Artificial Intelligence Technology Solutions Inc 10-Q for FY2024 Q3
Artificial Intelligence Technology Solutions Inc. (AITX)
About this 10-Q
Artificial Intelligence Technology Solutions Inc filed this 10-Q on January 16, 2024, covering the quarter ended November 30, 2023 (FY2024 Q3).
Headline figures
Quarter ended November 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $596.98K
- up 48.4% from $402.4K a year earlier
- Net loss
- $3.97M
- compared with a net loss of $4.09M 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
FOR THE QUARTERLY PERIOD ENDED
OR
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 3, 2024.
Table of Contents
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| November 30, 2023 | February 28, 2023* | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash | $ | $ | |||||
| Accounts receivable, net | |||||||
| Device parts inventory, net | |||||||
| Prepaid expenses and deposits | |||||||
| Total current assets | |||||||
| Operating lease asset | |||||||
| Revenue earning devices, net of accumulated depreciation of $ |
|||||||
| Fixed assets, net of accumulated depreciation of $ |
|||||||
| Trademarks | |||||||
| Investment at cost | |||||||
| Security deposit | |||||||
| Total assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | $ | |||||
| Advances payable- related party | |||||||
| Customer deposits | |||||||
| Current operating lease liability | |||||||
| Current portion of deferred variable payment obligation | |||||||
| Loan payable - related party | |||||||
| Incentive compensation plan payable | |||||||
| Current portion of loans payable, net of discount of $ |
|||||||
| Vehicle loan - current portion | |||||||
| Current portion of accrued interest payable | |||||||
| 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, 2023 and February 28, 2023, respectively | |||||||
| Series G Convertible Preferred Stock. $ par value; shares authorized, shares issued and outstanding at November 30, 2023 and February 28, 2023, 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 | |||||||
| Common Stock, $ par value; shares authorized and shares issued, issuable 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.
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended November 30, 2023 |
Three Months Ended November 30, 2022 |
Nine Months Ended November 30, 2023 |
Nine Months Ended November 30, 2022 |
||||||||||
| Revenues | $ | $ | $ | $ | |||||||||
| Cost of Goods Sold | |||||||||||||
| Gross Profit | |||||||||||||
| Operating expenses: | |||||||||||||
| Research and development (Note 10) | |||||||||||||
| General and administrative | |||||||||||||
| Depreciation and amortization | |||||||||||||
| Operating lease cost and rent | |||||||||||||
| 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 Loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Net income (loss) per share - basic | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Net income ( loss) per share - diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Weighted average common share outstanding - basic | |||||||||||||
| 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 SHAREHOLDERS’ DEFICIT
(Unaudited)
| Series E | Series F | Additional | Total | ||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||
| Balance at February 28, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Rounding | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at May 31, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Cashless exercise of warrants | — | — | ( |
) | |||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | ||||||||||||||||||||||
| Cancelled shares | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Exchange of warrants for debt | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Shares as payment for services | — | — | |||||||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at August 31, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Relative fair value of Series F warrants issued with debt | — | — | |||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at November 30, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT
(Unaudited)
| Series E | Series F | Additional | Total | ||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||
| Balance at February 28, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Relative fair value of Series F warrants issued with loans payable | — | — | — | ||||||||||||||||||||||
| Stock based compensation | — | — | — | ||||||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at May 31, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Shares as payment for services | — | — | |||||||||||||||||||||||
| Stock based compensation | — | — | — | ||||||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at August 31, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
| Issuance of shares, net of $ |
— | — | |||||||||||||||||||||||
| Relative fair value of Series F warrants issued with debt | — | — | — | ||||||||||||||||||||||
| Stock based compensation | — | — | — | ||||||||||||||||||||||
| Net income | — | — | — | ( |
) | ( |
) | ||||||||||||||||||
| Balance at November 30, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended November 30, 2023 |
Nine Months Ended November 30, 2022 |
||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | |||||||
| Net loss | $ | ( |
) | $ | ( |
) | |
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||
| Depreciation and amortization | |||||||
| Bad debts expense | |||||||
| Inventory provision | |||||||
| Reduction of right of use asset | |||||||
| Accretion of lease liability | |||||||
| Stock based compensation | |||||||
| Change in fair value of derivative liabilities | ( |
) | |||||
| Amortization of debt discounts | |||||||
| (Gain) loss on settlement of debt | ( |
) | ( |
) | |||
| Increase in related party accrued payroll and interest | |||||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | ( |
) | ( |
) | |||
| Prepaid expenses | ( |
) | ( |
) | |||
| Device parts inventory | ( |
) | ( |
) | |||
| Accounts payable and accrued expenses | |||||||
| Customer deposits | ( |
) | |||||
| Operating lease liabilities | ( |
) | ( |
) | |||
| Current portion of deferred variable payment obligation for payments | |||||||
| Accrued interest payable | |||||||
| Net cash used in operating activities | ( |
) | ( |
) | |||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | |||||||
| Purchase of fixed assets | ( |
) | ( |
) | |||
| Acquisition of trademarks | |||||||
| Reimbursement of security deposit | |||||||
| Net cash used in investing activities | ( |
) | ( |
) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Share proceeds net of issuance costs | |||||||
