Artificial Intelligence Technology Solutions Inc 10-Q for FY2023 Q3

Artificial Intelligence Technology Solutions Inc. (AITX)

10-Q 2023-01-20 For: 2022-11-30

Added on April 06, 2026

About this 10-Q

Artificial Intelligence Technology Solutions Inc filed this 10-Q on January 20, 2023, covering the quarter ended November 30, 2022 (FY2023 Q3).

Headline figures

Quarter ended November 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $402.4K; up 7.6% from $373.9K a year earlier
Net loss: $4.09M; compared with a net loss of $7.09M a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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Nevada		27-2343603
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

10800 Galaxie Avenue Ferndale, MI		48220
(Address of principal executive offices)		(Zip code)

Large accelerated filer	[_]	Accelerated filer	[_]

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

		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of November 30, 2022 and February 28, 2022 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended November 30, 2022 and 2021 (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended November 30, 2022 and 2021 (Unaudited)	5-6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2022 and 2021 (Unaudited)	7

	Notes to the Consolidated Financial Statements (Unaudited)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	37

ITEM 4.	Controls and Procedures	37

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	38

ITEM 1A.	Risk Factors	38

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 3.	Defaults Upon Senior Securities	38

ITEM 4.	Mine Safety Disclosures	38

ITEM 5.	Other Information	38

ITEM 6.	Exhibits	38

SIGNATURES		38

				^*
	November 30, 2022 (Unaudited)			February 28, 2022^*
ASSETS
Current assets:
Cash	$	713,493		$	4,648,146
Accounts receivable, net		464,044			429,469
Device parts inventory, net		1,573,380			1,530,657
Prepaid expenses and deposits		672,794			442,164
Total current assets		3,423,711			7,050,436
Operating lease asset		1,241,152			1,331,605
Revenue earning devices, net of accumulated depreciation of $676,615 and $434,661, respectively		1,092,203			709,063
Fixed assets, net of accumulated depreciation of $139,751 and $49,065, respectively		312,307			137,952
Trademarks		28,723			28,723
Security deposit		21,239			21,239
Total assets	$	6,119,335		$	9,279,018

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	1,166,171		$	968,853
Advances payable		1,594			1,594
Customer deposits		2,383			10,000
Current operating lease liability		111,985			254,027
Current portion of deferred variable payment obligation		497,150			325,600
Current portion of convertible notes payable, net of discount of $433,932 and $0, respectively		316,068			3,500
Loan payable - related party		203,276			193,556
Incentive compensation plan payable		842,000			479,500
Current portion of loans payable, net of discount of $158,194 and $14,745, respectively		1,240,306			1,004,708
Vehicle loan - current portion		38,522			38,522
Current portion of accrued interest payable		50,963			1,260,271
Derivative liability		—			7,587
Total current liabilities		4,470,418			4,547,718
Non-current operating lease liability		1,115,323			1,057,579
Loans payable, net of discount of $5,378,890 and $4,905,076, respectively		23,728,956			20,309,069
Deferred variable payment obligation		2,525,000			2,525,000
Accrued interest payable		4,775,150			1,816,009
Total liabilities		36,614,847			30,255,375

Commitments and Contingencies
Stockholders’ deficit:
Preferred Stock, undesignated; 15,545,650 shares authorized; no shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively		—			—
Series E Preferred Stock, $0.001 par value; 4,350,000 shares authorized; 3,350,000 and 3,350,000 shares issued and outstanding, respectively		3,350			3,350
Series F Convertible Preferred Stock, $1.00 par value; 4,350 shares authorized; 2,533 and 2,532 shares issued and outstanding, respectively		2,533			2,532
Series G Preferred Stock, $0.001 par value; 4,350,000 shares authorized, no shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively		—			—
Common Stock, $0.00001 par value; 6,000,000,000 shares authorized 5,260,515,892 and 4,735,210,360 shares issued, issuable and outstanding, respectively		52,607			47,353
Additional paid-in capital		76,421,377			73,015,576
Preferred stock to be issued		99,086			99,086
Accumulated deficit		(107,074,465	)		(94,144,254	)
Total stockholders’ deficit		(30,495,512	)		(20,976,357	)
Total liabilities and stockholders’ deficit	$	6,119,335		$	9,279,018


	Three Months Ended November 30, 2022			Three Months Ended November 30, 2021			Nine Months Ended November 30, 2022			Nine Months Ended November 30, 2021

