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Item 1. Financial Statements

2021-07-14 compared with 2021-01-19 · 1048 added, 756 removed, 435 unchanged (81% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, 2020

February 28, 2021*

Current assets:

Accounts receivable

Deposits on inventory

Device parts inventory

Total current assets

Revenue earning devices, net of accumulated depreciation of $197,138 and $123,088 respectively

Fixed assets, net of accumulated depreciation of $64,212 and $51,637, respectively

Operating lease asset

Revenue earning devices, net of accumulated depreciation

of $259,464 and $226,459, respectively

Fixed assets, net of accumulated depreciation of $71,751

and $67,113, respectively

Security deposit

LIABILITIES AND STOCKHOLDERS’

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Customer deposits

Current operating lease liability

Current portion of deferred variable payment obligation

Current portion of convertible notes payable, net of discount of $22,488 and $120,602 respectively

Current portion of convertible notes payable, net of

discount of $616,145 and $697,276 respectively

Loan payable - related party

Current portion of loans payable, net of discount of $207,500 and $0, respectively

Current portion of loans payable, net of discount of

$657,136 and $0, respectively

Vehicle loan - current portion

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Total current liabilities

Convertible notes payable, net of discount of $0 and $30,486 respectively

Loans payable, net of discount of $200,300 and $0, respectively

Non-current operating lease liability

Loans payable, net of discount of $7,780,664 and $2,510,994,

Deferred variable payment obligation

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15,545,650 shares authorized;

no shares issued and outstanding at November 30, 2020 and February 29, 2020, respectively

no shares issued and outstanding at May 31, 2021 and February 28, 2021, respectively

Series E Preferred Stock, $0.001 par value;

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2,716 and 2,799 shares issued and outstanding, respectively

Series G Preferred Stock, $0.001 par value;

shares authorized, no shares issued and outstanding at May 31, 2021 and February 28, 2021, respectively

Common Stock, $0.00001 par value;

5,000,000,000 shares authorized 1,889,573,434 and 418,415 shares issued and outstanding, respectively

5,000,000,000 shares

authorized 3,545,772,882 and 3,229,426,884 shares issued and outstanding, respectively

Additional paid-in capital

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* Derived from audited information

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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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Three Months Ended

Nine Months Ended

Cost of Goods Sold

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Depreciation and amortization

Loss on disposal of fixed assets

Operating lease cost

Total operating expenses

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Interest expense

Gain (loss) on settlement of debt

(Loss) on settlement of debt

Total other income (expense), net

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Weighted average common share outstanding - basic

3,489,517,478

Weighted average common share outstanding - diluted

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

3,489,517,478

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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Common stock issued for debt conversion

Stock based compensation

Balance at May 31 2019

Adjustment to derivative liability

Common stock issued for debt conversion

Stock based compensation

Balance at August 31 2019

Adjustment to derivative liability

Common stock issued for debt conversion

Stock based compensation

Balance at November 30 2019

Preferred Stock

Stockholders’

Balance at February 29, 2020

Adjustment to derivative liability

Common stock issued for debt conversion

Rounding shares

Balance at May 31, 2020

Contributed Capital

Adjustment to derivative liability

Common stock issued for debt conversion

Cancellation of Series F Preferred Shares

Balance at August 31, 2020

Contributed Capital

Adjustment to derivative liability

Common stock issued for debt conversion

Balance at February 28, 2021

3,229,426,884

Warrants issued with promissory notes

Balance at November 30, 2020

Series F preferred shares and warrants issued with deferred variable

payment obligation amendment agreement

Series F preferred shares cancelled in exchange for promissory notes

Series F preferred shares issued on exercise of warrants

Series F preferred shares converted to common shares

Warrants issued as part of a debt issuance

Stock based compensation

Balance at May 31, 2021

3,545,772,882

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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended November 30, 2020

Nine Months Ended November 30, 2019

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Depreciation and amortization

Loss (gain) on (disposal) impairment of fixed assets

Revenue earning device sold and expensed in cost of sales

Reduction of right of use asset

Accretion of lease liability

Stock based compensation

Provision for inventory

Change in fair value of derivative liabilities

Interest expense related to derivative liability in excess of face value of debt

Interest expense related to penalties from debt defaults

Amortization of debt discounts

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Accounts receivable

Prepaid expenses

Deposits on inventory

Device parts inventory

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Accrued expense, related party

Customer deposits

Operating lease liability payments

Balance owed WeSecure

Current portion of deferred variable payment obligation

Current portion of deferred variable payment obligations

Accrued interest payable

Advances payable

Net cash used in operating activities

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Purchase of fixed assets

Proceeds of disposal of fixed assets

Cash paid for security deposit

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of convertible debt

Proceeds from deferred variable payment obligation

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Repayment of loans payable

Net proceeds from convertible notes payable

Cash on consolidation of RAD G

Net borrowings (repayments) on loan payable - related party

Net borrowings(repayments) on loan payable - related

Net cash provided by financing activities

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Noncash investing and financing activities:

Debt discount from derivative liabilities

Right of use asset for operating lease liability

Transfer from device parts inventory to fixed assets

Conversion of convertible notes, interest and fees to shares of common stock

Release of derivative liability on conversion of convertible notes payable

Settlement of convertible notes payable to accounts payable and accrued expenses

Discount added to face value of loans

Warrants issued with loans

Capitalization of accrued interest to convertible notes payable and loans payable

Opening balance sheet RAD G

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

Conversion of convertible notes and interest to shares

of common stock

Release of derivative liability on conversion of convertible

notes payable

Exchange of notes payable for Series F preferred shares

Discount applied to face value of loans

Warrants issued as part of debt issuance

Series F preferred shares converted to common shares

Series F preferred shares issued on exercise of warrants

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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(“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 LLC.

On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc., through the issuance of 10,000 common shares to its sole shareholder.

On August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock.

AITX’s prior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships.

As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD.

As a result, AITX’s business going forward will consist of one segment activity which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.

The Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation of the transaction.

or the “Company”)

was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015.

On August 24, 2018, Artificial Intelligence

Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).

Robotic Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada

on July 26, 2016 as an LLC.

On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices,

Inc., through the issuance of 10,000 common shares to its sole shareholder.

On August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”),

whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares

of Series F Convertible Preferred Stock.

AITX’s prior business focus was transportation services, and AITX was exploring the on-demand

logistics market by developing a network of logistics partnerships.

As a result of the closing of the Acquisition, AITX has succeeded

to the business of RAD.

As a result, AITX’s business going forward will consist of one segment activity which is the delivery of

artificial intelligence and robotic solutions for operational, security and monitoring needs.

The Acquisition was treated as a reverse recapitalization effected by a share exchange for

financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation

of the transaction.

Therefore, no goodwill or other intangible assets were recorded by AITX as a result of the Acquisition.

RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer.

As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.

RAD is treated

as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer.

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.

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, 2020, the Company had negative cash flow from operating activities of $1,446,075.

As of November 30, 2020, the Company has an accumulated deficit of $29,257,504, and negative working capital of $15,673,795.

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 three months ended May 31, 2021, the Company had negative cash flow from operating

activities of $3,040,776.

As of May 31, 2021, the Company has an accumulated deficit of $67,426,672, and negative working capital of $7,049,695.

Management does not anticipate having positive cash flow from operations in the near future.

These factors raise a substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.

The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan.

Without additional capital, the Company will not be able to remain in business.

These factors raise a substantial doubt about

the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.

The Company does not have the resources at this time to repay its credit and debt obligations,

make any payments in the form of dividends to its shareholders or fully implement its business plan.

Without additional capital, the Company

will not be able to remain in business.

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

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan.

Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations.

There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable.

The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises substantial doubts about the Company’s ability to continue as a going concern.

In the near term, management plans to raise an additional $ 15 million to $ 50 million before

the end of the fiscal year.

Management is committed to raise either non-dilutive funds or minimally dilutive funds.

There is no assurance

that these funds will be able to be raised nor can we provide assurance that these possible raises may not have dilutive effects.

The Company currently projects that 2022 fiscal year’s revenues will be between 5 and

15 times greater than the 2021 fiscal year’s revenues.

This projection is based on the following factors:

an anticipated significant

increase in the orders;

an expected significant improvement in the Company’s ability to make timely deliveries;

an anticipated

significant improvement in the Company’s ability to support many more devices than this it could support during the 2021’s

However, there can be no assurance that the revenues will increase to the extent projected or that the anticipated improvements

will actually occur.

This expansion plan will require the Company to expend significant resources, including the

hiring of additional staffing, which the Company expects to finish the next fiscal year with between 75 –

125 employees.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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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 July 28, 2020.

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.

(see Note 16), Robotic Assistance Devices Mobile, Inc., On the Move Experience, LLC and OMV Transports, LLC.

The accompanying unaudited condensed consolidated financial statements have been prepared

in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the condensing

instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission

(“SEC”) and should be read in conjunction with the audited financial statements and notes thereto in the Company’s latest

Annual Report filed with the SEC on Form 10-K as filed on June 1, 2021.

The unaudited condensed consolidated financial statements include

the accounts of the Company and its wholly-owned subsidiaries, Robotic Assistance Devices, Inc., On the Move Experience, LLC and OMV Transports,

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, 2020 are not necessarily indicative of the results that may be expected for the entire year.

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 three months ended May 31, 2021 are not necessarily indicative

of the results that may be expected for the entire year.

Use of Estimates

In order to prepare financial statements in conformity with accounting principals 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 derivative liabilities.

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

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.

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.

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 were no allowances provided for the nine months ended November 30, 2020 and the year ended February 29, 2020.

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 $24,868 provided as of May 31, 2021 and February 28,

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.

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 at both nine months ended November 30, 2020 and February 29, 2020 we had a valuation reserve of $160,000.

A charge to income is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete

inventory, are noted.

As of both May 31, 2021 and February 28, 2021 there was no valuation reserve.

Revenue Earning Devices

Revenue earning devices are stated at cost.

Depreciation is provided on a straight-line basis over the estimated useful life of 48 months.

The Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment.

The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired.

The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.

Depreciation is provided on a straight-line basis

over the estimated useful life of 48 months.

The Company continually evaluates revenue earning devices to determine whether events or

changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated

for possible impairment.

The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset

has been impaired.

The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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Fixed assets are stated at cost.

Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to five years.

Depreciation is provided on the straight-line method based

on the estimated useful lives of the respective assets which range from three to five years.

Major repairs or improvements are capitalized.

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Office equipment

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.

Leasehold improvements

5 years, the life of the lease

The Company periodically evaluates the fair value of fixed assets whenever events or changes

in circumstances indicate that its carrying amounts may not be recoverable.

Upon retirement or other disposition of fixed assets, the

cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.

Research and Development

Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.

If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned.

At November 30, 2020 and February 29, 2020, the Company had no deferred development costs.

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 May 31, 2021 and February 28, 2021, the Company had no deferred development costs.

Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business.

The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.

If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements.

Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

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 7, 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:

The Company has entered into transactions, as more fully described in footnote 7, in which

it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain

revenue categories, generally based on a percentage of sales for those certain revenues.

The Company determines whether these agreements

constitute sales of future revenues or are in substance debt based on the facts and circumstances of each agreement, with the following

primary criteria determinative of whether the agreement constitutes a sale of future revenues or debt:

Does the agreement purport, in substance, to be a sale

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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 Company ’

s revenue for a reporting

period underlying the agreement have only a minimal impact on the investor ’

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.

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.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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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 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.

There was no cumulative effect

adjustment recognized as a result of this adoption.

Refer to Note 4 –

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Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return.

Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements.

Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years.

Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law.

ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted.

The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%.

A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance.

The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending February 28, 2021, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements.

We adopted ASU No.

2016—02—

Leases (topic 842) , as amended as of March 1, 2019 using the modified retrospective approach.

The modified retrospective approach provided a method for recording the existing leases at adoption and in comparative periods.

In addition, we elected the package of practical expedient permitted under the transition guidance within the new standard.

In addition, we elected the hindsight practical expedient to determine the lease term for existing leases.

The standard did not materially impact our consolidated net loss, accumulated deficit, and had no impact on cash flows.

Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception:

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.

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;

(b) purchase option that is reasonably certain

of being exercised;

or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.

If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance;

or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included

in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.

If at its inception, a lease meets any of the four lease criteria above, the lease is classified

by the Company as a sales/finance;

and if none of the four criteria are met, the lease is classified by the Company as an operating lease.

Operating lease payments are recognized as an expense in the income statement on a straight-line

basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless

of when actual payments are made.

This generally results in rent expense in excess of cash payments during the early years of a lease

and rent expense less than cash payments in the later years.

The difference between rent expense recognized and actual rental payments

is recorded as deferred rent and included in liabilities.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Otherwise, the Company accounts for the financial

instrument as permanent equity.

Our CEO and Chairman holds sufficient shares of the Company’s voting preferred stock

that give sufficient voting rights under the articles of incorporation and bylaws of the Company such that the CEO and Chairman can at

any time unilaterally vote to increase the number of authorized shares of common stock of the Company, without the need to call a general

meeting of common shareholders of the Company.

Initial Measurement

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

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).

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).

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

The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

Level 1 –

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

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;

other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

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.

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.

Inputs that are unobservable

for the asset or liability.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

1 unchanged sentence

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:

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

November 30, 2020

Derivative liability –

conversion features pursuant to convertible notes payable

conversion features pursuant to convertible

notes payable

February 28, 2021

Derivative liability –

conversion features pursuant to convertible notes payable

See Note 12 for specific inputs used in the multinomial lattice model used in determining fair value.

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

conversion features pursuant to convertible

notes payable

See Note 12 for specific inputs used in the multinomial lattice model used in determining

The carrying amounts of the Company’s financial assets and liabilities, such as cash,

accounts receivable, prepaid expenses and advances, accounts payable and accrued expenses, approximate their fair values because of the

short maturity of these instruments.

Earnings (Loss) per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.

Diluted EPS give effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.

In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options and/or warrants.

Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.

Basic loss per common share is computed based on the weighted average number of shares outstanding during the period.

Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments.

Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

Recently Adopted Accounting Pronouncements

On March 1, 2019 the Company adopted ASU No.

2016-02, Leases (Topic 842) , which is effective for public entities for annual reporting periods beginning after December 15, 2018.

Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

The Company adopted ASU 2016-02 on March 1, 2019 but does not expect any material impact on the financial statements because the leases commencing March 1, 2019 are month to month.

In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses .

ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology.

ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method.

A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date.

The Company is currently assessing the impact this accounting standard will have on its financial statements and related disclosures.

The Company adopted this March 1, 2020.

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.

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.

Recently Issued Accounting Pronouncements

Accounting for Income Taxes

In December 2019, the FASB issued a new standard to simplify the accounting for income taxes.

The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income

taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership

of equity method investments and foreign subsidiaries.

The guidance also simplifies aspects of accounting for franchise taxes and enacted

changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

standard will be effective for us beginning July 1, 2021, with early adoption permitted.

The Company does not expect any material impact

of this standard in our consolidated financial statements, including accounting policies, processes, and systems.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

Certain reclassifications have been made in the 2019 financial statements to conform to the 2020 presentation.

These reclassifications have no effect on net loss for 2019.

Recently Adopted Accounting Pronouncements

In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses .

ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes

the loss impairment methodology.

ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective

adoption method.

A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been

recognized before the effective date.

The Company is currently assessing the impact this accounting standard will have on its financial

statements and related disclosures.

The Company adopted this on March 1, 2020.

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).

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.

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

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.

Therefore, the

Company has elected to apply the practical expedient which eliminates the requirement to disclose information about remaining performance

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, 2020

Nine Months Ended

November 30, 2020

Device rental activities

Direct sales of goods and services

Three Months Ended

November 30, 2019

Nine Months Ended

November 30, 2019

Device rental activities

2 unchanged sentences

Revenue earning devices consisted of the following:

November 30, 2020

February 28, 2021

1 unchanged sentence

Accumulated depreciation

During the three months ended May 31, 2021 the Company made total additions to revenue earning

devices of $70,162 which were transfers from inventory During the three months ended May 31, 2021, the Company made total additions to

revenue earning devices of $0.

During the three months ended May 31, 2021 the Company sold a revenue earning device having

a net book value of $3,411 for revenues of $30,600 and included the $3,411 in cost of goods sold.

Depreciation expense was $33,005 and $22,641 for the three months ended May 31, 2021, and

2020 respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended November 30, 2020, the Company made total additions to revenue earning devices of $72,940.

During the nine months ended November 30, 2019, the Company made total additions to revenue earning devices of $132,081 including $106,256 in inventory transfers.

During the nine months ended November 30, 2019 the Company disposed of a revenue earning device having a net book value of $3,500 for $11,000 and recorded a gain on disposal of $7,500.

Depreciation expense was $26,589 and $74,050 for the three and nine months ended November 30, 2020, respectively, and $22,107 and $57,662 for the three and nine months ended November 30, 2019, respectively.

Fixed assets consisted of the following:

November 30, 2020

February 28, 2021

2 unchanged sentences

Accumulated depreciation

During the three months and nine months ended November 30, 2020 the Company made additions of $0 and $4,638.

The Company made additions of $1,000 for both the three and nine months ended November 30, 2019.During the nine months ended November 30 ,2020, the Company disposed of office equipment having an original cost of $3,550 and a net book value of $1,553 for $1,000 in proceeds and recorded a $553 loss on disposal of fixed assets.

Depreciation expense was $3,556 and $14,571 for the three and nine months ended November 30, 2020, respectively, and $5,484 and $16,397 for the three and nine months ended November 30, 2019, respectively.

During the three months ended May 31, 2021 and May 31, 2020 the Company made additions of

$15,362 and $4,638, respectively.

Depreciation expense was $4,638 and $5,474 for the three months ended May 31, 2021, and 2020

respectively.

DEFERRED VARIABLE PAYMENT OBLIGATION

On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 (including $192,500 paid in January and February 2019) in exchange for a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues).

If the total investor advances turned out to be less than $900,000, this would not constitute a breach of the agreement, rather the 9% rate would be adjusted on a pro-rata basis.

The investor had agreed to pay the remaining balance in minimum $60,000 monthly installments, concluding November 30, 2019.

At February 29, 2020 the investor had advanced the full $900,000.

On February 1, 2019 the Company entered into an agreement with an investor whereby the investor

would pay up to $900,000 (including $192,500 paid in January and February 2019) in exchange for a perpetual 9% rate payment (Payments)

on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues).

If the total investor advances turns out to be less than $900,000, this would not constitute a breach of the agreement, rather the 9%

rate would be adjusted on a pro-rata basis.

The investor has agreed to pay the remaining balance in minimum $60,000 monthly installments,

concluding November 30, 2019.

At February 29, 2020 the investor has advanced the full $900,000.

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

The investor would pay up to $400,000 (including $143,556 paid in May 2019) in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues.

If the total investor advances turned out to be less than $400,000, this would not constitute a breach of the agreement, rather the 4% rate would be adjusted on a pro-rata basis.

The investor had agreed to pay the remaining balance in four monthly installments of $64,111 starting July 1, 2019.

At February 29, 2020, $400,000 had been paid to the Company.

The investor would pay up to $50,000 (including $17,444 paid in May 2019) in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues.

If the total investor advances turned out to be less than $50,000, this would not constitute a breach of the agreement, rather the 1.11% rate would be adjusted on a pro-rata basis.

The investor has agreed to pay the remaining balance in four monthly installments of $8,014 starting July 1, 2019.

At February 29, 2020, $50,000 had been paid to the Company.

These variable payments (Payments) are to be made either 30 days up to 90 days after the fiscal quarter depending on the agreement.

If the Payments would deplete RAD’s available cash by a percentage between 1% and 31% depending on the rate Payment, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount.

The investor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s

reported quarterly Revenues.

If the total investor advances turns out to be less than $400,000, this would not constitute a breach of

the agreement, rather the 4% rate would be adjusted on a pro-rata basis.

The investor has agreed to pay the remaining balance in four

monthly installments of $64,111 starting July 1, 2019.

At February 29, 2020, $400,000 has been paid to the Company.

The investor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the

Company’s reported quarterly Revenues.

If the total investor advances turns out to be less than $50,000, this would not constitute

a breach of the agreement, rather the 1.11% rate would be adjusted on a pro-rata basis.

The investor has agreed to pay the remaining balance

in four monthly installments of $8,014 starting July 1, 2019.

At February 29, 2020, $50,000 has been paid to the Company.

These variable payments (Payments) are to be made 30 days after the end of each fiscal quarter.

If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the

quarterly report at an interest rate of 6% per annum on the unpaid amount.

In the event that at least 10% of the assets of the Company are sold by the Company, the investors

would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent

valuator to be chosen by the investors.

The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid

for the assets plus all future Payments associated with the assets sold.

In the event that the common or preferred shares are sold by

the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump

The FMV cannot exceed 30% of the share disposition price defined as the total price the third party paid for the shares plus

the total value of all future Payments.

On November 18, 2019 the Company entered into another similar arrangement with the (February

1, 2019) investor above whereby the investor would advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s

quarterly Revenues (commencing on quarter ending May 31, 2020).

At February 29, 2020 the investor has advanced $109,000 and the investor

advanced the $116,000 remainder as of May 2020.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

At May 31, 2020 the investor has fully funded this commitment.

On December 30, 2019 the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020).

At May 31, 2020 the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020.

As the investor has only advanced the $50,000 the 1.00% rate Payment has been adjusted on a pro-rata basis to 0.50%.

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

On December 30 , 2019 the Company entered into another similar arrangement with a new investor

whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues

(commencing quarter ended November 30, 2020).