| Proceeds from loans payable | |||||||
| Repayment of loans payable | ( |
) | ( |
) | |||
| Proceeds from convertible debt and warrants issued | |||||||
| 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: | |||||||
| Transfer from device parts inventory to revenue earning devices | $ | $ | |||||
| Shares issued for services | $ | $ | |||||
| Exchange of warrants for debt | $ | $ | |||||
| Discount applied to face value of loans | $ | $ | |||||
| Warrants issued as part of debt | $ | $ | |||||
| Exercise of warrants | $ | $ | |||||
| Series F preferred shares and warrants issued for debt | $ | $ | |||||
| Cancellation of Series E preferred shares and common shares | $ | $ | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL INFORMATION
Artificial Intelligence Technology Solutions Inc. (“AITX” or the “Company”) was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).
Robotic Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a Limited Liability Company. On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc., through the issuance of 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 was exploring the on-demand logistics market by developing a network of logistics partnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, and AITX’s business going forward will consist of one segment activity, which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.
The Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill or other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer. As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.
2. GOING CONCERN
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
For the nine months ended November 30, 2023, the Company had negative cash
flow from operating activities 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:
Management is committed to raise either non-dilutive
funds or minimally dilutive funds. There is no assurance that these funds will be able to be raised nor can we provide assurance that
these possible raises may not have dilutive effects. In March 2023, the Company entered into an equity financing agreement whereby an
investor will purchase up to $
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 year to date November 30, 2023 has raised an
additional $
- 8 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the condensing instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on June 14, 2023. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile, Inc., On the Move Experience, LLC and On the OMV Transports, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the nine months ended November 30, 2023 are not necessarily indicative of the results that may be expected for the entire year.
Use of Estimates
In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value preferred stock and derivative liabilities.
Concentrations
Loans payable
At November 30, 2023 there were $
Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.
Accounts Receivable
Accounts receivable are comprised of balances due
from customers, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated,
and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There was an allowance of $ and
$ provided as of November 30, 2023 and February 28, 2023, respectively. For the three months ended November 30, 2023 , three customers
account for
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 November 30, 2023 and February 28, 2023 there was a
valuation reserve of $
- 9 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue Earning Devices
Revenue earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of months. The Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from two to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.
Fixed assets consisted of the following:
| Computer equipment and software | or years | |
| Office equipment | ||
| Manufacturing equipment | ||
| Warehouse equipment | ||
| Tooling | ||
| Demo Devices | ||
| Vehicles | ||
| Leasehold improvements | years, the life of the lease |
The Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.
Research and Development
Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned. At November 30, 2023 and February 28, 2023, the Company had no deferred development costs.
Contingencies
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Sales of Future Revenues
The Company has entered into transactions, as more fully described in footnote 8, in which it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement constitutes a sale of future revenues or debt:
- 10 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| ● | Does the agreement purport, in substance, to be a sale | |
| ● | Does the Company have continuing involvement in the generation of cash flows due the investor | |
| ● | Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets | |
| ● | Is the investors rate of return is implicitly limited by the terms of the agreement | |
| ● | Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return | |
| ● | Does the investor have recourse relating to payments due |
In the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue method. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method. As of the date of these financial statements, the Company has determined that all such agreements are debt.
Revenue Recognition
ASU 2014-09, “Revenue from Contracts with
Customers (Topic 606)”, supersedes the revenue recognition requirements and industry specific guidance under Revenue Recognition
(Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount
that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Topic 606 defines a five-step
process that must be evaluated and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition
process than required under existing accounting principles generally accepted in the United States of America (“U.S. GAAP”)
including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction
price and allocating the transaction price to each separate performance obligation. The Company adopted Topic 606 on March 1, 2018, using
the modified retrospective method. Under the modified retrospective method, prior period financial positions and results will not be adjusted.
There was no cumulative effect adjustment recognized as a result of this adoption. Refer to Note 4 – Revenue from Contracts with
Customers for additional information. For the nine months ended November 30, 2023, customers accounted for
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax
Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws
and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation
is enacted.