Revenues	$	402,399		$	373,897		$	1,055,040		$	1,075,803

Cost of Goods Sold		125,960			143,424			453,898			296,304

Gross Profit		276,439			230,473			601,142			779,499

Operating expenses:
Research and development (Note 10)		813,313			982,446			2,800,834			2,316,383
General and administrative		2,123,768			3,964,512			6,762,602			8,455,224
Depreciation and amortization		92,855			67,927			332,643			153,261
Operating lease cost and rent		61,005			103,115			194,653			207,201
(Gain) loss on disposal of fixed assets		—			—			—			(29,125	)
Total operating expenses		3,090,941			5,118,000			10,090,732			11,102,944

Loss from operations		(2,814,502	)		(4,887,527	)		(9,489,590	)		(10,323,445	)

Other income (expense), net:
Change in fair value of derivative liabilities		—			—			3,595			372,502
Interest expense		(1,271,158	)		(2,050,254	)		(3,448,208	)		(4,812,477	)
Gain (loss) on settlement of debt		—			(156,661	)		3,992			(33,068,313	)
Total other income (expense), net		(1,271,158	)		(2,206,915	)		(3,440,621	)		(37,508,288	)

Net Loss	$	(4,085,660	)	$	(7,094,442	)	$	(12,930,211	)	$	(47,831,733	)

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

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

Weighted average common share outstanding - basic		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,783

Weighted average common share outstanding - diluted		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,783


	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	4,350,000			4,350		2,799			176,869		—		$	—		3,229,426,884	$	32,294	$	16,764,554		$	(31,521,754	)	$	(14,543,687	)
Series F Preferred Shares issued with amendment agreement	—			—		40			40							—		—		3,244,700			—			3,244,740
Series F Preferred Shares Warrants issued with amendment agreement	—			—		—			—		—			—		—		—		29,770,474			—			29,770,474
Series F Preferred Shares cancelled in exchange for promissory notes	—			—		(83	)		(83	)	—			—		—		—		(6,732,752	)		—			(6,732,835	)
Series F preferred shares issued on exercise of warrants	—			—		38			38		—			—		—		—		(38	)		—			—
Series F Preferred Shares converted to common shares	—			—		(78	)		(78	)	—			—		316,345,998		3,164		(3,086	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		4,749,006			—			4,749,006
Stock based compensation	—			—		—			—							—		—		69,350			—			69,350
Net income	—			—		—			—		—			—		—		—		—			(35,904,918	)		(35,904,918	)
Balance at May 31, 2021	4,350,000		$	4,350		2,716		$	176,786		—		$	—		3,545,772,882	$	35,458	$	47,862,208		$	(67,426,672	)	$	(19,347,870	)
Adjustment to derivative liability	—			—		—			—		—			—		—		—		422,272			—			422,272
Common stock issued for debt conversion	—			—		—			—		—			—		31,042,436		310		898,395			—			898,705
Exercise of warrants	—			—		—			—		—			—		300,251,561		3,003		(3,003	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		2,035,033			—			2,035,033
Cancellation of Series E Shares	(1,000,000	)		(1,000	)	—			—		—			—		—		—		1,000			—			—
Exchange of debt for common shares	—			—		—			—		—			—		116,104,232		1,161		6,454,235			—			6,455,396
Stock based compensation on issuable shares	—			—		—			—		—			—		2,100,000		21		109,179			—			109,200
Exchange of Series F Preferred Shares for debt	—			—		(184	)		(184	)	—			—		—		—		(3,999,976	)		—			(4,000,160	)
Net income	—			—		—			—		—			—		—		—		—			(4,832,373	)		(4,832,373	)
Balance at August 31, 2021	3,350,000		$	3,350		2,532		$	176,602		—		$	—		3,995,271,111	$	39,953	$	53,779,343		$	(72,259,045	)	$	(18,259,797	)
Issuance of shares, net of $253,811 issuance costs	—			—		—			—		—			—		345,168,473		3,452		8,466,551			—			8,470,003
Cashless exercise of 100,000,000 warrants	—			—		—			—		—			—		94,770,776		948		(948	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		1,284,783			—			1,284,783
Redemption of 19 Issuable Series F shares	—			—		—			(74,984	)	—			—		—		—		—			(425,016	)		(500,000	)
Issuance of Series G preferred as equity awards per employment agreement	—			—		—			—		1,500			1,500,000		—		—		—			—			1,500,000
Redemption of Series G shares as compensation payment	—			—		—			—		(1,500	)		(1,500,000	)	—		—		—			—			(1,500,000	)
Net income	—			—		—			—		—			—		—		—		—			(7,094,442	)		(7,094,442	)
Balance at November 30, 2021	3,350,000		$	3,350		2,532		$	101,618		—		$	—		4,435,210,360	$	44,353	$	63,529,729		$	(79,778,503	)	$	(16,099,453	)