At February 29, 2020 the investor has advanced $50,000 with the remainder to be advanced

no later than June 30, 2020.

If the total investor advances turns out to be less than $100,000, this would not constitute a breach of

the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.

On April 22, 2020 the Company entered into another similar arrangement with the (first May

9, 2019) investor above whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s

quarterly Revenues.

At May 31, 2020 the investor has fully funded this commitment.

The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement.

Because of this, the Company has determined that the agreements constitute debt agreements.

As of August 30, 2020, the Company has not yet completed its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these agreements.

The Company expects to have completed its analysis of the expected cash flows prior to the filing of the year end February 28, 2021 filing.

On July 1, 2020 the Company entered into a similar agreement with the first investor whereby the investor would pay up to $800,000 in exchange for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue.

On July 1, 2020 the Company entered into a similar agreement with the first investor whereby

the investor would pay up to $800,000 in exchange for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly

These Payments are to be made 90 days after the fiscal quarter with the first payment being due no later than May 31, 2021.

If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred.

The investor had agreed to pay $100,000 per month over an 8 month period with the first payment due July 2020 and the final payment no later than February 28, 2021.

As at August 31, 2020 the investor had fully funded the $800,000 commitment

On August 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for $900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $1,925,000.

the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred.

The investor had agreed to pay $100,000

per month over an 8-month period with the first payment due July 2020 and the final payment no later than February 28, 2021.

31, 2020 the investor had fully funded the $800,000 commitment.

On August 27, 2020 the Company and the first investor referred to above consolidated the three

separate agreements of February 1, 2019 for $900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement

for a total of $1,925,000.

This new agreement is for similar terms as the above agreements save for the following:

the rate payment is revised to 14.25% payable on revenues commencing the quarter ended August 31, 2020 and the Payments are secured by the assets of the Company.

This interest may be secured by UCC filing but is subordinated to equipment financing on the products the Company leases to its customers.

In summary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors.

The FMV cannot exceed 43.77% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold.

In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment.

The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.

For the nine months ended November 30, 2020, the Company has received $966,000 related to the deferred payment obligation bringing the balance to $2,525,000 at November 30, 2020.

(February 29, 2020 -$1,559,000).

The Payments will first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and will accrue every quarter thereafter.

For the three months and nine months ended November 30, 2020 the Company accrued $18,455 and $57,149 in Payments.

As of November 30, 2020, the Company has accrued a total of $77,683 in payments (February 29, 2020 -$30,534).

the rate payment is

revised to 14.25% payable on revenues commencing the quarter ended August 31, 2020 and the Payments are secured by the assets

of the Company.

This interest may be secured by UCC filing but is subordinated to equipment financing on the products the Company

leases to its customers.

In summary of all agreements mentioned above if in the event that at least 10% of the assets

of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated

with the assets sold as determined by an independent valuator to be chosen by the investors.

The FMV cannot exceed 43.77% of the total

asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold.

event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors

must be paid the FMV of all future Payments in one lump payment.

The FMV cannot exceed 43.77% of the share disposition price defined as

the total price the third party paid for the shares plus the total value of all future Payments.

As of March 1, 2021 as a result of the

amendment with the first investor noted below, this aggregate asset disposition % was reduced from 43.77 % to 33.77%.

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

The rate payment was reduced from 14.25 % to 9.65 %

The asset disposition % (see below) was reduced from 31 % to 21%

In consideration for the above changes, the investor received 40 Series F Convertible Preferred

Stock and a warrant to purchase 367 shares of its Series F Convertible Preferred Stock with a five-year term and an exercise price of

During the three months ended May31, 2021 the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred

The company attributed a fair value based on recent transactions for the Series F Preferred stock and warrants of $33,015,214 and

recorded a loss on settlement of debt with a corresponding adjustment to paid in capital.

The 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 May 31, 2021, the Company has not yet completed its assessment of the likely cash flows

under these agreements, and thus, has not yet determined the effective interest rate under these agreements.

The Company expects to have

completed its analysis of the expected cash flows prior to the filing of the year end February 28, 2022 filing.

As of May 31, 2021, and

February 28, 2021, the balances under these agreements were $2,525,000 and $2,525,000, respectively.

For the three months ended May 31, 2021, the Company has received $0 related to the deferred

payment obligation as the balance remains $2,525,000 at May 31, 2021.

For the year ended February 28, 2021, $966,000 has been paid to

the Company bringing the balance to $2,525,000 at February 28, 2021.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 May 31, 2021, the Company has accrued

$223,015 in Payments (February 28, 2021 -$91,857).

No amounts have been recorded to date as interest, as the amounts are immaterial.

CONVERTIBLE NOTES PAYABLE

1 unchanged sentence

Rate per Share

January 31, 2013

February 28, 2017* X

November 30, 2016* X

August 31, 2014

November 30, 2016* X

November 30, 2014

November 30, 2016* X

February 28, 2015

February 28, 2017* X

August 31, 2017* X

August 31, 2015

August 31, 2017* X

November 30, 2015

November 30, 2018* X

February 29, 2016

February 28, 2019* X

May 31, 2019* X

July 18, 2016

3 unchanged sentences

January 19, 2021

January 15, 2021 XXX

January 19, 2022

1 unchanged sentence

January 27, 2022

January 16, 2021

March 8, 2017

March 8, 2020*

March 9, 2017

March 9, 2021 XXX

April 26, 2017

April 26, 2018*

May 1, 2021 XXX

May 15, 2018*

May 17, 2020* XXX

June 7, 2018*

June 16, 2017

June 16, 2018*

August 8, 2017

August 8, 2018

July 28, 2017

July 28, 2018* XX

August 29, 2017

August 29, 2018* XX

October 4, 2017

October 16, 2017

October 16, 2018* XX

November 22, 2017

November 22, 2018* XX

December 28, 2017

December 29, 2017

December 29, 2018* XX

January 9, 2018

January 9, 2019*

January 30, 2018

January 30, 2019* XX

February 21, 2018

February 21, 2019* XX

March 14, 2018

March 14, 2019*

April 9, 2018

April 9, 2019* XX

March 21, 2017

March 21, 2018

April 20, 2018

April 20, 2019*

December 2, 2018*

December 14, 2018*

June 6, 2019*

June 19, 2018

March 19, 2019

August 1, 2018

August 1, 2019* XX

August 23, 2018

August 23, 2019*

September 13, 2018

June 30, 2019*

September 17, 2018

March 17, 2019*

September 20, 2018

September 20, 2019* XX

September 24, 2018

June 24, 2019*

August 8, 2017

November 8, 2018

August 15, 2019*

November 26, 2018

May 26, 2019*

August 29, 2019

August 29, 2020*

current portion of convertible notes payable

4 unchanged sentences

Current portion of convertible notes payable, net of discount

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The indicated notes were in default as of November 30, 2020.

The indicated note was in default as of May 31, 2021.

Default interest rate 22%

On December 10, 2020 (subsequent to quarter end) the Company settled the above notes indicated totaling $1,460,794 and associated accrued interest of $1,593,544 totaling $3,054,338 in exchange for promissory notes dated December 10, 2020 totaling $3,054,338, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $550,000.

These notes are secured by a general security charging all of RAD’s present and after-acquired property.

On December 10, 2020 (subsequent to quarter end) the Company settled the above notes indicated totaling $2,683,357 and associated accrued interest of $1,237,811 totaling $3,921,1688 in exchange for a promissory note dated December 10, 2020 of $3,921,1688, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $990,000.

On December 14, 2020 (subsequent to quarter end) the Company settled the above notes indicated totaling $235,000 and associated accrued interest of $75,375 totaling $310,375 in exchange for a promissory note dated December 14, 2020 of $310,375, maturing December 10, 2023 and bearing interest at 12% per annum, 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 and 55 shares of Series F Preferred Shares having a fair value of $1,151,166.

The note is convertible beginning six months after the date of issuance.

The notes are convertible at a discount (as indicated) to the average market price and are accounted for and evaluated under ASC 480 as discussed in Note 3.

The notes are convertible at a discount (as indicated) to the average market price and are

accounted for and evaluated under ASC 480 as discussed in Note 3.

The conversion price is not subject to adjustment from forward or reverse stock splits.

During the three months ended November 30, 2020 and 2019, the Company incurred original issue discounts of $0 and $1,250 respectively, and debt discounts from derivative liabilities of $0 and $ 25,000, respectively, related to new convertible notes payable.

During the three months ended November 30, 2020 and 2019, the Company recognized interest expense related to the amortization of debt discount of $0 and $56,171, respectively.

The Company recorded penalty interest of $494,428 and $175,463 during the three months ended November 30, 2020 and November 30, 2019, respectively.

During the nine months ended November 30, 2020 and 2019, the Company incurred original issue discounts of $0 and $1,250, respectively and derivative discounts of $0 and $26,250, respectively, related to new convertible notes payable.

During the nine months ended November 30, 2020 and 2019, the Company recognized interest expense related to the amortization of debt discount of $23,957 and $739,334, respectively.

The Company recorded penalty interest of $939,705 and $207,116 during the nine months ended November 30, 2020 and November 30, 2019, respectively.

The per share conversion price into which Principal Amount and interest (including any Default

Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall be equal

to $0.10 per share (the “Fixed Conversion Price”);

provided, however, that if, the lowest traded price on the date

six (6) months from the issue date hereof is below the Fixed Conversion Price, and no default exists, the conversion shall be $0.05 (the

“Alternative Fixed Conversion Price”) provided, further , that upon any Event of Default (as defined herein) after the

Issue Date, the Conversion Price shall equal the lower of (i) $0.03 (the “Default Fixed Conversion Price”);

or (ii) seventy

percent (70%) multiplied by the lowest closing price of the Common Stock during the fifteen (15) consecutive Trading Day period immediately

preceding the date of the respective event of default (the “Default Conversion Price”);

During both the three months ended May 31, 2021 and 2020, the Company incurred original issue

discounts of $0, and debt discounts from derivative liabilities of $0 related to new convertible notes payable.

During the three months

ended May 31, 2021 and 2020, the Company recognized interest expense related to the amortization of debt discount of $81,131 and $72,029,

respectively.

All the notes above are unsecured.

As of November 30, 2020, the Company had total accrued interest payable of $3,486,043 all of which is classified as current.

The Company determined that the embedded conversion features in the convertibles notes described below should be accounted for as derivative liabilities as a result of their variable conversion rates.

During the nine months ended November 30, 2020, the Company also had the following convertible note activity:

The company recorded $939,705 in penalties as increases on various notes, with a corresponding charge to interest.

holders of certain convertible notes payable elected to convert a total of $2,094,934 of principal and $1,083,982 accrued interest, and $20,500 of fees into 1,889,155,010 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.

As of May 31, 2021 and February 28, 2021, the Company had

total accrued interest payable of $60,872 and $49,764, respectively, all of which is classified as current.