Leases
Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.
Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Our Chief Executive Officer/ Chairman holds sufficient shares of the Company’s voting preferred stock that give sufficient voting rights under the articles of incorporation and bylaws of the Company such that the CEO/ Chairman can at any time unilaterally vote to increase the number of authorized shares of common stock of the Company, without the need to call a general meeting of common shareholders of the Company.
Initial Measurement
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.
Subsequent Measurement – Financial Instruments Classified as Liabilities
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other income (expenses).
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.
ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
- 12 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. | |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured on a Recurring Basis
The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:
| Fair Value Measurement Using | |||||||||||||
| Amount at Fair Value |
Level 1 | Level 2 | Level 3 | ||||||||||
| November 30, 2023 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
| February 28, 2023 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
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
Recently Issued Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. The amendments in ASU 2020-06 are effective for public entities, excluding smaller reporting companies as defined, for fiscal years beginning after December 15, 2021. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. A reporting entity is not permitted to adopt the guidance in an interim period, other than the first interim period of its fiscal year. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Management is currently evaluating the effect of these provisions on the Company’s financial position and results of operations.
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue is earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services are accounted for under Topic 606, and short-term rentals are accounted for under Topic 842 (which addresses lease accounting and was adopted on March 1, 2019).
As disclosed in the revenue recognition section of Note 3 – Accounting Polices, the Company adopted Topic 606 in accordance with the effective date on March 1, 2018. Note 3 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s financial statements. Revenue is recognized on direct sales of goods or services when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
After adopting Topic 842, also referred to above in Note 3, the Company is accounting for revenue earned from rental activities where an identified asset is transferred to the customer and the customer has the ability to control that asset. The Company recognizes revenue from its device rental activities when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction price is fixed or determinable and collection is reasonably assured. Performance obligations associated with device rental transactions are satisfied over the rental period. Rental periods are short-term in nature. Therefore, the Company has elected to apply the practical expedient which eliminates the requirement to disclose information about remaining performance obligations. Payments are due from customers at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected.
The following table presents revenues from contracts with customers disaggregated by product/service:
| Three Months Ended November 30, 2023 |
Three Months Ended November 30, 2022 |
Nine Months Ended November 30, 2023 |
Nine Months Ended November 30, 2022 |
||||||||||
| Device rental activities | $ | $ | $ | $ | |||||||||
| Direct sales of goods and services | |||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||
- 14 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. LEASES
We lease certain warehouses, and office space. Leases with an initial term of months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.
There is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Below is a summary of our lease assets and liabilities at November 30, 2023 and February 28, 2023.
| Leases | Classification | November 30, 2023 | February 28, 2023 | ||||||
| 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% which for the leases noted above was based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
Rent expense and operating lease cost was $
6. REVENUE EARNING DEVICES
Revenue earning devices consisted of the following:
| November 30, 2023 | February 28, 2023 | ||||||
| Revenue earning devices | $ | $ | |||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| Total | $ | $ | |||||
During the three and nine months ended November 30,
2023 the Company made total additions to revenue earning devices of $
Depreciation expense was $
- 15 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FIXED ASSETS
Fixed assets consisted of the following:
| November 30, 2023 | February 28, 2023 | ||||||
| Automobile | $ | $ | |||||
| Demo devices | |||||||
| Tooling | |||||||
| Machinery and equipment | |||||||
| Computer equipment | |||||||
| Office equipment | |||||||
| Furniture and fixtures | |||||||
| Warehouse equipment | |||||||
| Leasehold improvements | |||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| $ | $ | ||||||
During the three months ended November 30, 2023, the
Company made additions of $
Depreciation expense 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 $100,000 in exchange for a perpetual
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 $
In summary of all agreements mentioned above if in
the event that at least
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, 2023, the Company
