjustment to paid in capital. |
- 26 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Summary of Common Stock Warrant Activity
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at March 1, 2021 | $ |
|||||
| Issued | $ |
|||||
| Exercised | ( |
) | $ |
|||
| Forfeited and cancelled | ( |
— | — | |||
| Outstanding at November 30, 2021 | $ |
For both the three and nine months ended November 30, 2021 and November 30, 2020 the Company recorded a total of $ and $ respectively, to stock-based compensation for options, warrants and shares with a corresponding adjustment to additional paid-in capital.
During the nine months ended November 30, 2021 warrant holders had the following activity:
| - | ||
| - | in conjunction with debt disclosed in Note 12 (44), |
Schedule of black scholes model with assumption strike price
| Strike price | $ - $ |
| Fair value of Company’s common stock | $ - $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
Summary of Common Stock Option Activity
On April 9, 2021 the Company entered into an Employment Agreement with Chief Executive Officer, Steven Reinharz with a three- year term under the following terms whereby stock option awards will be granted if certain conditions are met :
| - | A stock option award (option 1) will be granted to the employee to purchase shares at an exercise price of $ $ per share if the trading share price of the Company reaches an average of $ 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 shares at an exercise price of $ $ per share if the trading share price of the Company reaches an average of $ per share for ten days over a 30 day trading period. |
| Objective #3: | Sales in any fiscal quarter exceed the total sales in fiscal year 2021 for the first time. |
| Award #3: | Five hundred (500) shares of Series G preferred stock. |
| Objective #4: | One hundred fifty (150) devices are deployed in the marketplace. |
| Award #4: | Two hundred fifty (250) shares of Series G preferred stock. |
- 27 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| Objective #5: | Year-to-date sales at any point in fiscal year 2022 exceed One Million Dollars ($1,000,000). |
| Award #5: | Two hundred fifty (250) shares of Series G preferred stock. |
| Objective #6: | The price per share of common stock has increased to and maintains a price of Ten Cents ($0.10) or more for ten (10) days in a thirty (30) day period. |
| Award #6: | Two hundred fifty (250) shares of Series G preferred stock. |
| Objective #7: | The price per share of common stock has increased to and maintains a price of Twenty Cents ($0.20) or more for ten (10) days in a thirty (30) day period. |
| Award #7: | Five hundred (500) shares of Series G preferred stock. |
| Objective #8: | The RAD 3.0 products are launched into the marketplace by November 30, 2021. |
| Award #8: | Five hundred (500) shares of Series G preferred stock. |
| Objective #9: | RAD receives an order for fifty (50) units from a single customer. |
| Award #9: | Five hundred (500) shares of Series G preferred stock. |
The fair value of the first two awards was obtained through the use of the Monte Carlo method was $ with a charge to stock- based compensation and a corresponding charge to paid in capital. The fair value of the remaining rewards was determined by calculating the vesting amounts of each reward and then determining for each reporting period the requisite service rendered and applying that against the cash redemption value of the number of shares of Series G issuable for each tier in the agreement. For the period ended November 30, 2021 that amount totaled $1,979,500 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. With the achievement of objectives 3,4,5 and 8 of the equity awards described above the CEO was granted 1,500 Series G Preferred shares which were redeemed in the reporting period for $1,500,000 in cash. As part of the grant, the Company is responsible for grossing up the award value and has accrued additional compensation for the estimated taxes to be paid by the executive.
On April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved and adopted the 2021 Incentive Stock Plan (the “2021 Plan”).
The purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors, executives, selected Employees and Consultants, and reward participants for making major contributions to the success of the Company. The 2021 Plan authorizes the granting of stock options, restricted stock, restricted stock units, stock appreciation rights and stock awards. A total of five million (5,000,000) shares of common stock may be issued under the 2021 Plan. All awards under the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback or similar policy of the Company in effect from time to time, as well as any similar provisions of applicable law, which could in certain circumstances require repayment or forfeiture of awards or any shares of stock or other cash or property received with respect to the awards, including any value received from a disposition of the shares acquired upon payment of the awards. The 2021 Plan will be administered by the Board or any Committee authorized by the Board, if applicable, which will have the sole authority to, among other things: construe and interpret the 2021 Plan; make rules and regulations relating to the administration of the 2021 Plan; select participants; and establish the terms and conditions of awards, all in accordance with the terms of the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the Board. Termination will not affect awards then outstanding.