	Nine Months Ended November 30, 2022			Nine Months Ended November 30, 2021
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss	$	(12,930,211	)	$	(47,831,733	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		332,643			153,261
Revenue earning device sold and expensed in cost of sales		—			3,410
Bad debts expense		224,215			107,022
Inventory provision		90,000			—
Reduction of right of use asset		84,298			75,609
Accretion of lease liability		107,187			86,350
(Gain) loss on disposal of fixed assets		—			(29,125	)
Stock based compensation		481,000			2,158,050
Change in fair value of derivative liabilities		(3,595	)		(372,502	)
Interest expense related to penalties from debt defaults		—			—
Amortization of debt discounts		1,094,388			2,700,233
(Gain) loss on settlement of debt		(3,992	)		33,068,313
Increase in related party accrued payroll and interest		9,720			220,140
Changes in operating assets and liabilities:
Accounts receivable		(258,790	)		(289,485	)
Prepaid expenses		(224,476	)		(392,811	)
Deposits on right of use asset		—			(18,462	)
Device parts inventory		(805,257	)		(1,864,340	)
Accounts payable and accrued expenses		197,317			177,240
Accrued expense -related party		—			(178,478	)
Customer deposits		(7,617	)		(500	)
Operating lease liabilities		(191,485	)		(161,959	)
Current portion of deferred variable payment obligation for payments		171,550			173,640
Balance owed WeSecure		—			(122,000	)
Accrued interest payable		1,749,833			1,903,365
Net cash used in operating activities		(9,883,272	)		(10,434,762	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets		(217,601	)		(34,534	)
Acquisition of trademarks		—			(26,327	)
Proceeds on disposal of fixed assets		—			30,000
Cash paid for security deposit		—			(15,880	)
Net cash used in investing activities		(217,601	)		(46,741	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Share proceeds net of issuance costs		4,657,979			7,463,654
Proceeds from loans payable		2,600,000			9,426,146
Repayment of loans payable		(1,711,009	)		(471,617	)
Proceeds from convertible debt and warrants issued		619,250			—
Repayment of convertible debt		—			(65,000	)
Series G preferred shares redeemed as payment on incentive plan payable		—			(1,500,000	)
Dividend and redemption of cancelled issuable Series F preferred shares		—			(500,000	)
Net borrowings (repayments) on loan payable - related party		—			(812,234	)
Net cash provided by financing activities		6,166,220			13,540,949

Net change in cash		(3,934,653	)		3,059,446

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

Cash, end of period	$	713,493		$	4,103,864

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	405,117		$	165,163
Cash paid for income taxes	$	—		$	—

Noncash investing and financing activities:
Right of use asset for operating lease liability	$	—		$	1,341,506
Transfer from device parts inventory to revenue earning devices	$	672,534		$	592,346
Conversion of convertible notes and interest to shares of common stock	$	—		$	898,705
Release of derivative liability on conversion of convertible notes payable	$	—		$	422,272
Derivative debt discount on re-valuation on loan amendment	$	—		$	438,835
Exchange of notes payable for Series F preferred shares	$	—		$	6,732,835
Exchange of warrants for debt	$	3,000,000		$	—
Discount applied to face value of loans	$	434,500		$	6,162,945
Warrants issued as part of debt	$	—		$	8,068,822
Exercise of warrants	$	97		$	3,951
Series F preferred shares and warrants issued for debt	$	1,240,628		$	4,000,160
Issuance of Series G preferred shares as payment of incentive plan payable	$	—		$	1,500,000
Cancellation of Series E preferred shares and common shares	$	171		$	1,000
Series F preferred shares converted to common shares	$	—		$	3,086
Series F preferred shares issued on exercise of warrants	$	—		$	38

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

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

	●	Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

	●	Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

	●	Level 3 – Inputs that are unobservable for the asset or liability.