has accrued $
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 shares of its Series F Convertible Preferred Stock with
a five-year term and an exercise price of $. During the three months ended May 31, 2021, the warrant holder exercised warrants to
acquire shares of Series F Convertible Preferred Stock. The Company attributed a fair value based on recent transactions for the Series
F Preferred stock and warrants of $
- 17 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company retains total involvement in the generation
of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because
of this, the Company has determined that the agreements constitute debt agreements. As of November 30, 2023, and February 28, 2023, the
long-term balances other than Payments already owed is the cash received of $
For both the three months and nine months ended November
30, 2023 and year ended February 28, 2023, the Company has received $
9. RELATED PARTY TRANSACTIONS
For both the three months ended November 30, 2023
and November 30, 2022 , the Company had
Pursuant to the amended Employment Agreement with
its Chief Executive Officer, for the three months and nine ended November 30, 2023, the Company accrued $
During the three months ended November 30, 2023 and
2022, the Company was charged $
During the nine months ended November 30, 2023 and
2022, the Company was charged $
10. OTHER DEBT – VEHICLE LOAN
In December 2016, RAD entered into a vehicle loan
for $
- 18 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11. LOANS PAYABLE
Loans payable at November 30, 2023 consisted of the following:
| Annual | ||||||||||
| Date | Maturity | Description | Principal | Interest Rate | ||||||
| July 18, 2017 | Promissory note | (1) * | $ | |||||||
| March 1, 2025 | Promissory note | (2) | ||||||||
| March 1, 2025 | Promissory note | (3) | ||||||||
| December 10, 2023 | Promissory note | (4) | ||||||||
| December 14, 2023 | Promissory note | (5) | ||||||||
| March 1, 2025 | Promissory note | (6) | ||||||||
| March 1, 2025 | Promissory note | (7) | ||||||||
| March 1, 2025 | Promissory note | (8) | ||||||||
| March 1, 2025 | Promissory note | (9) | ||||||||
| March 1, 2025 | Promissory note | (10) | ||||||||
| March 1, 2024 | Promissory note | (11) | ||||||||
| June 8, 2024 | Promissory note | (12) | ||||||||
| July 26, 2026 | Promissory note | (13) | ||||||||
| September 14, 2024 | Promissory note | (14) | ||||||||
| March 1, 2025 | Promissory note | (15) | ||||||||
| August 30,2024 | Promissory note | (16) | ||||||||
| March 1, 2025 | Promissory note | (17) | ||||||||
| March 1, 2025 | Promissory note | (18) | ||||||||
| March 1, 2025 | Promissory note | (19) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2026 | Promissory note | (20) | ||||||||
| October 31, 2025 | Purchase Agreement | (21) ** | — | |||||||
| $ | ||||||||||
| Less: current portion of loans payable | ( |
) | ||||||||
| Less: discount on non-current loans payable | ( |
) | ||||||||
| Non-current loans payable, net of discount | $ | |||||||||
| Current portion of loans payable | $ | |||||||||
| Less: discount on current portion of loans payable | ||||||||||
| Current portion of loans payable, net of discount | $ | |||||||||
| * | |
| ** |
- 19 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) | |
| (8) | |
| (9) |
- 20 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (10) | |
| (11) | |
| (12) | |
| (13) | |
| (14) | |
| (15) |
- 21 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (16) | |
| (17) | |
| (18) | |
| (19) |
- 22 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (20) | October 28, 2022, $ November 9, 2022, $ November 10, 2022, $ November 15, 2022, $ January 11, 2023, $ February 6, 2023, $ April 5, 2023, $ April 20, 2023, $ May 11, 2023, $ October 27 2023, $ |
| (21) |
- 23 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12. STOCKHOLDERS’ EQUITY (DEFICIT)
Summary or Preferred Stock Activity
No preferred stock activity during the period.
| Number of Series F Preferred Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at March 1, 2023 | $ |
|||||
| Issued | ||||||
| Exercised | — | |||||
| Forfeited and cancelled | — | |||||
| Outstanding at November 30, 2023 | $ |
During the nine months ended November 30, 2023, as
part of debt issuance the Company issued 244 Series F Preferred Warrants to a lender for a relative fair value of $
Summary of Common Stock Activity
The Company increased authorized common shares from to on August 30, 2023.
For the three months ended November 30, 2023, the
Company issued common shares with gross proceeds of $
For the nine months ended November 30, 2023, the Company
issued common shares with gross proceeds of
| Common shares | November 30, 2023 | February 28, 2023 | |||||
| Issued | |||||||
| Issuable | |||||||
| Issued, issuable and outstanding | |||||||
Summary of Common Stock Warrant Activity
For the three months and nine months ended November 30, 2023 and November 30, 2022, the Company recorded a total of $ and $, and $ and $ respectively, to stock-based compensation for options and warrants with a corresponding adjustment to additional paid-in capital.
Summary of Common Stock Warrant Activity
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at February 28, 2023 | $ |
|||||
| Issued | — | |||||
| Exercised | — | |||||
| Forfeited and cancelled | — | |||||
| Outstanding at November 30, 2023 | $ |
- 24 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at February 28 , 2023 | $ |
|||||
| Issued | — | |||||
| Exercised | — | |||||
| Forfeited, extinguished and cancelled | ( |
) | $ |
|||
| Outstanding at August 31, 2023 | $ |
13. COMMITMENTS AND CONTINGENCIES
Litigation
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
The related legal costs are expensed as incurred.