- 28 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
In March 2021, the Company settled with former landlords
for $
In April 2019 the principals of WeSecure filed a lawsuit
against the Company in California Superior Court seeking a total of $
The related legal costs are expensed as incurred.
Purchase Commitment
On August 15 ,2021 the Company entered into a memorandum of understanding with Ghost Robotics whereby the Company will modify and resell a Ghost Robotics (“Ghost”) product (“V50”) in development in exchange for the following:
| - | the Company will pay Ghost a non refundable marketing fee of $ | |
| - | the Company will purchase $ | |
| - | 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. |
Operating Lease
On December 18, 2020,
On March 10, 2021,
- 29 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
| Maturity of Lease Liabilities | Operating Leases |
||
| November 30, 2022 | $ | ||
| November 30, 2023 | |||
| November 30, 2024 | |||
| November 30, 2025 | |||
| November 30, 2026 | |||
| November 30, 2027 and after | |||
| Total lease payments | |||
| Less: Interest | ( |
) | |
| Present value of lease liabilities | $ | ||
The net income (loss) per common share amounts were determined as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||
| November 30, | November 30, | ||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||
| Numerator: | |||||||||||||
| Net income (loss) available to common shareholders | $ | ( |
) | $ | $ | ( |
) | $ | ( |
||||
| Effect of common stock equivalents: | |||||||||||||
| Add: interest expense on convertible debt | |||||||||||||
| Add Penalty interest on convertible debt | |||||||||||||
| Add (less) loss (gain) on change of derivative liabilities | ( |
) | ( |
) | |||||||||
| Net income (loss) adjusted for common stock equivalents | ( |
) | ( |
) | ( |
) | ( |
) | |||||
| Denominator: | |||||||||||||
| Weighted average shares – basic | |||||||||||||
| Net income (loss) per share – basic | $ | $ | $ | ( |
) | $ | |||||||
| Denominator: | |||||||||||||
| Weighted average shares – diluted | |||||||||||||
| Net income (loss) per share – diluted | $ | $ | $ | ( |
) | $ | |||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||
| November 30, | November 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Convertible notes and accrued interest | ||||||||
| Convertible Class F Preferred shares | ||||||||
| Stock options and warrants | ||||||||
| Total | ||||||||
- 30 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
16. SUBSEQUENT EVENTS
Subsequent to November 30, 2021 through to January 14, 2022:
- On December 26, 2021 the Company and GHS Investments, LLC (“the investor”) entered into a share purchase agreement whereby the investor would purchase up to shares of the Company’s common stock over the next year. The investor would receive % of the purchased shares at a price of 85% of the lowest volume weighted average price over the ten days prior to purchase date. Pursuant to this agreement the investor has so far acquired 100,000,000 common shares for net proceeds of $ .
- In December 2021,
- On January 3, 2022 the shareholders approved a proposed amendment effectuating the policy that the Corporation will not institute a reverse stock split of its Common Stock before January 1, 2024 unless the Corporation uplists to a NASDAQ exchange or the NYSE.
- 31 -
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 months and nine months ended November 30, 2021 and November 30, 2020 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, 2021, as filed on June 1, 2021 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. | |
| 4. | Creation and deployment new solutions such as ‘RAD Light My Way’, which allows end user personnel to activate RAD security devices to improve their security, situational awareness, deploy a unique deterrent and connect to monitoring security staff as may be available. |
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. |
- 32 -
Management Discussion and Analysis
Selected Results Per Quarter for Fiscal 2021
| Q3 | Q2 | Q1 | ||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | ||||||||
| November 30, 2021 | August 31, 2021 | May 31, 2021 | ||||||||
| Revenues | $ | 373,897 | $ | 141,572 | $ | 560,334 | ||||
| Gross profit | 230,473 | 99,618 | 449,408 | |||||||
| Operating expenses | 5,118,000 | 3,383,990 | 2,600,954 | |||||||
| Loss from operations | (4,887,527 | ) | (3,284,372 | ) | (2,151,546 | ) | ||||
| Other income (expense), net | (2,206,915 | ) | (1,548,001 | ) | (33,753,372 | ) | ||||
| Net income (loss) | $ | (7,094,442 | ) | $ | (4,832,373 | ) | $ | (35,904,918 | ) | |
Sales grew by 166% in Q3 over Q2. This is due to direct sales of new products increasing by $190,347 and device rental activities increasing by $41,978. Q1 sales were higher due to large direct sales during that quarter of $434,342.