During the three months ended May 31, 2021, the Company also had the following convertible

note activity:

The company settled convertible notes of $65,000 and accrued interest $22,525 for a cash payment

A loss on settlement of debt of $6,459 was recorded.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

1 unchanged sentence

RELATED PARTY TRANSACTIONS

For the nine months ended November 30, 2019, the Company had net repayments of $74,938 from its loan payable-related party.

For the nine months ended November 30, 2020 the Company repaid net advances of $344,618.

At November 30, 2020, the loan payable-related party was $1,189,155 and $1,310,358 at February 29, 2020.

Included in the balance due to the related party at November 30, 2020 is $874,374 of deferred salary and interest, $594,000 of which bears interest at 12%.

At February 29, 2020, included in the balance due to the related party is $656,334 of deferred salary and interest, $426,000 of which bears interest at 12%.

The accrued interest included in loan at November 30, 2020 and November 30, 2019 was $84,418 and $34,917, respectively.

During the three and nine months ended November 30, 2020 and 2019, the Company was charged $10,157 and $121,973, respectively for consulting fees for research and development to a company owned by a principal shareholder.

During the three and nine months ended November 30, 2019 the Company was charged $90,090 and $47,238, respectively in consulting fees for research and development to a company owned by a principal shareholder.

The company received a credit in the quarter ended May 31, 2019 that were a result of billing corrections of ($106,444) and after adjusting for this, would bring total charges in the nine months ended November 30, 2019 to $153,682.

For the three months ended May 31, 2021, the Company repaid net advances of $121,147 from

its loan payable-related party.

For the three months ended May 31, 2020 the Company repaid net advances of $21,726.

At May 31, 2021, the

loan payable-related party was $885,417 and $904,806 at February 28, 2021.

Included in the balance due to the related party at May 31,

2021 is $843,323 of deferred salary and interest, $702,000 of which bears interest at 12%.

At February 28, 2021, included in the balance

due to the related party is $883,710 of deferred salary and interest, $642,000 of which bears interest at 12%.

The accrued interest included

in loan at May 31, 2021 and May 31, 2020 was $138,858 and $50,730, respectively.

During the three months ended May 31, 2021 and 2020, the Company was charged $478,951 and

$50,695, respectively for consulting fees for research and development to a company partially owned by a principal shareholder during

the three months ended May 31, 2021 and another company fully owned by a principal shareholder during the three months ended May 31, 2020.

OTHER DEBT –

In December 2016, RAD entered into a vehicle loan for $47,704 secured by the vehicle.

The loan is repayable over 5 years maturing November 9, 2021, and repayable $1,019 per month including interest and principal.

In November 2017, RAD entered into another vehicle loan secured by the vehicle for $47,661.

The loan is repayable over 5 years, maturing October 24, 2022 and repayable at $923 per month including interest and principal.

The principal repayments made were $0 and $5,746 for the years ended February 29, 2020 and February 28, 2019, respectively.

Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was subsequently sold by the lender for proceeds of $21,907 which went to reduce the outstanding balance of the loan.

A loss of $3,257 was recorded as well.

A balance of $21,578 remains on this vehicle loan at both November 30, 2020 and February 29, 2020.

For the first vehicle loan, the vehicle was retired in 2020, the proceeds of the disposal of $18,766 was applied against the balance of the loan with a $5,515 gain on the remaining asset value of $13,251.

A balance of $16,944 remains on this vehicle loan at both November 30, 2020 and February 29, 2020 The remaining total balances of the amounts owed on the vehicle loans were $38,522 and $38,522 as of November 30, 2020 and February 28, 2020, respectively, of which all were classified as current.

The Company ceased making payments of principal and interest in fiscal 2019 and the company has returned the remaining vehicles to the financing company for disposal.

loan is repayable over 5 years maturing November 9, 2021, and repayable $1,019 per month including interest and principal.

2017, RAD entered into another vehicle loan secured by the vehicle for $47,661.

The loan is repayable over 5 years, maturing October 24,

2022 and repayable at $923 per month including interest and principal.

The principal repayments made were $0 for both the year ended February

28, 2021 and February 29, 2020.

Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was

subsequently sold by the lender for proceeds of $21,907 which went to reduce the outstanding balance of the loan.

A loss of $3,257 was

recorded as well.

A balance of $21,578 remains on this vehicle loan at both February 28, 2021 and February 29, 2020.

For the first vehicle

loan, the vehicle was retired in 2020, the proceeds of the disposal of $18,766 was applied against the balance of the loan with a $5,515

gain on the remaining asset value of $13,251.

A balance of $16,944 remains on this vehicle loan at both February 28, 2021 and February

The remaining total balances of the amounts owed on the vehicle loans were $38,522 and $38,522 as of May 31, 2021 and February

28, 2021, respectively, of which all were classified as current.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

1 unchanged sentence

LOANS PAYABLE

Loans payable consisted of the following:

Loans payable at May 31, 2021 consisted of the following:

Interest Rate

11 unchanged sentences

Promissory note

August 23, 2018

October 11, 2018

Promissory note

October 11, 2019

Promissory note

August 5, 2019

March 11, 2020

Factoring Agreement

November 12, 2019

August 11, 2020

Factoring Agreement

December 20, 2019

March 5, 2020

Factoring Agreement

October 17,2019

April 29, 2020

Factoring Agreement

September 27, 2019

April 4, 2020

Factoring Agreement

January 31, 2019

11 unchanged sentences

September 24, 2019

June 24, 2020

Promissory note

42 unchanged sentences

Promissory note

December 10, 2020

December 10, 2023

Promissory note

December 10, 2020

December 10, 2023

Promissory note

December 10, 2020

December 10, 2023

Promissory note

December 10, 2020

December 10, 2023

Promissory note

December 14, 2020

December 14, 2023

Promissory note

December 14, 2020

December 14, 2023

Promissory note

December 30, 2020

December 30, 2023

Promissory note

December 31, 2021

December 31, 2024

Promissory note

December 31, 2021

December 31, 2024

Promissory note

January 14, 2021

January 14, 2024

Promissory note

February 22, 2021

February 22, 2022

Promissory note

March 1, 2021

March 1, 2022

Promissory note

March 23, 2021

March 23, 2022

Promissory note

March 23, 2021

March 23, 2023

Promissory note

Less current portion of loans payable

2 unchanged sentences

Current portion of loans payable

Less discount on current portion of loans payable

Loans payable net of discount

Less discount on loans payable

Current portion of loans payable, net of discount

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

2 unchanged sentences

No notice has been given by the note holder.

Repayable in 12 monthly instalments of $2,376 commencing September 16 ,2018 and secured by revenue earning devices having a net book value of at least $25,000.

Only $12,376 has been repaid by the Company and no notices have been received.

Accrued interest of $1,511 has been recorded.

Repayable in 12 monthly instalments of $2,376 commencing September 16 ,2018 and secured by

revenue earning devices having a net book value of at least $25,000.

Only $12,376 has been repaid by the Company and no notices have been

The note may be pre-payable at any time.

The note balance includes 33% original issue discount of $25,882.

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 note balance includes 33% original issue discount

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.

No repayments have been made by the Company and no notices have been received.

Total loan $79,750, repayable $475 per business day including fees and interest of $25,170.

Original cash proceeds of $31,353 and $23,227 carried from previous loan less repayment of $58,500, including payments of $8,275 made during the nine months ended November 30, 2020.

The Company has pledged a security interest on all accounts receivable and bank accounts of the Company.

Obligation under personal guaranty of the controlling shareholder of the Company.

$20,000 loan repaid during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

The note balance includes 33% original issue discount of $2,590.

The note balance includes 33% original issue discount

The note may be pre-payable at any time.

The note balance includes 33% original issue discount of $28,567.

The note balance includes 33% original issue discount

$6,000 repaid during the year ended February 29, 2020.

$257,000 Canadian loan.

Interest payable every calendar quarter commencing June30, 2019, if unpaid accrued interest to be paid at maturity.

An additional interest amount calculated as 4% of RAD revenues from SCOT rentals for the fiscal years 2020 and 2021 shall be payable March 31, 2020 and March 31, 2021, respectively.

Secured by a general security charging all of RAD’s present and after-acquired property in favor of the lender on a first priority basis subject to the following:

the lender’s security in this respect shall be postponeable to security in favor of institutional financing obtained by RAD.

Bonus interest of 10,304 has been accrued payable March 31, 2020.

Interest payable every calendar quarter commencing June 30, 2019,

if unpaid accrued interest to be paid at maturity.

An additional interest amount calculated as 4% of RAD revenues from SCOT rentals for

the fiscal years 2020 and 2021 shall be payable March 31, 2020 and March 31, 2021, respectively.

Secured by a general security charging

all of RAD’s present and after-acquired property in favor of the lender on a first priority basis subject to the following:

lender’s security in this respect shall be postponeable to security in favor of institutional financing obtained by RAD.

funding of $ 26,146 during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

The note balance includes 33% original issue discount of $26,104.

Total loan of $243,639, repayable $1,509 per week including fees and interest of $60,042.

Original cash proceeds of $7,877, repayment of loans (5) and (13) totaling $15,732, partial repayment of fees of $5,566 all totaling $29,175, additional advances of $88,772 with remaining $65,551 to be advanced to the company over the remaining 18 weeks.

The Company has repaid a total of $98,616, including payments of $20,827 made during the nine months ended November 30, 2020.

The Company has pledged a security interest on all accounts receivable and bank accounts of the Company.

Obligation under personal guaranty of the controlling shareholder of the Company.

Total loan of $71,000, repayable $710 per business day including fees and interest of $21,000.

Original proceeds of $50,000.

Loan fully repaid at August 31, 2020.

Total loan of $59,960, repayable $590 per business day including fees and interest of $19,960.

Original proceeds of $40,000 less repayment of $51,103, including payments of $6,036 made during the quarter ended August 31, 2020.

The Company has pledged a security interest on all accounts receivable and bank accounts of the Company.

Obligation under personal guaranty of the controlling shareholder of the Company.

The note balance includes 33% original issue discount

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 $600,0000 and was issued with a warrant to purchase 300,000,000

shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $4,749.005 using Black-Scholes

with assumptions described in note 13.

The discounts are being amortized over the term of the loan.

After allocating these charges to

debt and equity according to their respective values, a debt discount of $4,749.005 with a corresponding adjustment to paid in capital

for the relative value of the warrant.

For the three months ended year ended May 31, 2021, the Company recorded amortization expense

of $37,925 with an unamortized discount of $5,311,080 at May 31, 2021.

In exchange for 28 Series F preferred shares, the Company issued a noninterest bearing unsecured

loan for $2,545,900.

A fair value of the loan of $2,267,768 was determined with a debt discount off $278,132.

For the three months

ended year ended May 31, 2021, the Company recorded amortization expense of $52,578 with an unamortized discount $225,554 at May 31, 2021.

In exchange for 55 Series F preferred shares, the Company issued a noninterest bearing unsecured

loan for $5,000,875.

A fair value of the loan of $4,465,067 was determined with a debt discount off $538,808.