	Amount at		Fair Value Measurement Using
	Fair Value		Level 1		Level 2		Level 3
November 30, 2022
Liabilities
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares	$	842,000	$	—	$	—	$	842,000
Derivative liability – conversion features pursuant to convertible notes payable	$	—	$	—	$	—	$	—

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

Leases	Classification	November 30, 2022		February 28, 2022
Assets
Operating	Operating Lease Assets	$	1,241,152	$	1,331,605
Liabilities
Current
Operating	Current Operating Lease Liability	$	111,985	$	254,027
Noncurrent
Operating	Noncurrent Operating Lease Liabilities		1,115,323		1,057,579
Total lease liabilities		$	1,227,308	$	1,311,606

	November 30, 2022			February 28, 2022
Revenue earning devices	$	1,768,818		$	1,143,724
Less: Accumulated depreciation		(676,615	)		(434,661	)
	$	1,092,203		$	709,063

	November 30, 2022			February 28, 2022
Automobile	$	84,880		$	84,880
Manufacturing equipment		25,625			16,800
Demo devices		63,979			16,539
Computer equipment and software		133,959			36,742
Office equipment		15,312			15,312
Warehouse equipment		11,415			11,415
Tooling		101,320			—
Leasehold improvements		15,568			5,329
		452,058			187,017
Less: Accumulated depreciation		(139,751	)		(49,065	)
	$	312,307		$	137,952

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

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

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

*	This note was in default as of February 28, 2022. Default interest rate 22%
(1)	The conversion price was not subject to adjustment from forward or reverse stock splits. Effective in August 2022 this note (and accrued interest) was no longer convertible.
(2)	Subject to adjustment for dilutive issuances

●	The Company transferred the above July 18, 2016 $3,500 note to loans payable as the note was no longer convertible. This was a result of an SEC action against the debt holder who was also a common stockholder.

●	On August 9, 2022 the Company entered into a new convertible note for $750,000 with a one year maturity, interest rate of 12%, with a warrant (Warrant 1) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.01, and an additional warrant (Warrant 2) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.008 to be cancelled and extinguished if the note balance is $375,000 or less by February 9. 2023. The Company received $619,250 in cash proceeds, recorded an original issue discount of $75,000, recognized $393,949 based on a relative fair value calculation as debt discount with a corresponding adjustment to paid-in capital for the attached warrants, and transaction fees of $55,750. The discount is amortized over the term of the loan. This Note shall have priority over all unsecured indebtedness of the Company. The note has certain default provisions such as failure to pay any principal or interest when due and failure to maintain a minimum market capitalization of $30 million. In the event of these or any other default provisions, the note becomes due and payable at 125%.

						Annual
Date	Maturity	Description		Principal		Interest Rate
July 18, 2016	July 18, 2017	Promissory note	(35) *	$	3,500	22%
June 11, 2018	June 11, 2019	Promissory note	(2) (#)		—	25%
January 31, 2019	June 30, 2019	Promissory note	(1) (#)		—	15%
May 9, 2019	June 30, 2019	Promissory note	(3) (#)		—	15%
May 31, 2019	June 30, 2019	Promissory note	(4) (#)		—	15%
June 26, 2019	June 26, 2020	Promissory note	(5) (#)		—	15%
September 24, 2019	June 24, 2020	Promissory note	(6) (#)		—	15%
January 30, 2020	January 30, 2021	Promissory note	(7) (#)		—	15%
February 27, 2020	February 27, 2021	Promissory note	(8) (#)		—	15%
April 16, 2020	April 16, 2021	Promissory note	(9) (#)		—	15%
May 12, 2020	May 12, 2021	Promissory note	(11) (#)		—	15%
May 22, 2020	May 22, 2021	Promissory note	(12) (#)		—	15%
June 2, 2020	June 2, 2021	Promissory note	(13) (#)		—	15%
June 9, 2020	June 9, 2021	Promissory note	(14) (#)		—	15%
June 12, 2020	June 12, 2021	Promissory note	(15) (#)		—	15%
June 16, 2020	June 16, 2021	Promissory note	(16) (#)		—	15%
September 15, 2020	September 15, 2022	Promissory note	(17) (#)		—	10%
October 6, 2020	March 6, 2023	Promissory note	(18) (#)		—	12%
November 12, 2020	November 12, 2023	Promissory note	(19) (#)		—	12%
November 23, 2020	October 23, 2022	Promissory note	(20) (#)		—	15.5%
November 23, 2020	November 23, 2023	Promissory note	(21) (#)		—	15%
December 10, 2020	December 10, 2023	Promissory note	(22) (#)		—	12%
December 10, 2020	December 10, 2023	Promissory note	(23)		3,921,168	12%
December 10, 2020	December 10, 2023	Promissory note	(24)		3,054,338	12%
December 10, 2020	December 10, 2023	Promissory note	(25)		165,605	12%
December 14, 2020	December 14, 2023	Promissory note	(26)		310,375	12%
December 30, 2020	December 30, 2023	Promissory note	(27)		350,000	12%
December 31, 2021	December 31, 2024	Promissory note	(28)		25,000	12%
December 31, 2021	December 31, 2024	Promissory note	(29)		145,000	12%
January 14, 2021	January 14, 2024	Promissory note	(30)		550,000	12%
February 22, 2021	February 22, 2024	Promissory note	(31)		1,650,000	12%
March 1, 2021	March 1, 2024	Promissory note	(10)		6,000,000	12%
June 8, 2021	June 8, 2024	Promissory note	(32)		2,750,000	12%
July 12, 2021	July 26, 2026	Promissory note	(33)		3,936,360	7%
September 14, 2021	September 14, 2024	Promissory note	(34)		1,650,000	12%
July 28, 2022	July 28, 2023	Promissory note	(36)		170,000	15%
August 30, 2022	August 30,2024	Promissory note	(38)		3,000,000	15%
September 7, 2022	September 7, 2023	Promissory note	(37)		400,000	15%