This sales growth is a result of an expansion of our customer base and product line and our ability to ramp up production to meet demand. We expect to continue this growth trend in the fourth quarter and in our next fiscal year as projects accelerate through the sales funnel. We expect an increase to the rate of growth in 2023 as we start to deliver on new products.
Operating expense increases considerably in Q3 and Q2 mostly as a result of $1,979,500 in equity awards and the new production facility which commenced in May 2021 of this fiscal year.
Other expenses increased due to the Series F Preferred Stock and debt settlements that have been occurring throughout the fiscal year.
Results of Operations for the Three Months Ended November 30, 2021 and 2020
The following table shows our results of operations for the three months ended November 30, 2021 and 2020. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Revenue
| Period | Change | |||||||||||
| Three Months Ended November 30, 2021 |
Three Months Ended November 31, 2020 |
Dollars | Percentage | |||||||||
| Revenues | $ | 373,897 | $ | 119,700 | $ | 254,197 | 212% | |||||
| Gross profit | 230,473 | 95,018 | 135,455 | 143% | ||||||||
| Operating expenses | 5,118,000 | 995,092 | 4,122,908 | 414% | ||||||||
| Loss from operations | (4,887,527 | ) | (900,074 | ) | (3,987,453 | ) | 443% | |||||
| Other income (expense), net | (2,206,915 | ) | 4,308,379 | (6,515,294 | ) | (151% | ) | |||||
| Net loss | $ | (7,094,442 | ) | $ | 3,408,305 | $ | (10,502,747 | ) | (308% | ) | ||
- 33 -
The following table presents revenues from contracts with customers disaggregated by product/service:
| Three Months Ended | Three Months Ended | Change | ||||||||||
| November 30, 2021 | November 30, 2020 | Dollars | Percentage | |||||||||
| Device rental activities | $ | 165,353 | $ | 84,600 | $ | 80,753 | 95% | |||||
| Direct sales of goods and services | 208,544 | 35,100 | 173,444 | 494% | ||||||||
| $ | 373,897 | $ | 119,700 | $ | 254,197 | 212% | ||||||
Total revenue for the three-month period ended November 30, 2021 was $373,897 which represented an increase of $254,197 compared to total revenue of $119,700 for the three months ended November 30, 2020. This large increase is a result of increases in rental activities of $80,753 and direct sales of goods and services of $173,444 as the Company continues to grow its business.
Gross profit
Total gross profit for the three-month period ended November 30, 2021 was $230,473 which represented an increase of $135,455, compared to gross profit of $95,018 for the three months ended November 30, 2020. The increase resulted primarily from the increased revenues noted above. The gross profit % of 62% for the three-month period ended November 30, 2021 was lower than the margin of 79% for the prior year’s corresponding period due to different sales mix.
Operating Expenses
| Period | Change | |||||||||||
| Three Months Ended November 30, 2021 |
Three Months Ended November 31, 2020 |
Dollars | Percentage | |||||||||
| Research and development | $ | 982,446 | $ | 20,624 | $ | 961,822 | 4,664% | |||||
| General and administrative | 3,964,512 | 941,323 | 3,023,189 | 321% | ||||||||
| Depreciation and amortization | 67,927 | 30,145 | 37,782 | 125% | ||||||||
| Operating lease cost and rent | 103,115 | 3,000 | 100,115 | 3,337% | ||||||||
| Operating expenses | $ | 5,118,000 | $ | 995,092 | $ | 4,122,908 | 414% | |||||
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 November 30, 2021 and November 30, 2020, were $5,118,000 and $995,092, respectively. The overall increase of $4,122,908 was primarily attributable to the following changes in operating expenses of:
| ● | General and administrative expenses increased by $3,023,189. In comparing the three months ended November 30, 2021 and November 30, 2020 this significant increase was primarily due to increases in advertising and promotion by $47,250, professional fees by $184,908, wages and salaries by $1,765,645 (including bonus expense to CEO of $1,311,739), stock-based compensation by $957,500, and travel by $102,809 and with the remaining increase and offsets distributed amongst other G&A accounts. These large increases may be explained due to the large ramp up in costs this fiscal year to operate the new manufacturing facility and the hiring of 18 additional full-time employees. In addition, the expenses of the prior year’s corresponding quarter were also much lower due to the Covid 19 pandemic and the limited cash available at that time. |
| ● | Research and development increased by $961,822 due to funding development of new products as well as upgrades of existing products. |
| ● | Depreciation and amortization increased by $37,782 due to increases in fixed assets and revenue earning devices. |
| ● | Operating lease cost and rent increased by $100,115 due to the three new leases including the new manufacturing facility for the three months ended November 30, 2021 as compared to a month-to-month lease of only office space for the three months ended November 30, 2020. |
- 34 -
Other Income (Expense)
Other income (expense) during the three months ended November 30, 2021 and November 30, 2020, was ($2,206,915) and $4,308,379, respectively. The $6,515,294 increase in other expense was primarily attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.
| ● | In comparing the three months ended November 30, 2021 and the three months ended November 30, 2020, the change in fair value of derivative liabilities decreased by $5,354,622 was solely the change in fair value for the three months ended November 30, 2020y due to the re-valuation of the derivative liability on convertible notes and accrued interest based on the change in the market price of the Company’s common stock. The valuation of the derivatives associated with our convertible notes and accrued interest of the notes is dependent upon a number of estimates developed by management. Included in those estimates are the timing and availability of common stock underlying the conversion of the notes and accrued interest. Our notes generally contain provisions such that the holders are barred from conversion of any amount of principal or interest should that conversion cause their ownership of common stock to exceed 4.99% of the then outstanding common stock of the Company. Because of this, the amount of the derivative can at times be limited due to this factor. In the quarter ended November 30, 2020, the reduction of convertible notes and accrued interest through conversions as well as an increase in the subsequent redemption assumption due to the settlement arrangements describe in Note 8. The result of this was a significant decrease in the liability reported as of November 30, 2020 and an increase in the change in fair value of derivative liabilities. |
| ● | Interest expense increased by $973,979 due to a significant increase loans payable, most significantly new loans totaling over $19 million, including loans from the Series F preferred share exchanges, and other debt exchanges. |
| ● | Loss on settlement of debt was $156,661 for the quarter ended November 30, 2021 and a $30,032 gain in the prior year’s quarter. The company settled defaulted debt at a loss this quarter. |
Net loss
We had a net loss of $7,094,442 for the three months ended November 30, 2021, compared to net income of $3,408,305 for the three months ended November 30, 2020. The change is primarily the result of the change in fair value of derivative liabilities and other items discussed above.
Results of Operations for the Nine Months Ended November 30, 2021 and 2020
The following table shows our results of operations for the nine months ended November 30, 2021 and 2020. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Revenue
| Period | Change | |||||||||||
| Nine Months Ended November 30, 2021 |
Nine Months Ended November 31, 2020 |
Dollars | Percentage | |||||||||
| Revenues | $ | 1,075,803 | $ | 259,103 | $ | $816,700 | 315% | |||||
| Gross profit | 779,499 | 189,120 | 590,379 | 312% | ||||||||
| Operating expenses | 11,102,944 | 2,095,823 | 9,007,121 | 430% | ||||||||
| Loss from operations | (10,323,445 | ) | (1,906,703 | ) | (8,416,742 | ) | 441% | |||||
| Other income (expense), net | (37,508,288 | ) | (1,727,957 | ) | (35,780,331 | ) | (2,071% | ) | ||||
| Net loss | $ | (47,831,733 | ) | $ | (3,634,660 | ) | $ | (44,197,073 | ) | (1,216% | ) | |
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The following table presents revenues from contracts with customers disaggregated by product/service:
| Nine Months Ended | Nine Months Ended | Change | ||||||||||
| November 30, 2021 | November 30, 2020 | Dollars | Percentage | |||||||||
| Device rental activities | $ | 383,434 | $ | 214,803 | $ | 168,631 | 79% | |||||
| Direct sales of goods and services | 692,369 | 44,300 | 648,069 | 1,463% | ||||||||
| $ | 1,075,803 | $ | 259,103 | $ | 816,700 | 315% | ||||||
Total revenue for the nine-month period ended November 30, 2021 was $1,075,803 which represented an increase of $816,700 compared to total revenue of $259,103 for the nine months ended November 30, 2020. This large increase in direct sales is a result of unit sales which includes sales of new units totaling $575,813 with the remaining increases in training revenue. Rental activities increased by 79% as well as the Company continues to grow its business.
Gross profit
Total gross profit for the nine-month period ended November 30, 2021 was $779,499 which represented an increase of $590,379, compared to gross profit of $189,120 for the nine months ended November 30, 2020. The increase resulted primarily from the increased revenues noted above. The gross profit % of 72% for the nine-month period ended November 30, 2021 which was consistent with the 73% gross profit for the prior year’s corresponding period.
Operating Expenses
| Period | Change | |||||||||||
| Nine Months Ended November 30, 2021 |
Nine Months Ended November 31, 2020 |
Dollars | Percentage | |||||||||
| Research and development | $ | 2,316,383 | $ | 211,025 | $ | 2,105,358 | 998% | |||||
| General and administrative | 8,455,224 | 1,780,824 | 6,674,400 | 375% | ||||||||
| Depreciation and amortization | 153,261 | 88,621 | 64,640 | 73% | ||||||||
| Operating lease cost and rent | 207,201 | 14,800 | 192,401 | 1,300% | ||||||||
| (Gain) loss on disposal of fixed assets | (29,125 | ) | 553 | (29,678 | ) | 5,367% | ||||||
| Operating expenses | $ | 11,102,944 | $ | 2,095,823 | $ | 9,007,121 | 430% | |||||
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 nine-month period ended November 30, 2021 and November 30, 2020, were $11,102,944 and $2,095,823, respectively. The overall increase of $9,007,121 was primarily attributable to the following changes in operating expenses of:
| ● | General and administrative expenses increased by $6,674,400. In comparing the nine months ended November 30, 2021 and November 30, 2020 this significant increase was primarily due to increases in professional fees by $719,576, wages and salaries $2,994,796 (including bonus to CEO of $1,311,739), stock-based compensation $1,795,966, health insurance $87,303, investor relations $71,250, payments under deferred variable payment obligation $126,492, duty and freight $182,843, office expenses $148,847, advertising and promotion $77,908, bad debts expense $103,900 , software and technology $97,350,warehouse expense $73,362, and travel $278,883 with the remaining increase distributed amongst other G&A accounts. These large increases may be explained due to the large ramp up in costs this year to operate the new manufacturing facility, the hiring of 18 additional full-time employees and the termination costs of the former director. In addition, the expenses of the prior year’s corresponding quarter were also much lower due to the Covid 19 pandemic and the limited cash available at that time. |
| ● | Research and development increased by $2,105,358 due to funding development of new products as well as upgrades of existing products. |
| ● | Depreciation and amortization increased by $64,640 due to increases in fixed assets and revenue earning devices. |
| ● | Operating lease cost and rent increased by $192,401 due to the three new leases including seven months of the new manufacturing facility for the nine months ended November 30, 2021 as compared to a month-to-month lease of office space for the nine months ended November 30, 2020. |
| ● | (Gain) loss on disposal of fixed assets decreased by $29,678 due to a vehicle sold this current quarter. |
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Other Expense
Other expense during the nine months ended November 30, 2021 and November 30, 2020, was $37,508,288 and 1,727,957, respectively. The $35,780,331 increase in other income was attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.
| ● | In comparing the nine months ended November 30, 2021 and the nine months ended November 30, 2020, the change in fair value of derivative liabilities decreased by $654,826 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 as well as reductions in derivative liability as a result of settlements on the underlying debt. Fair value of derivatives was largely affected by the decrease in the market price of the Company’s common stock during the current period as well as the significant reduction in convertible debt and accrued interest that occurred at the end of fiscal 2021 and first nine months of fiscal 2022. |
| ● | Interest expense increased by $2,027,160 due to a significant increase loan payable, most significantly new loans totaling over $19 million, including loans from the Series F preferred share exchanges, and other debt exchanges. |
| ● | Loss on settlement of debt was $33,068,313 the quarter ended November 30, 2021 and a gain of $30,032 in the prior year’s quarter. The amendment of the deferred variable payment obligation referred to in Note 8 led to a $33,015,215 loss which was partially offset by gains from accrued liabilities settlements and the debt exchange for common shares which was partially offset by a loss on the convertible debt amendment that resulted in an overall gain this quarter. This loss on settlement of debt is non-cash and has no effect on the cash flows of the Company. |
Net loss
We had a net loss of $47,831,733 for the nine months ended November 30, 2021, compared to a net loss of $3,634,660 for the nine months ended November 30, 2020. The change is primarily the result of the loss on settlement in the nine months ended November 30, 2021 as well as the large increase in operating cost attributable to the new factory and payroll increases and other items discussed above.
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. For the nine months ended November 30, 2021, we have generated revenue and are trying to achieve positive cash flows from operations
As of November 30, 2021, we had a cash balance of $4,103,864, share proceeds receivable of $ 1,007,349, accounts receivable of $281,007, device parts inventory of $1,336,065 and $7,418,470 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:
| November 30, 2021 | February 28, 2021 | ||||||
| Current assets | $ | 7,120,096 | $ | 1,207,033 | |||
| Current liabilities(1) | 7,418,470 | 4,410,710 | |||||
| Working capital | $ | (298,374 | ) | $ | (3,203,677 | ) | |
__________
| (1) | As of November 30, 2021 and February 28, 2021, current liabilities included approximately $7,299 and $444,466, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms. |
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As of November 30, 2021 and February 28, 2021, we had a cash balance of $4,103,864 and $1,044,418, respectively.
| Nine Months Ended November 30, 2021 |
Nine Months Ended November 30, 2020 |
||||||
| Net cash used in operating activities | $ | (10,434,762 | ) | $ | (1,446,075 | ) | |
| Net cash used in investing activities | $ | (46,751 | ) | $ | (76,577 | ) | |
| Net cash provided by financing activities | $ | 13,540,949 | $ | 1,758,642 | |||
Net cash used in operating activities.
Net cash used in operating activities for the nine months ended November 30, 2021 was ($10,434,762), which included a net loss of ($47,831,733), non-cash activity such as the loss on settlement of debt of $33,068,313, revenue earning device sold and expensed in cost of sales $3,410, bad debts expense $107,022, reduction of right of use asset of $75,609, accretion of lease liability $86,350, stock based compensation of $2,158,050, change in fair value of derivative liabilities of ($372,502), gain on disposal of fixed assets ($29,125) change in operating assets of ($773,791), amortization of debt discount of $2,700,233, increase in related party accrued payroll and interest of $220,140 and depreciation and amortization of $153,261 to derive the uses of cash in operations.
Net cash used in investing activities.
Net cash used in investing activities for the nine months ended November 30, 2021 was ($46,751), which was the purchase of fixed assets of ($34,534), acquisition of trademarks ($26,327), proceeds on disposal of fixed assets of $30,000 and ($15,880) paid for security deposits.
Net cash provided by financing activities.
Net cash provided by financing activities was $13,540,949 for the nine months ended November 30, 2021. This consisted of share proceeds net of issuance costs of $7,463,654, proceeds from loans payable of $9,426,146, reduced by net repayments from loan payable – related party of $812,234, settlement of convertible debt $65,000, repayments on loans payable of $471,617, dividend on redemption on cancelled issuable Series F preferred shares ($500,000) , and Series G preferred shares redeemed as payment on incentive plan ($1,500,000).
Off-Balance Sheet Arrangements
None.
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, 2021 filed with the SEC on June 1, 2021.
Related Party Transactions
For the nine months ended November 30, 2021, the Company repaid net advances of $812,234 from its loan payable-related party. For the nine months ended November 30, 2020 the Company repaid net advances of $344,618. At November 30, 2021, the loan payable-related party was $134,234 and $904,806 at February 28, 2021. Included in the balance due to the related party at November 30, 2021 is $54,000 of deferred salary and interest, $54,000 of which bears interest at 12%. At February 28, 2021, included in the balance due to the related party is $883,710 of deferred salary and interest, $642,000 of which bears interest at 12%. The accrued interest included in loan at November 30, 2021 and November 30, 2020 was $540 and $84,418, respectively.
Pursuant to the amended Employment Agreement with its Chief Executive Officer in Note 14, the Company accrued $1,979,500 of stock-based compensation with a corresponding adjustment to incentive compensation plan payable due to the vesting cost of the equity awards. These awards are payable through the issuance of Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. The Company will classify these awards granted as Series G Preferred Shares as a liability accordingly because of those terms. The Company issued and redeemed 1500 Series G Preferred Shares for $1,500,000 as payment on achieved equity awards.
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During the three and nine months ended November 30, 2021 the Company was charged $1,041,788 and $562,837, respectively in consulting fees for research and development by a company partially owned by a principal shareholder. The principal shareholder with a minority interest in the related party has received no compensation from the related party company. During the three and nine months ended November 30, 2020, the Company was charged $10,157 and $121,973, respectively for consulting fees for research and development by a company owned by a principal shareholder, who received no compensation from the related party company.
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 November 30, 2021. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of November 30, 2021, 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 November 30, 2021, we did not maintain effective controls over our control environment. Although we have now developed and effectively communicated to our employees our accounting policies and procedures. improved our segregation of duties, instituted more consistent practices and have received SOC Type 1 accreditation, our 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. Management has determined that this circumstance constitute a material weakness. | |
| 2. | As of November 30, 2021, 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.
Change in Internal Controls over Financial Reporting
During this reporting period the Company instituted many policies and procedures, adjusted the corporate structure and has received SOC Type 1 accreditation. This constitutes a material improvement in internal controls.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In April 2019 the principals of WeSecure filed a lawsuit against the Company in California Superior Court seeking a total of $199,358 plus attorney’s fees and damages. The total included claims for the non-payment of a balance from the sale of WeSecure assets to the Company, unpaid consulting fees payable to the two principals of WeSecure, and labor code violations. In June 2019, the parties settled all claims for $180,000, payable in 14 monthly installments, and a full release. The $122,000 balance owing at February 28, 2021 was paid in full on March 17, 2021.
The related legal costs are expensed as incurred.
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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.
ITEM 6. EXHIBITS
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3.1 |
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3.2 |
Bylaws (2) |
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14 |
Code of Ethics (2) |
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21 |
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31.1 |
Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. (3) |
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31.2 |
Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. (3) |
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32.1 |
Section 1350 Certification of principal executive officer. (3) |
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32.2 |
Section 1350 Certification of principal financial accounting officer. (3) |
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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) |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document (3) |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document (3) |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document (3) |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document (3) |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document (3) |
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104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (3) |
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(1) |
Incorporated by reference to our Form 10-KT file with the Securities and Exchange Commission on March 12, 2018. |
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(2) |
Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010. |
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(3) |
Filed or furnished herewith. |
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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: January 19, 2022 | BY: /s/ Steven Reinharz |
| Steven Reinharz | |
| President, Chief Executive Officer (principal executive officer) | |
| Date: January 19, 2022 | BY: /s/ Anthony Brenz |
| Anthony Brenz | |
| Chief Financial Officer (principal financial officer) |
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