For the three months

ended year ended May 31, 2021, the Company recorded amortization expense of $104,226 with an unamortized discount $431,582 at May 31,

The note may be pre-payable at any time.

The note balance includes 33% original issue discount of $3,000.

Total loan of $12,400, repayable $1,240 per week including fees and interest of $2,400.

Original cash proceeds of $10,000, repayments of $4,920.

The Company has pledged a security interest on all accounts receivable and bank accounts of the Company.

Obligation under personal guaranty of the controlling shareholder of the Company.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes 22% original issue discount of $2,450.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes 24% original issue discount of $1,200.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes an original issue discount of $3,850.

The note balance includes an original issue discount

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note may be pre-payable at any time.

The note balance includes an original issue discount of $8,000.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes an original issue discount of $15,000.

$ 40,000 CDN loan, both principal and interest are due at maturity, if unpaid there is a 10% penalty on unpaid balance.

The note balance includes an original issue discount

$ 40,000 CDN loan, both principal and interest are due at maturity, if unpaid there is a 10%

penalty on unpaid balance.

By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share.

Principal repayable in one year.

Interest repayable in 10 monthly instalments of $460 commencing January 11 ,2019 and secured by revenue earning devices having a net book value of at least $186,000.

25,000 repaid.

$ 60,000 CDN loan, principal is due at maturity, interest is payable commencing the third month after the loan over the remaining 10 months.

Interest repayable in 10 monthly instalments of $460 commencing

January 11 ,2019 and secured by revenue earning devices having a net book value of at least $186,000.

$25,000 repaid during the

Repaid in full.

$ 60,000 CDN loan, principal is due at maturity, interest is payable commencing the third

month after the loan over the remaining 10 months.

If principal or interest unpaid there is a 10% penalty on unpaid balance.

By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share.

consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share.

Total loan of $44,183 (in $USD) and related

accrued interest paid during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

The note balance includes an original issue discount of $12,000.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes an original issue discount of $6,000.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes an original issue discount of $10,000.

The note balance includes an original issue discount

The note may be pre-payable at any time.

The note balance includes an original issue discount of $7,000.

$ 10,000 CDN loan, principal is due at maturity, interest is payable monthly commencing the third month after the loan over the remaining 10 months.

The note balance includes an original issue discount

$ 10,000 CDN loan, principal is due at maturity, interest is payable monthly commencing the

third month after the loan over the remaining 10 months.

If principal or interest unpaid there is a 10% penalty on unpaid balance.

By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share.

Total loan of $7,381 (in $USD) and

related accrued interest paid during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

The note balance includes an original issue discount of $50,000.

The note balance includes an original issue discount

Interest payable monthly, principal due at maturity.

Secured by a general security charging all of RAD’s present and after-acquired property.

Principal 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 a general security charging all of RAD’s present and

after-acquired property.

Principal 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 note may be pre-payable at any time.

The note balance includes an original issue discount of $10,000 and was issued with warrant to purchase 70,000,000 shares at an exercise price of $0.00165 per share, with a 3 year term and having a fair value of $77,000 using Black-Scholes with assumptions described in Note 13.

The discount and warrant are being amortized over the term of the loan.

Principal 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.

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 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

$41,176 with a corresponding adjustment to paid in capital.

For the three months ended May 31, 2021, the Company recorded amortization

expense of $2,610 with an unamortized discount of $45,719 at May 31 ,2021.

Principal and interest repayable in 21 monthly instalments commencing December 6, 2020 of

$4,060 commencing February 21, 2021.

Secured by revenue earning devices.

The note may be pre-payable at any time.

The note balance includes an original issue discount of $25,000 and was issued with warrant to purchase 230,000,000 shares at an exercise price of $0.00165 per share with a 3 year term and having a fair value of $253,000 using Black-Scholes with assumptions described in note 13.

The discount and warrant are being amortized over the term of the loan.

DERIVATIVE LIABILITIES

As of November 30, 2020, the Company revalued the fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible notes payable and determined that it had a total derivative liability of $3,261,457.

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 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 $125,814 with a corresponding adjustment to paid in capital for the relative value of the warrant.

For the three months

ended May 31, 2021, the Company recorded amortization expense of $7,245 with an unamortized discount of $136,555 at May 31 ,2021.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company estimated the fair value of the derivative liabilities using the multinomial lattice model using the following key assumptions during the three months ended November 30, 2020:

The 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 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 $54,545

with a corresponding adjustment to paid in capital for the relative value of the warrant.

For the three months ended May 31, 2021,

the Company recorded amortization expense of $1,844 with an unamortized discount of $58,726 at May 31 ,2021.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 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 using Black-Scholes with assumptions described in Note 13.

This note is secured by a general security

charging all of the Company’s present and after-acquired property.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 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 using Black-Scholes with assumptions described in Note 13.

This note is secured by a general security

charging all of the Company’s present and after-acquired property.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 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

using Black-Scholes with assumptions described in Note 13.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 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

using Black-Scholes with assumptions described in Note 13.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby

$100,000 in convertible notes and associated accrued interest of $37,589 totaling $137,589 was exchanged for this promissory note of $192,625.

Loan fully repaid at May 31,2021.

The note 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 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

$271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant.

For the three months ended May

31, 2021, the Company recorded amortization expense of $4,275 with an unamortized discount of $299,855 at May 31 ,2021.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 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.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby

$79,500 in convertible notes and associated accrued interest of $28,925 totaling $108,425was 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.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note 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 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 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

$380,174 with a corresponding adjustment to paid in capital.

For the three months ended May 31, 2021, the Company recorded amortization

expense of $10,579 with an unamortized discount of $414,877 at May 31 ,2021.

The note 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 using Black-Scholes with assumptions described in note 13.

The discount and warrant are

being amortized over the term of the loan.

After allocating these charges to debt and equity according to their respective values, a debt

discount of $1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant.

For the three

months ended May 31, 2021, the Company recorded amortization expense of $11,556 with an unamortized discount of $1,481,022 at May 31 ,2021.

DERIVATIVE LIABILITIES

As of May 31, 2021, the Company revalued the fair value of all of the Company’s derivative

liabilities associated with the conversion features on the convertible notes payable and determined that it had a total derivative liability

The Company estimated the fair value of the derivative liabilities using the multinomial lattice

model using the following key assumptions during the three months ended May 31, 2021:

$0.0660 - $0.0632

7 unchanged sentences

Expected term (years)

During the three months ended November 30, 2020, and 2019, the Company released $873,673 and $109,987, respectively, of the Company’s derivative liability to equity due to the conversions of principal and interest on the associated notes.

During the nine months ended November 30, 2020, and 2019, the Company released $2,601,903 and $493,405, respectively, of the Company’s derivative liability to equity due to the conversions of principal and interest on the associated notes.

The changes in the derivative liabilities (Level 3 financial instruments) measured at fair value on a recurring basis for the nine months ended November 30, 2020 were as follows:

During the three months ended May 31, 2021, and 2020, the Company released $0 and $167,498,

respectively, of the Company’s derivative liability to equity due to the conversions of principal and interest on the associated

The changes in the derivative liabilities (Level 3 financial instruments) measured at fair

value on a recurring basis for the three months ended May 31, 2021 were as follows:

Balance as of February 28, 2021

Release of derivative liability on conversion of convertible notes payable

Reduction of derivative liability due to debt settlement

Change in fair value of derivative liabilities

Balance as of November 30, 2020

Balance as of May 31, 2021

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STOCKHOLDERS’

EQUITY (DEFICIT)

Summary or Preferred Stock Activity

Series F Preferred Stock

During the three months ended May 31, 2021 Series F shareholders had the following activity:

40 Series C Preferred Shares and a warrant to purchase 367 Series F Preferred Shares with

a five-year term and an exercise price of $1.00 were issued to an investor in exchange for amending their deferred variable payment obligation

agreement as disclosed in Note 7.

The company attributed a fair value based on recent transactions for the Series F Preferred stock

and warrants of $33,015,214 and recorded a loss on settlement of debt with a corresponding adjustment to paid in capital.

The warrant holder exercised warrant to acquire 38 Series F Preferred Shares.

The shareholder converted 78 Series F Preferred Shares into 316,345,908 common shares.

Two Series F Preferred shareholders exchanged 83 Series F Preferred Shares for two promissory

notes as disclosed in point (11) and (12) in Note 11.

The notes are non -interest bearing, have a one-year maturity and total $7,546,775.

Summary of Preferred Stock Warrant Activity

Number of Series C Preferred Warrants

Weighted Average Exercise Price

Weighted Average Remaining Years

Outstanding at March 1, 2021

Forfeited and cancelled

Outstanding at May 31, 2021

Summary of Common Stock Activity

On March 27, 2020, the Company undertook a 10,000:1 reverse stock split and on August 24, 2018, the Company undertook a 100:1 reverse stock split.

The share capital has been retrospectively adjusted accordingly to reflect this reverse stock split, except for the conversion price of certain convertible notes as the conversion price is not subject to adjustment from forward and reverse stock splits (see Note 8).

During the nine months ended November 30, 2020, the Company issued 1,889,155,010 shares of its common stock for the conversion of debt and related interest and fees totaling $3,199,416 including $2,094,934 of principal, $1,083,982 interest, $20,500 in fees in connection with debt converted during the period, as well as the release of the related derivative liability (see Note 12).

Summary of Preferred Stock Activity

On July 22, 2020 the board of directors passed a resolution whereby the sole director agreed to return for cancellation, 816 of his 1000 Series F preferred shares to the Company.

On December 1, 2020 the company issued 110 Series F shares having a fair value of $362,084 to a consultant for services previously rendered which was recorded as professional fees with a corresponding adjustment to accrued liabilities.

Summary of Warrant Activity

During the three months ended May 31, 2021 common shareholders had the following activity:

A Series C Preferred shareholder converted 78 Series F Preferred Shares for 316,345,998 common

Summary of Common Stock Warrant Activity

Number of Warrants

3 unchanged sentences

Forfeited and cancelled

Outstanding at November 30, 2020

Outstanding at May 31, 2021

For the three months ended May 31, 2021 and May 31, 2020, the Company recorded a total of

$0 and $0, respectively, to stock-based compensation for options and warrants with a corresponding adjustment to additional paid-in capital.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended November 30, 2020 and November 30, 2019, the Company recorded a total of $0 and $0, respectively, to stock-based compensation for options and warrants with a corresponding adjustment to additional paid-in capital.

During the nine months ended November 30, 2020 the Company issued warrants to purchase a total 300,000,000 common shares along with promissory notes (see Note 11) recorded as a discount and amortized over the respective loan term with a corresponding adjustment to paid in capital.

These warrants (a) have an aggregate grant date fair value of $300,000 based on the Black-Scholes Option Pricing model with the following assumptions:

Fair value of Company’s common stock

Dividend yield

Expected volatility

Risk free interest rate

0.39% - 0.41%

Expected term (years)

COMMITMENTS AND 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 is both probable that a liability has been incurred, and the amount can be reasonably estimated.