				Balance			Balance
		Interest	Conversion	November 30,			February 28,
Issued	Maturity	Rate	Rate per Share	2022			2022
July 18, 2016	July 18, 2017^*	8%	$0.003⁽¹⁾	$	—		$	3,500
August 9, 2022	August 9, 2023	12%	$0.009⁽²⁾		750,000			—
				$	750,000		$	3,500

(Less): current portion of convertible notes payable					(750,000	)		(3,500	)
(Less): discount on noncurrent convertible notes payable					—			—
Noncurrent convertible notes payable, net of discount				$	—		$	—

Current portion of convertible notes payable				$	750,000		$	3,500
(Less): discount on current portion of convertible notes payable					(433,932	)		—
Current portion of convertible notes payable, net of discount				$	316,068		$	3,500

●	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.

*	In default. Default interest rate 22%

(#)	Loans with a principal balance of $1,661,953 along with associated accrued interest of $342,138 totaling $2,004,091 were paid in March 2022, with a remaining accrued liability of $62,979.

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

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

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

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

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

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

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

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

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

(10)	The unsecured note may be pre-payable at any time. Cash proceeds of $5,400,000 were received. The note balance of $6,000,000 includes an original issue discount of $600,000 and was issued with a warrant to purchase 300,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $4,749,005 with a corresponding adjustment to paid in capital for the relative value of the warrant. For both the three and six months ended November 30, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $0 at November 30, 2022. The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase 150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $2,850,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

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

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

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

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

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

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

(17)	Original $300,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Interest payable monthly, principal due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The loan and accrued interest were fully paid in March 2022.

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

(19)	Original $110,000 note may be pre-payable at any time. The note balance includes an original issue discount of $10,000 and was issued with a warrant to purchase 70,000,000 shares at an exercise price of $0.00165 per share, with a 3-year term and having a relative fair value of $41,176. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $41,176 with a corresponding adjustment to paid in capital. The loan and accrued interest were fully paid in March 2022.

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

(21)	Original $300,000 note may be pre-payable at any time. The note balance includes an original issue discount of $25,000 and was issued with a warrant to purchase 230,000,000 shares at an exercise price of $0.00165 per share with a 3-year term and having a relative fair value of $125,814. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $125,814 with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022.

(22)	Original $82,500 note may be pre-payable at any time. The note balance includes an original issue discount of 7,500 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.002 per share with a 3-year term and having a relative fair value of $54,545. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $54,545 with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022.

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

(24)	This promissory note was issued as part of a debt settlement whereby $1,460,794 in convertible notes and associated accrued interest of $1,593,544 totaling $3,054,338 was exchanged for this promissory note of $3,054,338, and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a relative fair value of $550,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

(25)	This promissory note was issued as part of a debt settlement whereby $103,180 in convertible notes and associated accrued interest of $62,425 totaling $165,605 was exchanged for this promissory note of $165,605, and a warrant to purchase 80,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a fair value of $176,000.

(26)	This promissory note was issued as part of a debt settlement whereby $235,000 in convertible notes and associated accrued interest of $75,375 totaling $310,375 was exchanged for this promissory note of $310,375, and a warrant to purchase 25,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a fair value of $182,500.

(27)	The note, with an original principal amount of $350,000, may be pre-payable at any time. The note balance includes an original issue discount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of $271,250. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $22,829 and $53,156, respectively, with an unamortized discount of $223,697 at November 30, 2022.

(28)	This promissory note was issued as part of a debt settlement whereby $9,200 in convertible notes and associated accrued interest of $6,944 totaling $16,144 was exchanged for this promissory note of $25,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

(29)	This promissory note was issued as part of a debt settlement whereby $79,500 in convertible notes and associated accrued interest of $28,925 totaling $108,425 was exchanged for this promissory note of $145,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

(30)	The note, with an original principal amount of $550,000, may be pre-payable at any time. The note balance includes an original issue discount of $250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of $380,174. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $380,174 with a corresponding adjustment to paid in capital. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $34,441 and $85,968, respectively, with an unamortized discount of $281,264 at November 30, 2022.

(31)	The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $1,342,857. The discount and warrant are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $82,582 and $184,959, respectively, with an unamortized discount of $1,309,454 at November 30, 2022. The maturity date was extended from February 22, 2022 to February 22, 2024 on February 28, 2022 in exchange for warrants to purchase 50,000,000 at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $950,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

(32)	The note, with an original principal balance of $2,750,000, may be pre-payable at any time. The note balance includes an original issue discount of $50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $0.064 per share with a 3-year term and having a relative fair value of $2,035,033. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $2,035,033 with a corresponding adjustment to paid in capital. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $120,297 and $319,016, respectively, with an unamortized discount of $930,729 at November 30, 2022. The maturity date was extended from June 8, 2022 to June 8, 2024 on February 28, 2022 in exchange for warrants to purchase 85,000,000 at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $1,615,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

(33)	This loan, with an original principal balance of $4,000,160, was in exchange for 184 Series F preferred shares from a former director. The interest and principal are payable at maturity. The loan is unsecured. For the quarter and nine months ended November 30, 2022 there was repayments $27,800 and $63,800, respectively on the note.

(34)	The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $0.037 per share with a 3-year term and having a relative fair value of $1,284,783, The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,284,783 with a corresponding adjustment to paid in capital. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $59,646 and $122,486 respectively. with an unamortized discount of $1,279,947 at November 30, 2022.

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

(36)	Original $170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $20,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $4,589 and $6,048 with an unamortized discount of $13,952 at November 30, 2022.

(37)	Original $400,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $10,691 with an unamortized discount of $39,309 at November 30, 2022.

(38)	A warrant holder exchanged 955,000,000 warrants for a promissory note of $3,000,000, bearing interest at 15% with a two year maturity. The fair value of the warrants was determined to be $2,960,500 with a corresponding adjustment to paid-in capital and a debt discount of $39,500 which will be amortized over the term of the loan. Principal and interest due at maturity. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $4,248, with an unamortized discount of $35,252 at November 30, 2022

(39)	Original $475,000 note may be pre-payable at any time. The note balance includes an original issue discount of $75,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $16,473 with an unamortized discount of $58,527 at November 30, 2022.

(40)	Original $350,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest due at maturity. Secured by a general security charging all of the Company’s s present and after-acquired property. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $3,593 with an unamortized discount of $46,407 at November 30, 2022.

(41)	On October 28, 2022 the Company entered into an loan facility with a lender for up to $4,000,000 including an original issue discount of $500,000. In exchange the Company will issue one series F Preferred Share, extended 329 series F warrants with a March 1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10 tranches with each trance of $400,000, with cash proceeds of $350,000 an original issue discount of $50,000, October 31, 2026 maturity, and 61 Series F warrants with a October 31, 2033 maturity. Secured by a general security charging all of the Company’s present and after-acquired property. At November 30, 2022 the Company has issued 4 tranches as follows: October 28, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $299,399. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $349,399 at November 30, 2022. November 9, 2022, $400,000 loan, original issue discount of $50,000 , 61 Series F Preferred Share warrants e having a relative fair value of $299,750. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $349,750 at November 30, 2022. November 10, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants e having a relative fair value of $302,020. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $352,020 at November 30, 2022. November 15, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants e having a relative fair value of $299,959. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $0 with an unamortized discount of $349,959 at November 30, 2022.

	Number of Series C Preferred Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2022	329	$1.00	11.50
Issued	244	$1.00	10.00
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at November 30, 2022	573	$1.00	10.00

Common shares	November 30, 2022		February 28, 2022
Issued		5,248,415,892		4,733,110,360
Issuable		12,100,000		2,100,000
Issued, issuable and outstanding		5,260,515,892		4,735,210,360

	Number of Warrants		Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2022	1,216,845,661		$0.07	2.38
Issued	94,000,000		$0.009	4.94
Adjusted⁽¹⁾	66,750,000		$0.011	1.41
Exercised	(61,378,210	)	$0.011	(1.41)
Forfeited, extinguished and cancelled	(955,000,000	)	$0.008	(1.61)
Outstanding at November 30, 2022	361,217,451		$0.03	2.52

Maturity of Lease Liabilities	Operating Leases
November 30, 2023	$	250,169
November 30, 2024		229,016
November 30, 2025		207,558
November 30, 2026		207,558
November 30, 2027		207,558
November 30, 2028 and after		709,156
Total lease payments		1,811,015
Less: Interest		(583,707	)
Present value of lease liabilities	$	1,227,308


	For the Three Months Ended						For the Nine Months Ended
	November 30,						November 30,
	2022			2021			2022			2021
Numerator:
Net income (loss) available to common shareholders	$	(4,085,660	)	$	(7,094,442	)	$	(12,930,211	)	$	(47,831,733	)

Effect of common stock equivalents
Add: interest expense on convertible debt		22,438			38,345			27,863			63,299
Add: amortization of debt discount		78,149			694,855			90,767			775,986
Add (less) loss (gain) on settlement of debt		—			—			(3,992	)		—
Add (less) loss (gain) on change of derivative liabilities		—			—			(3,595	)		372,502
Net income (loss) adjusted for common stock equivalents		(3,985,073	)		(6,361,242	)		(12,819,168	)		(46,619,946	)

Denominator:
Weighted average shares – basic		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,723

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

Dilutive effect of common stock equivalents:
Convertible Debt		—			—			—			—
Preferred shares		—			—			—			—
Warrants		—			—			—			—
		—			—			—			—

Denominator:
Weighted average shares – diluted		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,723

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

	For the Three and Nine Months Ended
	November 30
	2022	2021

Convertible Series F Preferred Shares	18,148,779,827	15,294,230,742

●	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.

●	Integrated hardware/software with AI-driven responses simulating and expanding on what legacy or manned solutions could perform.

●	Performance of difficult, rare, and high value tasks such as firearm detection and immediate response whether autonomously or with human assistance.

●	Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging over most legacy solutions in use today.

●	Patrol and response of commercial, industrial and government areas requiring heightened security work to be completed via autonomous mobile robotics devices.

●	Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed.

●	Use RAD’s exclusive hardware and software, purpose-built by for delivery of these solutions. Various form factors have been customized to deliver this new functionality, both mobile and stationary.

●	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.

●	Perform workflow functions via purpose-built fixed and mobile devices with unique technology and methodology.

●	RIO™, a portable, solar-powered, wide-area security device. RIO was formally introduced to the security industry at one of its premier trade shows, GSX 2022 in Atlanta in September 2022.

●	ROSA-P, a switched-powered security and safety solution that powers RAD’s best-selling ROSA 3.x where power does not currently exist in the industry at night.

●	RADDOG™, the security industry’s purpose-built mobile robot dog.

●	ROSS™, a software solution which enables millions of IP security cameras presently deployed with the ability to connect with the RAD ecosystem (RADSoC). ROSS empowers these non-RAD cameras to run the same AI analytic capabilities as other RAD hardware solutions.

●	Wholly owned subsidiary Robotic Assistance Devices Group, Inc. (RAD-G) announced the launch of a sales initiative targeting OEM markets. This market development endeavor marks our first of its kind and involves the placement of hardware and software solutions developed across all subsidiaries for use in other vertical markets through OEM suppliers.

●	Wholly owned subsidiary Robotic Assistance Devices Mobile, Inc., is expected to make a new solution announcement sometime in FY2024.

●	25 ROAMEOs, the robust mobile-patrolling security robot. The current schedule, subject to engineering development timelines, parts availability and manufacturing, has these ROAMEO units available to ship to clients and start billing as soon as August 2023. We expect to deploy 5-10 a month beginning in August. Pre-selling has begun with the goal of exceeding 25 units for FY2024.

●	150 RIOs, portable solar-powered, wide-area security devices. RAD’s largest dealer is expected to add this to their line card by May 2023 which we can reasonably expect will drive significant volume. Management expects RIO revenue to begin significance towards the end of Q2 FY2024.

●	350 ROSAs / ROSA-Ps, stationary security and safety solutions. This number of ROSA & ROSA P units is roughly at the same run rate as the last few months of calendar year 2022 and is considered by management to be easily achievable. Management expects a minimum of 30 units being added monthly to recurring monthly revenue beginning March 1, 2023.

●	100 AVAs, an autonomous access control / vehicle access device. AVA 3.0 units hit 10 deployed units by mid-January. Early indications of market reception are positive and it’s expected that dealers will begin ordering in greater quantities as management gathers more case studies and references.

●	15 RADDOG™, the security industry’s purpose-built robot dog. RADDOG version 1.0 was first publicly displayed on December 7, 2022 at the Company’s Investor Open House and Technology Reveal. As was stated at that time all of our tests were successful and we are moving forward with a larger, stronger version to commercialize. This version will be shown at the ISC West trade show in Las Vegas at the end of March and will be available to ship to clients in the May time frame. The projected number of 15 is considered conservative by management for FY2024.

●	5000 IP camera integrations via ROSS. These are expected to be ‘take-over’ or ‘side-by-side’ type deployments featuring pre-existing LAN connected IP security cameras. ‘Take-over’ deployments would replace the pre-existing Video Management System and ‘side-by-side’ deployments would leave the existing systems in place and use secondary camera feeds through ROSS.

●	35 TOM autonomous visitor management devices. TOM, an acronym for ‘The Office Manager’ is the evolution and replacement for Wally™. ‘TOM+’ is scheduled for development and release in FY2024. Currently RAD’s largest single client has deployed TOM units throughout the US and at two European locations. Given monthly sales orders it is expected that this 35 unit target could be met entirely by this one client. We are discussing rolling the product out to its dealer channel as at the moment it is only available to this single client.

	Period
	Three Months Ended			Three Months Ended			Change
	November 30, 2022			November 30, 2021			Dollars			Percentage
Revenues	$	402,399		$	373,897		$	28,502		8%
Gross profit		276,439			230,473			45,966		20%
Operating expenses		3,090,941			5,118,000			(2,027,059	)	(40%	)
Loss from operations		(2,814,502	)		(4,887,527	)		2,073,025		42%
Other income (expense), net		(1,271,158	)		(2,206,915	)		935,757		42%
Net income (loss)	$	(4,085,660	)	$	(7,094,442	)	$	3,008,782		42%

●	General and administrative expenses decreased by $1,840,744. In comparing the three months ended November 30, 2022 and November 30, 2021 this decrease was primarily due to the following decreases: stock based compensation of $819,500 for higher prior year charges based on the CEO incentive plan, wages and salaries for prior year bonuses paid, bad debts expense of $25,785 and professional fees of $126,435. These decreases were offset by the following increases: insurance of $51,485 due to health plan for new employees and increased liability and property insurance due to new manufacturing facility, advertising , sales and marketing of $82,893, subcontractor fees of $13,802, travel of $18,004, duty and freight of $36,230 and bad debts expense due to a general provision of $40,000 on slow payers due to present economic factors.

●	Research and development decreased by $169,133 due to higher activity in the prior year in R&D design and equipment for the development of new products such as ROAMEO and AVA, as well as upgrades of existing products. That decrease was partially offset by an increase in research and development paid to a related party of $146,995.

●	Depreciation and amortization increased by $24,928 due to the acquisition of computer equipment and new revenue earning devices.

●	Operating lease cost and rent decreased by $42,110 due to one less office lease for the three months ended November 30, 2022 comparing to the three months ended November 30, 2021.

●	Interest expense decreased by $779,096 due to a decrease in debt amortization expense. The three months ended November 30, 2021 had higher amortization due to debt settlements.

●	Loss on settlement of debt was $0 the quarter ended November 30, 2022 and $156,661 in the quarter ended November 30, 2022.