Operating Lease
On December 18, 2020,
On March 10, 2021,
On September 30, 2021,
On January 28, 2022,
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
$
Summary of rent expense and operating lease cost are recorded over the lease terms on a straight-line basis.
| Maturity of Lease Liabilities | Operating Leases |
||
| November 30, 2024 | $ | ||
| November 30, 2025 | |||
| November 30, 2026 | |||
| November 30, 2027 | |||
| November 30, 2028 | |||
| November 30, 2029 and after | |||
| Total lease payments | |||
| Less: Interest | ( |
) | |
| Present value of lease liabilities | $ | ||
- 25 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Numerator: | |||||||||||||
| Net income (loss) available to common shareholders | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Effect of common stock equivalents | |||||||||||||
| Add: interest expense on convertible debt | |||||||||||||
| Add: amortization of debt discount | |||||||||||||
| Add (less) loss (gain) on settlement of 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 | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Dilutive effect of common stock equivalents: | |||||||||||||
| Convertible Debt | — | — | — | — | |||||||||
| Preferred shares | — | — | — | — | |||||||||
| Warrants | — | — | — | — | |||||||||
| — | — | — | — | ||||||||||
| 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, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Convertible notes and accrued interest | |||||||||||||
| Convertible Series F Preferred Shares* | |||||||||||||
| Stock options and warrants | |||||||||||||
| Total | |||||||||||||
| * |
| For the Three and Nine Months Ended | ||||
| November 30, 2023 | November 30, 2022 | |||
| Convertible Series F Preferred Shares | ||||
15. SUBSEQUENT EVENTS
Subsequent to November 30, 2023 through to January 12, 2024:
— The Company issued common shares pursuant to a share purchase agreement for gross proceeds of $, issuance costs of $ and net proceeds of $.
- 26 -
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion of our financial condition and results of operations for the three and six months ended August 31, 2023 and August 31, 2022 should be read in conjunction with our unaudited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 28, 2023, as filed on June 14, 2023 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms “AITX”, the “Company”, “we”, “us”, and “our” refer to Artificial Intelligence Technology Solutions Inc.
Overview
AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’s fiscal year end is February 28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave., Ferndale Michigan, 48220, and our telephone number is 877-767-6268.
AITX’s mission is to apply Artificial Intelligence (AI) technology to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of the client organization.
A short list of basic examples include:
| 1. | Typical security guard-related functions such as monitoring a parking lot during and after hours and responding appropriately. This scenario applies to perimeters, interior yard areas, and related similar environments. | |
| 2. | Integrated hardware/software with AI-driven responses, simulating and expanding on what legacy or manned solutions could perform. | |
| 3. | Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today. |
RAD solutions are unique because they:
| 1. | Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed. | |
| 2. | Use unique hardware purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new functionality. | |
| 3. | Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms. |
We encourage everyone to ensure they have the most up to date news by visiting AITX at AITX News - AITX - Artificial Intelligence Technology Solutions.
- 27 -
Management Discussion and Analysis
Results of Operations for the Three Months Ended November 30, 2023 and 2022
The following table shows our results of operations for the three months ended November 30, 2023 and 2022. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| Period | ||||||||||||
| Three Months Ended |
Three Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Revenues | $ | 596,980 | $ | 402,399 | $ | 194,581 | 48% | |||||
| Gross profit | 461,066 | 276,439 | 184,627 | 67% | ||||||||
| Operating expenses | 2,846,017 | 3,090,941 | (244,924 | ) | (8% | ) | ||||||
| Loss from operations | (2,384,951 | ) | (2,814,502 | ) | 429,551 | (15% | ) | |||||
| Other income (expense), net | (1,581,533 | ) | (1,271,158 | ) | (310,375) | 24% | ||||||
| Net Loss | $ | (3,966,484 | ) | $ | (4,085,660 | ) | $ | (119,176) | (3% | ) | ||
Revenue
The following table presents revenues from contracts with customers disaggregated by product/service:
| Three Months Ended |
Three Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Device rental activities | $ | 416,062 | $ | 154,628 | $ | 261,434 | 169% | |||||
| Direct sales of goods and services | 180,918 | 247,771 | (66,853 | ) | (27% | ) | ||||||
| $ | 596,980 | $ | 402,399 | $ | 194,581 | 48% | ||||||
Total revenue for the three-month period ended November 30, 2023 was $596,980 which represented an increase of $194,581 compared to total revenue of $402,399 for the three months ended November 30, 2022. This increase is a result of higher rental activities in the current year’s quarter due to 84 new deployments this quarter.
Gross profit
Total gross profit for the three-month period ended November 30, 2023 was $461,066, which represented an increase of $184,627 compared to gross profit of $276,439 for the three months ended November 30, 2022. The gross profit increased due to the higher sales and higher proportion of rental activities at higher margins than direct sales. The gross profit % of 77% for the three-month period ended November 30, 2022 was higher than the gross profit % of 69% for the prior year’s corresponding period.
Operating Expenses
| Period | ||||||||||||
| Three Months Ended |
Three Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Research and development | $ | 557,126 | $ | 813,313 | $ | (256,187 | ) | (31% | ) | |||
| General and administrative | 2,009,047 | 2,123,768 | (114,721 | ) | (5% | ) | ||||||
| Depreciation and amortization | 215,763 | 92,855 | 122,908 | 132% | ||||||||
| Operating lease cost and rent | 64,081 | 61,005 | 3,076 | 5% | ||||||||
| Operating expenses | $ | 2,846,017 | $ | 3,090,941 | $ | (244,924 | ) | (8% | ) | |||
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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, 2023 and November 30, 2022, were $2,847,017 and $3,090,941, respectively. The overall decrease of $244,924 was primarily attributable to the following changes in operating expenses of:
| ● | General and administrative expenses decreased by $114,721. In comparing the three months ended November 30, 2023 and November 30, 2022 this decrease was primarily due to the following decreases: stock based compensation by $28,598, sales and marketing by $79,451, travel by $30,478, insurance $35,606 and bad debts expense $77,135. These were partially offset by increases in the following accounts: subcontractors by $37,415, wages and salaries $72,071 and other G& A increases. |
| ● | Research and development decreased by $256,187 due to due to a reduction in funding on development of future products. |
| ● | Depreciation and amortization increased by $122,908 due to large increases in revenue earning devices, demo devices, tooling and computer equipment. |
| ● | Operating lease cost and rent increased by $3,076 due to one less lease in the current period. |
Other Income (Expense)
Other income (expense) during the three months ended November 30, 2023 and November 30, 2022, was ($1,581,533) and ($1,271,158), respectively. The $310,375 increase in other expense was primarily attributable to the increase in interest and debt amortization expense which is a result of higher loans in 2023.
Net loss
We had a net loss of $3,966,484 for the three months ended November 30, 2023, compared to a net loss of $4,085,660 for the three months ended November 30, 2022. The decrease in net loss of $119,176 is due to a number of factors: higher gross profit and lower general and administrative and other expense offset by higher other expenses in the three months ended November 30, 2023.
Results of Operations for the Nine Months Ended November 30, 2023 and 2022
The following table shows our results of operations for the nine months ended November 30, 2023 and 2022. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Revenue
| Period | ||||||||||||
| Nine Months Ended |
Nine Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Revenues | $ | 1,368,551 | $ | 1,055,040 | $ | 313,511 | 30% | |||||
| Gross profit | 1,052,112 | 601,142 | 450,970 | 75% | ||||||||
| Operating expenses | 9,431,292 | 10,090,732 | (659,440 | ) | (7% | ) | ||||||
| Loss from operations | (8,379,180 | ) | (9,489,590 | ) | 1,110,410 | (12% | ) | |||||
| Other income (expense), net | (4,902,225 | ) | (3,440,621 | ) | (1,461,604 | ) | 42% | |||||
| Net loss | $ | (13,281,405 | ) | $ | (12,930,211 | ) | $ | (351,194 | ) | 3% | ||
The following table presents revenues from contracts with customers disaggregated by product/service:
| Nine Months Ended |
Nine Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Device rental activities | $ | 997,754 | $ | 622,647 | $ | 375,107 | 60% | |||||
| Direct sales of goods and services | 370,797 | 432,393 | (61,596 | ) | (14% | ) | ||||||
| $ | 1,368,551 | $ | 1,055,040 | $ | 313,511 | 30% | ||||||
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Total revenue for the nine-month period ended November 30, 2023 was $1,368,551 which represented an increase of $313,511 compared to total revenue of $1,055,040 for the nine months ended November 30, 2022. This 30% increase was because of higher rental activities due to 220 new deployments year to date November 30, 2023.
Gross profit
Total gross profit for the nine-month period ended November 30, 2023 was 1,052,112 which represented an increase of $450,970, compared to gross profit of $601,142 for the nine months ended November 30, 2022. The gross profit increased due to the 30% higher sales and higher proportion of rental activities at higher margins than direct sales. The gross profit % of 77% for the nine-month period ended November 30, 2023 was higher than the gross profit % of 57% for the prior year’s corresponding period.
Operating Expenses
| Period | ||||||||||||
| Nine Months Ended |
Nine Months Ended |
Change | ||||||||||
| November 30, 2023 | November 30, 2022 | Dollars | Percentage | |||||||||
| Research and development | $ | 2,243,431 | $ | 2,800,834 | $ | (557,403 | ) | (20% | ) | |||
| General and administrative | 6,423,951 | 6,762,602 | (338,651 | ) | (5% | ) | ||||||
| Depreciation and amortization | 574,746 | 332,643 | 242,103 | 73% | ||||||||
| Operating lease cost and rent | 189,164 | 194,653 | (5,489 | ) | (3% | ) | ||||||
| Operating expenses | $ | 9,431,292 | $ | 10,090,732 | $ | (659,440 | ) | (7% | ) | |||
General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the six-month period ended November 30, 2023 and November 30, 2022, were $9,431,292 and $10,090,732, respectively. The overall decrease of $659,440 was primarily attributable to the following changes in operating expenses of:
| ● | General and administrative expenses decreased by $338,651. In comparing the six months ended November 30, 2023 and November 30, 2022 the decrease may be partially explained by the following decreases: wages and salaries by $18,426, stock based compensation by $143,104, sales and marketing by $128,797, travel by $70,449 and bad debts expense $197,405. These were partially offset by increases in the following accounts: professional fees by $68,350, subcontractors by $63,956 , dues and subscriptions by $ $25,977 and other G& A increases. |
| ● | Research and development decreased by $557,493 due to a reduction in funding on development of future products. |
| ● | Depreciation and amortization increased by $242,103 due to the acquisition of ERP computer software, computer equipment tooling, and 220 new revenue earning devices. |
| ● | Operating lease cost and rent decreased by $5,489 due to one less lease in the current period. |
Other Income (Expense)
Other income (expense) during the nine months ended November 30, 2023 and November 30, 2022, was ($4,902,225) and (3,440,621), respectively. The 1,461,604 increase in other expense was primarily attributable to the increase in interest and debt amortization expense which is a result of higher loans in 2023.
Net loss
We had a net loss of $13,281,405 for the nine months ended November 30, 2023, compared to a net loss of $12,930,211 for the nine months ended November 30, 2022. The increase in net loss of $351,194 is primarily a result of higher other expenses consisting of interest and debt amortization costs. This increase was partially offset by higher gross profit and lower operating expenses.
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Liquidity, Capital Resources and Cash Flows
Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.
As of November 30, 2023, we had a cash balance of $97,478, accounts receivable of $505,438, device parts inventory of $2,220,159 and $16,459,125 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, 2023 | February 28, 2023 | ||||||
| Current assets | $ | 3,514,315 | $ | 3,438,992 | |||
| Current liabilities | 16,459,125 | 16,049,593 | |||||
| Working capital | $ | (12,944,810 | ) | $ | (12,610,601 | ) | |
As of November 30, 2023 and February 28, 2023, we had a cash balance of $97,478 and $939,759, respectively.
Summary of Cash Flows
| Summary of Cash Flows | Nine Months Ended November 30, 2023 |
Nine Months Ended November 30, 2022 |
|||||
| Net cash used in operating activities | $ | (9,378,427 | ) | $ | (9,883,272 | ) | |
| Net cash used in investing activities | $ | (10,044 | ) | $ | (217,601 | ) | |
| Net cash provided by financing activities | $ | 8,546,190 | $ | 6,166,220 | |||
Net cash used in operating activities.
Net cash used in operating activities for the nine months ended November 30, 2023 was $9,378,427 which included a net loss of $13,281,405, non-cash activity such as the bad debts expense of $26,730, reduction of right of use asset of $88,378, accretion of lease liability $99,248, stock based compensation of $337,896, gain on settlement of debt of ($38,740) , change in operating assets and liabilities of $966,052, amortization of debt discount of $1,755,897, increase in related party accrued payroll and interest of $92,770 and depreciation and amortization of $574,746 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, 2023 was $10,044 which was the purchase of fixed assets of $13,903 offset by reimbursement of security deposit $3,859.
Net cash provided by financing activities.
Net cash provided by financing activities was $8,546,100 for the nine months ended November 30, 2023. This consisted of share proceeds net of issuance costs of 7,527,190, proceeds from loans payable of $1,400,000, reduced by repayments on loans payable of $381,000.
Off-Balance Sheet Arrangements
None.
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Critical Accounting Policies and Estimates
Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended February 28, 2023, as filed on June 14, 2023.
Related Party Transactions
For both the three months ended November 30, 2023 and November 30, 2022 , the Company had no repayments of net advances from its loan payable-related party At November 30, 2023, the loan payable-related party was $299,286 and $206,516 at February 28, 2023. Included in the balance due to the related party at November 30, 2023 is $222,754 of deferred salary and interest, $183,625 of which bears interest at 12%. At February 28, 2023, included in the balance due to the related party is $108,000 of deferred salary with $108,000 bearing interest at 12%. The accrued interest included in loan at November 30, 2023 and February 28, 2023 was $28,267 and $15,660 respectively.
Pursuant to the amended Employment Agreement with its Chief Executive Officer, for the three months and nine ended November 30, 2023, the Company accrued $62,000 (2022-$138,000) and $187,000 (2022-$362,500) of incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. At November 30, 2023 and February 28, 2023 there was $1,166,000 and $979,000 of incentive compensation payable.
During the three months ended November 30, 2023 and 2022, the Company was charged $526,723 and $794,460, respectively for fees for research and development from a company partially owned by a principal shareholder.
During the nine months ended November 30, 2023 and 2022, the Company was charged $2,185,998 and $2,735,589, respectively for fees for research and development from a company partially owned by a principal shareholder.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of November 30, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of November 30, 2023, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
| 1. | As of November 30, 2023, we did not maintain effective controls over our control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. | |
| 2. | As of November 30, 2023, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. |
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
This item is not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Each issuance of securities was issued without registration in reliance of the exemption from registration Section 3(a)9 of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to the Company.
ITEM 5. OTHER INFORMATION
None.
- 33 -
ITEM 6. EXHIBITS
| Exhibit No. | Description of Document |
| 3.1 | Articles of Incorporation (1) |
| 3.2 | Bylaws (2) |
| 14 | Code of Ethics (2) |
| 21 | Subsidiaries of the Registrant (3) |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. (3) |
| 31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. (3) |
| 32.1 | Section 1350 Certification of principal executive officer. (3) |
| 32.2 | Section 1350 Certification of principal financial accounting officer. (3) |
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (3) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document (3) |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (3) |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (3) |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (3) |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (3) |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (3) |
__________
| (1) | Incorporated by reference to our Form 10-KT file with the Securities and Exchange Commission on March 12, 2018. |
| (2) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010. |
| (3) | Filed or furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Artificial Intelligence Technology Solutions Inc. | |
| Date: January 16, 2024 | BY: /s/ Steven Reinharz |
| Steven Reinharz | |
| President, Chief Executive Officer (principal executive officer) | |
| Date: January 16, 2024 | BY: /s/ Anthony Brenz |
| Anthony Brenz | |
| Chief Financial Officer (principal financial officer) |
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Exhibit 21.1
Artificial Intelligence Technology Solutions Inc.
Subsidiaries
| Name | Jurisdiction of Incorporation | |
| Robotic Assistance Devices, Inc. | Nevada | |
| Robotic Assistance Devices Group, Inc. | Nevada | |
| Robotic Assistance Devices Mobile, Inc. | Nevada |
Exhibit 31.1
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, Steven Reinharz, certify that:
1. I have reviewed this Form 10-Q for the period ended November 30, 2023 of Artificial Intelligence Technology Solutions Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: January 16, 2024 | BY: /s/ Steven Reinharz |
| Steven Reinharz | |
| President, Chief Executive Officer (principal executive officer) |
Exhibit 31.2
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, Anthony Brenz, certify that:
1. I have reviewed this Form 10-Q for the period ended November 30, 2023 of Artificial Intelligence Technology Solutions Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: January 16, 2024 | BY: /s/ Anthony Brenz |
| Anthony Brenz | |
| Chief Financial Officer (principal financial officer) |
Exhibit 32.1
SECTION 1350 CERTIFICATION
In connection with the quarterly report of Artificial Intelligence Technology Solutions Inc. (the “Company”) on Form 10-Q for the period ended November 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Steven Reinharz, President of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: January 16, 2024 | BY: /s/ Steven Reinharz |
| Steven Reinharz | |
| President, Chief Executive Officer (principal executive officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
SECTION 1350 CERTIFICATION
In connection with the quarterly report of Artificial Intelligence Technology Solutions Inc. (the “Company”) on Form 10-Q for the period ended November 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Anthony Brenz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: January 16, 2024 | BY: /s/ Anthony Brenz |
| Anthony Brenz | |
| Chief Financial Officer (principal financial officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.