If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements.

Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

In April 2019 the principals of WeSecure (see Note 9) filed lawsuit in California Superior Court seeking damages for this non-payment of this balance of WeSecure assets sold totaling $25,000, unpaid consulting fees payable to the two principals through September 2019 totaling $125,924, and labor code violations of $48,434, all totaling $199,358 plus attorney’s fees and damages.

The parties finally settled all claims with a full release for $180,000 in June 2019 payable in 14 monthly instalments as follows:

The company has fully accrued the above $180,000 at February 28, 2019.

At November 30, 2020 an outstanding balance of $139,500 remains.

As of November 30, 2020 the Company paid $40,500.

As of this filing the November 2019 through July 2020 instalments are in arrears.

The Company repaid $10,000 towards these arrears in the three months ended November 30, 2020 included in the total payments above.

The related legal costs are expensed as incurred.

Summary of Common Stock Option Activity

On April 9, 2021 entered into an Employment Agreement with Chief Executive Officer, Steven

Reinharz with three year term under the following terms whereby stock option awards will be granted if certain conditions are met :

A stock option award (option 1) will be granted to the employee to purchase 10,000,000 shares

at an exercise price of $ $0.15 per share if the trading share price of the Company reaches an average of $0.30 per share for ten days

over a 30 day trading period.

A stock option award (option 2) will be granted to the employee to purchase 30,000,000 shares

at an exercise price of $ $0.25 per share if the trading share price of the Company reaches an average of $0.50 per share for ten days

over a 30 day trading period.

The fair value these two awards using a Monte Carlo method was $69,350 with a charge to stock

based compensation and a corresponding charge to paid in capital.

On April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors

of our Company (“Board”) approved and adopted the 2021 Incentive Stock Plan (the “2021 Plan”).

The purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive

awards to retain Directors, executives, selected Employees and Consultants, and reward participants for making major contributions to

the success of the Company.

The 2021 Plan authorizes the granting of stock options, restricted stock, restricted stock units, stock appreciation

rights and stock awards.

A total of five million (5,000,000) shares of common stock may be issued under the 2021 Plan.

All awards under

the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback or similar policy of the Company in effect

from time to time, as well as any similar provisions of applicable law, which could in certain circumstances require repayment or forfeiture

of awards or any shares of stock or other cash or property received with respect to the awards, including any value received from a disposition

of the shares acquired upon payment of the awards.

The 2021 Plan will be administered by the Board or any Committee authorized by the

Board, if applicable, which will have the sole authority to, among other things:

construe and interpret the 2021 Plan;

make rules and

regulations relating to the administration of the 2021 Plan;

select participants;

and establish the terms and conditions of awards, all

in accordance with the terms of the 2021 Plan.

The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the

Termination will not affect awards then outstanding.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND 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 is both probable that a liability

has been incurred, and the amount can be reasonably estimated.

If these estimates and assumptions change or prove to be incorrect, it

could have a material impact on the Company’s condensed consolidated financial statements.

Contingencies are inherently unpredictable,

and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

In March 2021, the Company settled with former landlords for $30,000.

The Company had accrued

$62,552 at February 28, 2021.

A gain on settlement of debt of $32,552 was recorded.

In April 2019 the principals of WeSecure filed a lawsuit against the Company in California

Superior Court seeking a total of $199,358 plus attorney’s fees and damages.

The total included claims for the non-payment of a

balance from the sale of WeSecure assets to the Company, unpaid consulting fees payable to the two principals of WeSecure, and labor code

In June 2019, the parties settled all claims for $180,000, payable in 14 monthly installments, and a full release.

balance owing at February 28, 2021 was paid in full on March 17, 2021.

The related legal costs are expensed as incurred.

Operating Lease

The Company currently maintains an office at 1218-1222 Magnolia Ave, Suite 106 Bldg.

H, Corona, California 92881 pursuant to a month to month lease which commenced March 1, 2019.

The Company’s annual rent is $12,000 per year.

RAD maintains a mailing address for 31103 Ranch Viejo Road, Suite d2114, San Juan Capistrano, California, for a nominal fee of $264/yr.

On December 18, 2020, the Company entered into a 15-month lease agreement for office space

at 18009 Sky Park Circle Suite E, Irvine CA, 92614, commencing on December 18, 2020 through to March 31, 2022 with a minimum base rent

of $3,859 per month.

The Company paid a security deposit of $3,859.

On March 10, 2021, the Company entered into a 10 year lease agreement for q manufacturing

facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent

of $15,880 per month.

The base rent increase by 3% per annum commencing May 1, 2024.

The Company paid a security deposit of $15,880.

The Company’s leases are accounted for as operating leases.

Rent expense is recorded over the lease terms on a straight-line basis.

Rent expense was $3,000 and $14,800 for the three and nine months ended November 30, 2020, respectively and $2,000 and $6,000 for the three and nine months ended November 30, 2019, respectively.

At November 30, 2020 the Company had no future minimum payments.

Rent expense and operating

lease cost are recorded over the lease terms on a straight-line basis.

Rent expense and operating lease cost was $30,064 for the three

months May 31, 2021 and $3,000 for the three months May 31, 2020.

Maturity of Lease Liabilities

May 31, 2027 and after

Total lease payments

Present value of lease liabilities

Convertible Notes Payable

Certain convertible notes payable carry conditions whereby in the event of ant default of any condition the Company would be subject to certain financial penalties.

Certain convertible notes payable carry conditions whereby in the event of ant default of

any condition the Company would be subject to certain financial penalties.

Penalties earned through May 31, 2021 have been recorded in

these financial statements.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS (LOSS) PER SHARE

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

For the Three Months Ended

For the Nine Months Ended

For the Year Ended

Net income (loss) available to common shareholders

1 unchanged sentence

interest expense on convertible debt

Add Penalty interest on convertible debt

Add (less) loss (gain) on change of derivative liabilities

Net income (loss) adjusted for common stock equivalents

Weighted average shares - basic

Weighted average shares –

3,489,517,478

Net income (loss) per share –

Dilutive effect of common stock equivalents:

Convertible Debt

Convertible notes and accrued interest

Preferred shares

Weighted average shares –

3,489,517,478

Net income (loss) per share –

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The anti-dilutive shares of common stock equivalents for the three and nine months ended November 30, 2020 and November 30, 2019 were as follows:

For the Three Months Ended

For the Nine Months Ended

The anti-dilutive shares of common stock equivalents for the three months ended May 31, 2021

and 2020 were as follows:

For the Year Ended

Convertible notes and accrued interest

13,732,671,277

Convertible Class F Preferred Shares

12,232,916,443

6,519,028,347

20,551,701,667

Stock options and warrants

12,906,512,276

ROBOTIC ASSISTANCE DEVICES GROUP, INC.

CONSOLIDATION

In the quarter ended August 31, 2020, one of Robotics Assistance Devices, Inc.’s (“RAD”) lenders entered receivership under the US Bankruptcy Courts supervision.

The trustee assigned to the bankruptcy estate used powers granted under the loan agreement with RAD to take over and control RAD’s bank accounts which allowed the trustee to transfer all funds available to the bankruptcy estate in partial repayment of the loan, which amounted to approximately

Because the trustee of the bankruptcy estate maintained effective control of RAD’s bank accounts, one member of Management transferred control of an entity under his control to the Company in order to transfer the conduct of RAD business to the new entity, Robotics Assistance Devices Group, Inc.

(“RAD G”) Because of this, the Company has consolidated RAD G beginning on June 1, 2020.

The table below shows the assets and liabilities consolidated on June 1, 2020 that were contributed:

Accounts receivable

Other liabilities

Net liabilities contributed

SUBSEQUENT EVENTS

Subsequent to November 30, 2020 through to January 12, 2021:

Convertible note holders converted $161,480 of principal and $100,471 interest into 436,567,860 shares of the Company’s common stock.

On December 1, 2020 the Company issued 110 Series F Preferred Shares to a consultant for services rendered at a fair value of $362,084.

The company recorded this as payment for accrued liabilities with a corresponding adjustment to paid in capital.

On December 10, 2020 the Company settled convertible notes (see Note 8) totaling $1,460,794 and associated accrued interest of $1,593,544 totaling $3,054,338 in exchange for promissory notes dated December 10, 2020 totaling $3,054,338, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $550,000.These notes are secured by a general security charging all of RAD’s present and after-acquired property.

On December 10, 2020 the Company settled additional convertible notes (see Note 8) totaling $2,683,357 and associated accrued interest of $1,237,811 totaling $3,921,1688 in exchange for a promissory note dated December 10, 2020 of $3,921,168, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $990,000.

On December 10, 2020 RAD Inc.

entered into a 15 month lease commencing December 18, 2020 and ending March 31, 2022.

The monthly lease payments are $3,859 with a$3,859 security deposit.

The Company will account for this according to ASC 842.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 14, 2020 the Company settled additional convertible notes (see Note 8) totaling $235,000 and associated accrued interest of $75,375 totaling $310,375 in exchange for a promissory note dated December 14, 2020 of $310,375, maturing December 10, 2023 and bearing interest at 12% per annum , 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 and 55 shares of Series F Preferred Shares having a fair value of $ 1,151,166.

On December 28, 2020 and January 1, 2021 a warrant holder exercised 145,741.573 and 131,345,178 warrant shares through cashless exercise and received 119,000,000 and 125,000,000 shares, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SUBSEQUENT EVENTS

Subsequent to May 31, 2021 through to July 12, 2021:

warrant holder exercised a warrant to acquire 11,000,000 common shares through cashless exercise

yielding 9,975,508 shares.

The promissory note holders denoted (11) and (12) in Note 11 exchanged $7,546,775 I in promissory

notes for 116,104,232 common shares having a fair value of $7,062,620 at the time of conversion.

On June 22, 2021, Mr.

Garett Parsons submitted his resignation as a director of our Company

effective as of June 22, 2021 as a result of personal reasons.

In connection with the resignation of Mr.

Parsons, the Company and Mr.

Parsons entered into a resignation letter agreement.

Pursuant to the terms of this letter, Mr.

Parsons will receive, among other things,

a lump sum payment equal to $265,700 due and payable which was paid in June 2021.

This amount was accrued for at May 31, 2021.Furthermore,

on July 6, 2021, Mr.

Parsons surrendered his 1,000,000 Class E preferred shares for cancellation by the Company as part of his resignation.

On July 12, 2021, the former director agreed to surrender his remaining 184 Series F preferred

shares in exchange for a note payable from the Company of $4,000,160 bearing interest at 7% per annum with a 5 year term, maturing July

On July 12, 2021 the Company and CEO amended the April 9, 2021 Employment Agreement effective

July 1, 2021 whereby the following objectives and awards were added to the two existing ones:

Objective #3 :

Sales in any fiscal quarter exceed the total sales in fiscal year 2021 for the first time.

Five hundred (500) shares of Series G preferred stock.

Objective #4 :

One hundred fifty (150) devices are deployed in the marketplace.

Two hundred fifty (250) shares of Series G preferred stock.

Objective #5 :

Year-to-date sales at any point in fiscal year 2022 exceed One Million Dollars ($1,000,000).

Two hundred fifty (250) shares of Series G preferred stock.

Objective #6 :

The price per share of common stock has increased to and maintains a price of Ten Cents ($0.10)

or more for ten (10) days in a thirty (30) day period.

Two hundred fifty (250) shares of Series G preferred stock.

Objective #7 :

The price per share of common stock has increased to and maintains a price of Twenty Cents

($0.20) or more for ten (10) days in a thirty(30) day period.

Five hundred (500) shares of Series G preferred stock.

Objective #8 :

The RAD 3.0 products are launched into the marketplace by November 30, 2022.

Five hundred (500) shares of Series G preferred stock.

Objective #9 :

RAD receives an order for fifty (50) units from a single customer.

Five hundred (500) shares of Series G preferred stock.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

Forward-Looking Statements

The following discussion of our financial condition and results

of operations for the nine months ended November 30, 2020 and November 30, 2019 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 10K for the year ended February 29, 2020, as filed on July 28, 2020 with the SEC.

The following discussion of our financial condition and results of operations for the three

months ended May 31, 2021 and May 31, 2020 should be read in conjunction with our unaudited consolidated financial statements and the

notes to those statements that are included elsewhere in this report.

Our discussion includes forward-looking statements based upon current

expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the

timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors,

including those set forth under Item 1A.

Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 28,

2021, as filed on June 1, 2021 with the SEC.

We use words such as “anticipate,”

11 unchanged sentences

“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.

Artificial Intelligence Technology Solutions Inc.

(formerly On the Move Systems Corp.) was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015.

On August 24, 2018 AITX 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 LLC.

On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc.

through the issuance of its 10,000 authorized common shares to its sole shareholder.

AITX’s prior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships.

As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, in which AITX purchased all of the outstanding shares of capital stock of RAD.

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.

The Company received pre-order letters of intent from dealers and

end users for 76 ROAMEO units that represents approximately $320,000 in monthly recurring revenue.

The Company is working to turn

these pre-orders into firm orders with an expectation that conversions could begin in the first quarter of the new fiscal year

ended February 28, 2022.

It is expected that ROAMEO production ramp-up time will take at least two quarters during fiscal 2022

to fulfill converted pre-orders.

The Company expects to form a new wholly owned subsidiary to provide

services in the security and robotics space that are complimentary to RAD Inc and RAD Mobile sometime in the fiscal year ended

February 28, 2022.

Selected Results Per Quarter for Fiscal 2021

Three Months Ended

November 30, 2020

Three Months Ended

August 31, 2020

Three Months Ended

Operating expenses

Loss from operations

Other income (expense), net

Net income (loss)

Sales grew 20% from the quarter ended August 31, 2020 over the quarter

ended May 31, 2020 and 57% from the quarter ended November 30, 2020 over the quarter ended August 31, 2020.

This sales growth is a result of an expansion of our customer base

and product line and our ability to ramp up production to meet demand.

We expect to continue this growth trend in the fourth

quarter and in our next fiscal year as projects accelerate through the sales funnel.

We expect an increase to the rate of growth

in 2022 as we start to deliver on ROAMEO and AVA products.

Operating expenses in the quarter ended November 30, 2020 was $995,092

however after adjusting for stock based consulting fees of $362,084, was actually 10% lower in this quarter vs the quarter ended

August 31, 2020.

The company has made improvements to continue to reduce non-operational costs.

The Company continues to reduce it’s convertible debt both

through conversions and settlements that will take place next quarter and described in Note 8.

This reduces the derivative liability

and should allow the Company to attract more funding in the future form alternative sources as the dilutive effect of the

convertible debt is reduced.

The changes in the market price of the stock as well as the conversions, settlements and other factors

described in Note 12 and further in this management, discussion and analysis leads to large fluctuations in other income and consequently

net income (loss) for the Company.

Specifically, most of derivative liabilities shown

in this filing will be eliminated in the year end filing.

This will be a substantial improvement to the AITX balance sheet.

Results of Operations for the Three Months Ended November 30, 2020 and 2019

The following table shows our results of operations for the three months ended November 30, 2020 and 2019.

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Three Months Ended

November 30, 2020

Three Months Ended

November 30, 2019

Operating expenses

Loss from operations

Other income (expense), net

Net income (loss)

Total revenue for the three month period ended November 30, 2020 was $119,700 which represented an increase of $48,266 compared to total revenue of $71,434 for the three months ended November 30, 2019.

This 68% increase is explained by a 20% increase in rental revenues and a 758% increase in direct sales of goods.

Total gross profit for the three month period ended November 30, 2020 was $95,018 which represented an increase of $50,445, compared to gross profit of $44,573 for the three months ended November 30, 2019.

The increase decrease resulted primarily from an increase in sales and higher margins on greater direct sales of goods.

Operating Expenses

Three Months Ended

November 30, 2020

Three Months Ended

November 30, 2019

Research and development

General and administrative

Depreciation and amortization

(Gain) on disposal of fixed assets

Operating expenses

Our operating expenses were comprised of general and administrative expenses, research and development, loss on disposal of fixed assets 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, 2020 and November 30, 2019, were $995,092 and $580,369, respectively.

The overall increase of $414,723 was primarily attributable to the following changes in operating expenses of:

General and administrative expenses increased by $511,609.

In comparing the three months ended November 30, 2020 and November 30, 2019 this increase was primarily due to increases in subcontractor and professional fees including an accrual for $362,085 in stock based compensation payable to a consultant as well as start up costs of $128,000 related to our new ROAMEO products.

Research and development decreased by $106,940 primarily due to

the classification of ROAMEO start up costs of approximately $128,000 referenced above included in G&A for the quarter ended November 30, 2020.

Depreciation and amortization increased by $2,554 due to increases in revenue earning devices.

Gain on disposal was $7,500 for the three months ended November 30, 2020.

There were no disposals in the current period.

Other Income (Expense)

Other income (expense) consisted of the change of fair value of derivative instruments and interest.

Other income (expense) during the three months ended November 30, 2020 and November 30, 2019, was $4,308,379 and ($2,860,235), respectively.

The 7,168,614 increase in other income was primarily attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.

Fair value of derivatives was largely affected by the decrease in the market price of the Company’s common stock during the current period.

In comparing the three months ended November 30, 2020 and the three months ended November 30, 2019, the change in fair value of derivative liabilities increased by $7,463.218 due to the re-valuation of derivative liability on convertible notes and accrued interest based on the change in the market price of the Company’s common stock.

The valuation of the derivatives associated with our convertible notes and accrued interest of the notes is dependent upon a number of estimates developed by management.

Included in those estimates are the timing and availability of common stock underlying the conversion of the notes and accrued interest.

Our notes generally contain provisions such that the holders are barred from conversion of any amount of principal or interest should that conversion cause their ownership of common stock to exceed 4.99% of the then outstanding common stock of the Company.

Because of this, the amount of the derivative can at times be limited due to this factor.

In the quarter ended November 30, 2020, the reduction of convertible notes and accrued interest through conversions as well as an increase in the subsequent redemption assumption due to the settlement arrangements describe in Note 8.

The result of this was a significant decrease in the liability reported as of November 30, 2020 and an increase in the change in fair value of derivative liabilities.

Interest expense increased by $250,771 due to an increase in penalty interest of $494,428 offset by a decrease in accrued interest due to lower amounts of outstanding convertible notes in 2020.

Gain on settlement of debt was nil the nine month’s ended November 30, 2020 and $73,865 in the prior year’s period.

The 2020 gain of $30,032 is attributed to accounts payable settlements not convertible notes or loans payable.

Net income (loss)

We had net income of $3,408,305 for the three months ended November 30, 2020, compared to net loss of ($3,396,031) for the three months ended November 30, 2019.

The change is primarily the result of the change in the fair value of the derivative liabilities and other items discussed above.

Results of Operations for the Nine Months Ended November 30, 2020 and 2019

The following table shows our results of operations for the nine months ended November 30, 2020 and 2019.

and similar expressions to identify forward-looking

Unless expressly indicated or the context requires otherwise, the terms “AITX”,

the “Company”, “we”, “us”, and “our”

refer to Artificial Intelligence Technology Solutions

AITX was incorporated in Florida on March 25, 2010.

AITX reincorporated into Nevada on February

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:

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.

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:

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 unique hardware purpose-built by RAD for delivery of these solutions.

Various form factors

have been customized to deliver this new functionality.

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.

Management Discussion and Analysis

Results of Operations for the Three Months Ended May 31, 2021 and 2020

The following table shows our results of operations for the three months ended May 31, 2021

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Nine Months Ended

November 30, 2020

Nine Months Ended

November 30, 2019

Operating expenses

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Other income (expense), net

Total revenue for the nine month period ended November 30, 2020 was $259,103 which represented an increase of $72,340, compared to total revenue of $186,763 for the nine months ended November 30, 2019.

This 39% increase is a result of a natural growth over time as the customer grows its customer base and is explained by a 29% increase in rental revenues and a 28% increase in direct sales of goods.

Total gross profit for the nine month period ended November 30, 2020 was $189,120 which represented an increase of $70,486, compared to gross profit of $118,634 for the nine months ended November 30, 2019.

The increase resulted primarily from the increased revenues noted above as well as higher margins on greater direct sales of goods.

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

Device rental activities

Direct sales of goods and services

Total revenue for the three-month period ended May 31, 2021 was $560,334 which represented

an increase of $497,013 compared to total revenue of $63,321 for the three months ended May 31, 2020.

This large increase is a result

of unit sales which includes sales of new units totaling $434,342.

Rental activities increased by 109% as well as the Company continues

to grow its business.

Total gross profit for the three-month period ended May 31, 2021 was $449,408 which represented

an increase of $395,377, compared to gross profit of $54,031 for the three months ended May 31, 2020.

The increase resulted primarily

from the increased revenues noted above.

The gross profit % of 80% for the three-month period ended May 31, 2021 was slightly lower than

the margin of 85% for the prior year’s corresponding period dure to the shift in sales mix.

Operating Expenses

Nine Months Ended

November 30, 2020

Nine Months Ended

November 30, 2019

Research and development

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Depreciation and amortization

Loss (gain) on impairment of fixed assets

Operating lease cost

Operating expenses

Our operating expenses were comprised of general and administrative expenses, research and development, loss on disposal of fixed assets and depreciation.

General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants.

Our operating expenses during the nine month period ended November 30, 2020 and November 30, 2019, were $2,095,823 and $1,546,165, respectively.

The overall increase of $549,658 was primarily attributable to the following changes in operating expenses of:

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 May 31, 2021

and May 31, 2020, were $2,600,954 and $392,762, respectively.

The overall increase of $2,208,192 was primarily attributable to the following

changes in operating expenses of:

General and administrative expenses increased by $1,619,869.

In comparing the nine months ended November 30, 2020 and November 30, 2019 this increase was primarily due to increases in subcontractors by $63,882, professional fees by $118,164, stock based compensation of $362,085, ROAMEO start-up costs of approximately $128,000, investor relations and regulatory fees of $ 58,542 offset by decreases in travel by $106,259.

Research and development decreased by $35,487 primarily due to the

classification of ROAMEO start up costs of approximately $128,000 referenced above included in G&A for the quarter ended November

When considering those charges research and development actually increased this nine month period over last.

Depreciation and amortization increased by $14,562 due to increases in revenue earning devices.

Loss on disposal was $553 for the nine months ended November 30, 2020 compared to a gain of $7,500 in the corresponding prior year period.

In comparing the three months

ended May 31, 2021 and May 31, 2020 this significant increase was primarily due to increases in production supplies by $196,219, professional

fees by $489,255, wages and salaries $349,717, subcontractor fees $142,108, stock based compensation $69,350, duty and freight $61,043,

office expenses $56,279, travel $40,267 and advertising $25,879 with the remaining increase distributed amongst other G&A accounts.

These large increases may be explained due to the large ramp up in costs this quarter to operate the new manufacturing facility, the hiring

of 18 additional full-time employees and the termination costs of the former director (see Note 16).

In addition, the expenses of the

prior year ’

s corresponding quarter were also much lower due to

the Covid 19 pandemic and the limited cash available at that time.

Research and development increased by $552,922 due to funding development of new products

as well as upgrades of existing products.

Depreciation and amortization increased by $9,527 due to increases in fixed assets and revenue

earning devices.

Operating lease cost and rent increased by $25,874 due to the two new leases including one

month of the new manufacturing facility for the three months ended May 31, 2021 as compared to a month-to-month lease of office space

for the three months ended May 31, 2020.

Other Income (Expense)

Other income (expense) consisted of the change of fair value of derivative instruments and interest.

Other income (expense) during the nine months ended November 30, 2020 and November 30, 2019, was ($1,727,957) and ($1,653,128), respectively.

The 74,829 increase in other expense was primarily attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.

Fair value of derivatives was largely affected by the decrease in the market price of the Company’s common stock during the current period.

In comparing the nine months ended November 30, 2020 and the nine months ended November 30, 2019, the change in fair value of derivative liabilities increased by $659,357 due to the re-valuation of derivative liability on convertible notes and accrued interest based on the change in the market price of the Company’s common stock.

The valuation of the derivatives associated with our convertible notes and accrued interest of the notes is dependent upon a number of estimates developed by management.

Included in those estimates are the timing and availability of common stock underlying the conversion of the notes and accrued interest.

Because of this, the amount of the derivative can at times be limited due to this factor.

In the nine months ended November 30, 2020, the reduction of convertible notes and accrued interest through conversions as well as an increase in the subsequent redemption assumption due to the settlement arrangements describe in Note 8.

The result of this was a significant decrease in the liability reported as of November 30, 2020 and an increase in the change in fair value of derivative liabilities.

Interest expense increased by $577,844 due to an increase in interest expense on debt of approximately $387,000 and $732,589 in penalty interest which was partially offset by a reduction in amortization of debt discounts of $541,644.

At November 30, 2020 most of the debt has reached maturity and has been fully amortized.

Interest expense for the 9 months ended November 30, 2020 was higher than in the prior year’s period because most of the debt is in default and interest is being accrued at a higher default rate and most debt had penalties that were added to the principal amount when the debt and interest was unpaid at maturity.

Gain on settlement of debt was $30,032 the nine month’s ended November 30, 2020 and $186,374 in the prior year’s period.

The 2020 gain of $30,032 is attributed to accounts payable settlements not convertible notes or loans payable.

We had net loss of $3,634,660 for the nine months ended November 30, 2020, compared to net loss of $3,080,659 for the nine months ended November 30, 2019.

The change is primarily the result of the change in the fair value of the derivative liabilities and other items discussed above.

Other income (expense) consisted of the change of fair value of derivative instruments and

Other income (expense) during the three months ended May 31, 2021 and May 31, 2020, was ($33,753,372) and $2,314,007, respectively.

The $36,067,379 decrease in other income was primarily attributable to the change in the fair value of derivatives, interest expense,

and loss on settlement of debt.

In comparing the three months ended May 31, 2021 and the three months ended May 31, 2020,

the change in fair value of derivative liabilities decreased by $2,664,052 due to the re-valuation of derivative liability on convertible

notes based on the change in the market price of the Company’s common stock.

Fair value of derivatives was largely affected by the

decrease in the market price of the Company’s common stock during the current period as well as the significant reduction in convertible

debt and accrued interest that occurred at the end of fiscal 2021.

Interest expense increased by $418,966 due to a significant increase loan payable, most significantly

a new $6 million loan, and the approximately $7M in loans from the Series F preferred share exchange.

Loss on settlement of debt was $32,984,361 the quarter ended May 31, 2021 and nil in the prior

year’s quarter.

The amendment of the deferred variable payment obligation referred to in Note 7 led to a $33,015,215 loss which

was partially offset by gains from accrued liabilities settlements.

This loss on settlement of debt is non-cash and has no effect

on the cash flows of the Company.

We had a net loss of $35,904,918 for the three months ended May 31, 2021, compared to net

income of $1,975,276 for the three months ended May 31, 2020.

The change is primarily the result of the loss on settlement in the three

months ended May 31, 2021 as well as the change in the fair value of the derivative liabilities and other items discussed above.

Liquidity, Capital Resources and Cash Flows

Management believes that we will continue to incur losses for the immediate future.

Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever.

we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities,

These conditions raise substantial doubt about our ability to continue as a going concern.

Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.

For the nine months ended November 30, 2020, we have generated revenue and are trying to achieve positive cash flows from operations.

As of November 30, 2020, we had a cash balance of $249,297, accounts receivable of $111,709, inventory of $104,360 and $16,139,162 in current liabilities.

At the current cash consumption rate, we will need to consider additional funding sources going forward.

Our unaudited condensed consolidated

financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be

necessary should we be unable to continue as a going concern.

For the three months ended May 31, 2021, we have generated revenue and are

trying to achieve positive cash flows from operations.

As of May 31, 2021, we had a cash balance of $2,948,210, accounts receivable of $565,431,device

parts inventory of $247,671 and $10,891,007 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.

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, 2020

The following table summarizes total current assets, liabilities and working capital (deficit)

for the periods indicated:

February 28, 2021

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Working capital

As of November 30, 2020 and February 29, 2020, current liabilities included approximately $3.3 million and $6.9 million, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms.

As of November 30, 2020 and February 29, 2020, we had a cash balance of $249,297 and $13,307, respectively.

Nine Months Ended

November 30, 2020

Nine Months Ended

November 30, 2019

As of May 31, 2021 and February 28, 2021, current liabilities included approximately $0.24

million and $0.44 million, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance

with the various conversion terms.

As of May 31, 2021 and February 28, 2021, we had a cash balance of $2,948,210 and $1,044,418,

respectively.

Summary of Cash Flows

Net cash used in operating activities

2 unchanged sentences

Net cash used in operating activities.

Net cash used in operating activities for the nine months ended November 30, 2020 was $1,446,075, which included a net loss of $3,634,660, non-cash activity such as the change in fair value of derivative liabilities of $1,027,328, change in operating assets and liabilities of $1,442,137, interest expense related to penalties from debt defaults $939,705, amortization of debt discount of $197,650, increase in related party accrued payroll and interest of $215,196,stock based compensation of $362,084, loss on disposal of fixed assets of $553, gain on settlement of debt of $30,032 and depreciation and amortization of $88,621 to derive the uses of cash in operations.

Net cash used in operating activities for the three months ended May 31, 2021 was $3,040,776,

which included a net loss of $35,904,918, non-cash activity such as the loss on settlement of debt of $32,984,361, revenue earning device

sold and expensed in cost of sales $3,411, reduction of right of use asset of $ 15,822, accretion of lease liability $13,052,stock based

compensation of $69,350, change in fair value of derivative liabilities of ($179,439), change in operating assets of $478,088, amortization

of debt discount of $317,269, increase in related party accrued payroll and interest of $80,760 and depreciation and amortization of $37,643

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, 2020 was $76,577, which was the purchase of fixed assets $77,577 offset by the proceeds of disposal of fixed assets of $1,000.

Net cash used in investing activities for the three months ended May 31, 2021 was $15,362,

which was the purchase of fixed assets and $15,880 paid for a security deposit.

Net cash provided by financing activities.

Net cash provided by financing activities was $1,758,642 for the nine months ended November 30, 2020.

This consisted of proceeds from deferred payment obligation of $966,000, proceeds from loans payable $1,213,623, reduced by net repayments from loan payable –

related party of $344,618, cash acquired on consolidation of RAD G of $284, and repayments on loans payable of $76,079.

Net cash provided by financing activities was $4,975,810 for the three months ended May 31,

This consisted of proceeds from loans payable of $5,426,146, reduced by net repayments from loan payable –

related party of

$121,147, settlement of convertible debt $65,000, and repayments on loans payable of $264,189.

Off-Balance Sheet Arrangements

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 29, 2020 filed with the SEC on July 28, 2020.

Critical accounting policies and estimates are further discussed in our Annual Report on Form

10-K for the year ended February 28, 2021 filed with the SEC on June 1, 2021.

Related Party Transactions

For the nine months ended November 30, 2019, the Company had net repayments of $74,938 from its loan payable-related party.

For the nine months ended November 30, 2020 the Company repaid net advances of $344,618.

At November 30, 2020, the loan payable-related party was $1,189,155 and $1,310,358 at February 29, 2020.

Included in the balance due to the related party at November 30, 2020 is $874,374 of deferred salary and interest, $594,000 of which bears interest at 12%.

At February 29, 2020, included in the balance due to the related party is $656,334 of deferred salary and interest, $426,000 of which bears interest at 12%.

The accrued interest included in loan at November 30, 2020 and November 30, 2019 was $84,418 and $34,917, respectively.

For the three months ended May 31, 2021, the Company repaid net advances of $121,147 from

its loan payable-related party.

For the three months ended May 31, 2020 the Company repaid net advances of $21,726.

At May 31, 2021, the

loan payable-related party was $885,417 and $904,806 at February 28, 2021.

Included in the balance due to the related party at May 31,

2021 is $843,323 of deferred salary and interest, $702,000 of which bears interest at 12%.

At February 28, 2021, included in the balance

due to the related party is $883,710 of deferred salary and interest, $642,000 of which bears interest at 12%.

The accrued interest included

in loan at May 31, 2021 and May 31, 2020 was $138,858 and $50,730, respectively.

During the three months ended May 31, 2021 and 2020, the Company was charged $478,951 and

$50,695, respectively for consulting fees for research and development to a company partially owned by a principal shareholder during

the three months ended May 31, 2021 and another company fully owned by a principal shareholder during the three months ended May 31, 2020.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements