What changed in this filing

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Item 1. Financial Statements

2022-01-19 compared with 2021-10-19 · 428 added, 349 removed, 1181 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2021

February 28, 2021*

Current assets:

Accounts receivable, net of allowance

Share proceeds receivable

Prepaid expenses

Deposits on inventory

Device parts inventory

33 unchanged sentences

15,545,650 shares authorized;

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

no shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively

Series E Preferred Stock, $ 0.001 par value;

5 unchanged sentences

Series G Preferred Stock, $ 0.001 par value;

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

100,000 shares

authorized, no shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively

Common Stock, $ 0.00001 par value;

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

Cost of Goods Sold

11 unchanged sentences

Gain (loss) on settlement of debt

Total other expense net

Net loss per share - basic

Net loss per share - diluted

Weighted average common share outstanding - basic

Total other income (expense), net

Net income (loss)

Net income (loss) per share - basic

Net income (loss) per share - diluted

Weighted average common share outstanding - basic and diluted

4,183,357,145

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S

Preferred Stock

Stockholders’

Shareholders'

Balance at February 28, 2020

8 unchanged sentences

Balance at August 31, 2020

Preferred Stock

Stockholders’

Contributed capital

Adjustment to derivative liability

Common stock issued for debt conversion

1,359,543,219

Warrants issued with promissory notes

Balance at November 30, 2020

1,889,573,434

Shareholders'

Balance at February 28, 2021

3,229,426,884

Series F preferred shares and warrants issued with deferred

variable payment obligation amendment agreement

Series F Preferred Shares issued with amendment agreement

Series F Preferred Shares Warrants issued with amendment agreement

Series F Preferred Shares cancelled in exchange for promissory

Series F preferred shares issued on exercise of warrants

Series F preferred shares issued on exercise of

Series F Preferred Shares converted to common shares

Warrants issued as part of a debt issuance

Relative fair value of warrants issued with debt

Stock based compensation

3 unchanged sentences

Common stock issued for debt conversion

Stock based compensation on issuable shares

Exercise of warrants

Exchange of debt for common shares

Relative fair value of warrants issued with debt

Cancellation of Series E preferred shares

Cancellation of Series E Shares

Exchange of debt for common shares

Stock based compensation on issuable shares

Exchange of Series F Preferred Shares for debt

1 unchanged sentence

3,995,271,111

Issuance of shares, net of $ 253,811 issuance costs

Cashless exercise of 100,000,000 warrants

Relative fair value of warrants issued with debt

Redemption of 19 Issuable Series F shares

Issuance of Series G preferred as equity awards per employment

Redemption of Series G shares as compensation payment

Balance at November 30, 2021

4,435,210,360

The accompanying notes are an integral part of

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

CASH FLOWS USED IN OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash used in operating activities:

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Revenue earning device sold and expensed in cost of sales

(Gain) loss on disposal of fixed assets

Bad debts expense

Revenue earning device sold and expensed in cost of sales

Reduction of right of use asset

Accretion of lease liability

(Gain) loss on disposal of fixed assets

Stock based compensation

Change in fair value of derivative liabilities

Interest expense related to penalties from debt defaults

Change in fair value of derivative liabilities

Amortization of debt discounts

(Gain) loss on settlement of debt

Increase in related party accrued payroll and interest

Increase (decrease) in related party accrued payroll and

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses

Deposits on inventory

Deposit on right of use asset

Device parts inventory

2 unchanged sentences

Customer deposits

Operating lease liabilities

Current portion of deferred variable payment obligation

Operating lease liability payments

Balance owed WeSecure

Current portion of deferred variable payment obligations for Payments

Accrued interest payable

Net cash used in operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets

Proceeds on disposal of fixed assets

Acquisition of trademarks

Cash paid for security deposit

Proceeds on disposal of fixed assets

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Share proceeds net of issuance costs

Settlement of convertible debt

Proceeds from deferred variable payment obligation

1 unchanged sentence

Repayment of loans payable

Series G preferred shares redeemed as payment on incentive plan payable

Dividend and redemption of cancelled issuable Series F shares

Cash acquired on consolidation of RAD G

Repayment of convertible debt

Net borrowings (repayments) on loan payable - related

Net borrowings(repayments) on loan payable - related party

Net cash provided by financing activities

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Noncash investing and financing activities:

Right of use asset for operating lease liability

Transfer from device parts inventory to revenue earning

Right of use asset for lease liability

Transfer from device parts inventory to fixed assets

Net assets on consolidation of RAD G

Conversion of convertible notes and interest to shares

of common stock

Release of derivative liability on conversion of convertible

notes payable

Derivative debt discount on re-valuation on loan amendment

Conversion of convertible notes and interest to shares of common stock

Release of derivative liability on conversion of convertible notes payable

Derivative debt discount on revaluation of loan amendment

Settlement of convertible notes payable to accounts payable and accrued expenses

Exchange of notes payable for Series F preferred shares

Discount applied to face value of loans

Warrants issued as part of debt

Warrants issued as part of debt issuance

Exercise of warrants

1 unchanged sentence

Cancellation of Series E preferred shares

Issuance of Series G preferred shares as payment on incentive plan payable

Series F preferred shares converted to common shares

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statements are those of RAD as if RAD had always been the reporting company.

AITX now fully owns three subsidiaries:

1 - Robotic Assistance Devices

Inc (‘RAD’), currently the primary operating entity;

2 – Robotic Assistance Devices Group Inc (‘RAD-G’),

a company developing technology to be used as an OEM by other companies as well as RAD;

3 – Robotic Devices Mobile Inc (‘RAD-M’),

a company that develops mobile robotic solutions such as ROAMEO.

GOING CONCERN

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of liabilities that may result from the possible inability of the Company to continue as a going concern.

For the six months ended August 31, 2021, the Company

For the nine months ended November 30, 2021, the Company

had negative cash flow from operating activities of $( 10,434,762 ).

As of August 31, 2021, the Company has an accumulated deficit of $ ( 72,259,045 ) ,

As of November 30, 2021, the Company has an accumulated deficit of

$( 79,778,503 ), and negative working capital of $ 298,374 .

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.

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

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

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financial situation as follows:

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

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 fiscal year.

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.

The company began raising money through it’s S-3 this quarter and

made improvements in paying off debt, investing in inventory and at November 30, 2021 had $4.1 million of cash on hard.

Management continues

to raise money through the S-3 and expects to raise approximately another $5 million before the end of this fiscal year.

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

There is no assurance that these funds will be able to be

raised nor can we provide assurance that these possible raises may not have dilutive effects.

The Company through to December 31, 2021

has raised approximately $8.5 million net of issuance costs through the sale of its common shares and $9.4 in proceeds from debt issuances.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company is on track to achieve it’s 2022 fiscal year revenue

projections of approximately 4 to 5 times greater than 2021 fiscal year’s revenues.

The company again projects 2023 fiscal year

revenues to achieve similar growth.

This projection is based on the following factors:

A continuously improving sales pipeline that

yields progressive quarterly sales increases;

Implementation of ‘quick ship’ options that allow some solutions to ship

off the shelf in 24 hours;

Continued improvements in production, inventory handling, forecasting that allows more devices to be ready

to ship in a quicker manner;

Continued significant improvements in device technology that streamlines deployments and ensures simple

Commercial release of several new solutions, specifically including:

‘RAD Light My Way™’, RAD’s

first QUFV (‘robodog’), launch of RAD G’s OEM program, launch of the newly announced delivery vehicle.

However, there

can be no assurance that the revenues will increase to the extent projected or that the anticipated improvements will actually occur.

The company has, as forecast previously, achieved an employee count of

71 employees at the close of this reporting quarter.

This expansion plan will require the Company to continue to increase SG&A/R&D

expenses, including the hiring of additional staffing, which the Company expects to finish this next fiscal year with between 80 –

90 employees.

ACCOUNTING POLICIES

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of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of such statements.

of operations for the six months ended August 31, 2021 are not necessarily indicative of the results that may be expected for the entire

of operations for the nine months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the entire

Use of Estimates

7 unchanged sentences

consolidated financial statements are those associated with the assumptions used to value preferred stock and derivative liabilities.

Reclassifications

Certain amounts in the Company’s condensed consolidated financial

statements for prior periods have been reclassified to conform to the current period presentation.

These reclassifications have not changed

the results of operations of prior periods.

The Company considers all highly liquid investments

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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 $ 26,890 and

$ 24,868 provided as of August 31, 2021 and February 28, 2021, respectively.

from customers, net of estimated allowances for credit losses.

In determining collectability, historical trends are evaluated, and specific

customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

There was an allowance of $ 131,890 and $ 24,868 provided

as of November 30, 2021 and February 28, 2021, respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Device Parts Inventory

9 unchanged sentences

increase in the valuation, such as excess or obsolete inventory, are noted.

As of both August 31, 2021 and February 28, 2021 there was

As of both November 30, 2021 and February 28, 2021 there was

no valuation reserve.

9 unchanged sentences

of the asset exceeds the fair value.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fixed assets are stated at cost.

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and amortized over the expected useful life or written off if a product is abandoned.

At August 31, 2021 and February 28, 2021, the Company

had no deferred development costs.

At November 30, 2021 and February 28, 2021, the

Company had no deferred development costs.

Contingencies

8 unchanged sentences

heavily on estimates and assumptions.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sales of Future Revenues

8 unchanged sentences

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’s rate

Does the investor have recourse relating to payments due

5 unchanged sentences

the Company has determined that all such agreements are debt.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

9 unchanged sentences

price and allocating the transaction price to each separate performance obligation.

The Company adopted Topic 606 on March 1, 2018, using

the modified retrospective method.

Under the modified retrospective method, prior period financial positions and results will not be adjusted.

There was no cumulative effect adjustment recognized as a result of this adoption.

Refer to Note 4 – Revenue from Contracts with

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liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lease agreements are evaluated to determine if they

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and actual rental payments is recorded as deferred rent and included in liabilities.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Distinguishing Liabilities from Equity

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developed based on the best information available in the circumstances (unobservable inputs).

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The fair value hierarchy consists of three broad levels,

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

Level 1 – Unadjusted quoted

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

Level 2 – Inputs other than quoted prices

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

Level 2 inputs include quoted prices

for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are

inputs other than quoted prices that are observable for the asset or liability;

and inputs that are derived principally from

or corroborated by observable market data by correlation or other means.

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

that are accessible at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset

or liability, either directly or indirectly.

Level 2 inputs include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are

observable for the asset or liability;

and inputs that are derived principally from or corroborated by observable market data by correlation

or other means.

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Measured on a Recurring Basis

2 unchanged sentences

Fair Value Measurement Using

August 31, 2021

November 30, 2021

Incentive compensation plan payable- revaluation of equity awards payable

in Series G shares

Derivative liability – conversion features pursuant to convertible notes payable

February 28, 2021

Incentive compensation plan payable- revaluation of equity awards payable

in Series G shares

Derivative liability – conversion features pursuant to convertible notes payable

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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 intra-period tax

allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for

outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries.

The guidance also

simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for

transactions that result in a step-up in the tax basis of goodwill.

The standard will be effective for us beginning July 1, 2021,

with early adoption permitted.

The Company does not expect any material impact of this standard in our consolidated financial

statements, including accounting policies, processes, and systems.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

Accounting for Income Taxes

In December 2019, the FASB issued a new standard to

simplify the accounting for income taxes.

The guidance eliminates certain exceptions related to the approach for intra-period tax allocation,

the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences

related to changes in ownership of equity method investments and foreign subsidiaries.

The guidance also simplifies aspects of accounting

for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in

the tax basis of goodwill.

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

The Company does

not expect any material impact of this standard in our consolidated financial statements, including accounting policies, processes, and

Recently Adopted Accounting Pronouncements

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Three Months Ended

August 31, 2021

Six Months Ended

August 31, 2021

November 30, 2021

Nine Months Ended

November 30, 2021

Device rental activities

1 unchanged sentence

Three Months Ended

August 31, 2020

Six Months Ended

August 31, 2020

November 30, 2020

Nine Months Ended

November 30, 2020

Device rental activities

Direct sales of goods and services

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

August 31, 2021

November 30, 2021

February 28, 2021

1 unchanged sentence

Accumulated depreciation

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended August 31, 2021, the Company

made total additions through inventory transfers to revenue earning devices of $ 282,337 .

During the six months ended August 31, 2020,

During the nine months ended November 30, 2021, the

Company made total additions through inventory transfers to revenue earning devices of $ 592,346 .

During the nine months ended November

30, 2020, the Company made total additions to revenue earning devices of $ 72,940 .

During the six months ended August 31, 2021 the Company

sold a revenue earning device having a net book value of $ 3,255 for revenues of $ 30,600 and included the $ 3,255 in cost of goods sold.

Depreciation expense was $ 43,834 and $ 76,839 for the

three and six months ended August 31, 2021, respectively, and $ 24,820 and $ 47,461 for the three and six months ended August 31, 2020,

During the nine months ended November 30, 2021 the

Company sold a revenue earning device having a net book value of $ 3,255 for revenues of $ 30,600 and included the $ 3,255 in cost of goods

Depreciation expense was $ 61,976 and $ 138,815 for

the three and nine months ended November 30, 2021, respectively, and $ 26,589 and $ 74,050 for the three and nine months ended November

30, 2020, respectively.

Fixed assets consisted of the following:

August 31, 2021

November 30, 2021

February 28, 2021

1 unchanged sentence

Office equipment

Leasehold improvements

Accumulated depreciation

During the three months and six months ended August

During the three months and nine months ended November

30, 2021 the Company made additions of $ 2,372 and $ 34,534 , respectively.

During both the three months and six months ended August 31,

2020 the Company made additions of $ 4,638 .

During the six months ended August 31, 2021 the Company sold a vehicle

having a net book value of $ 875 for fair value proceeds of $ 30,000 and recorded a gain on disposal of fixed assets of $ 29,125 .

During the six months ended August 31, 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.

During the three months and nine months ended November 30, 2020

the Company made additions of $ 0 and $ 4,638 .

During the nine months ended November 30, 2021 the

Company sold a vehicle having a net book value of $ 875 for fair value proceeds of $ 30,000 and recorded a gain on disposal of fixed assets

of $ 29,125 .

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 $ 5,951 and $ 14,446 for the

three and six months ended August 31, 2021, respectively, and $ 5,540 and $ 11,015 for the three and six months ended August 31, 2020, respectively.

three and nine months ended November 30, 2021, respectively, and $ 3,556 and $ 14,571 for the three and nine months ended November 30, 2020,

respectively.

We lease certain warehouses and office space.

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Below is a summary of our lease assets and liabilities at August 31, 2021

Below is a summary of our lease assets and liabilities at November 30,

2021 and February 28, 2021.

Classification

August 31, 2021

November 30, 2021

February 28, 2021

12 unchanged sentences

Rent expense and operating lease

cost was $ 75,212 and $ 104,086 for the three and six months ended August 31, 2021, respectively, and $ 4,300 and $ 7,300 for the three and

six months ended August 31, 2020, respectively.

cost was $ 103,115 and $ 207,201 for the three and nine months ended November 30, 2021, respectively, and $ 3,000 and $ 14,800 for the three

and nine months ended November 30, 2020, respectively.

DEFERRED VARIABLE PAYMENT OBLIGATION

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later than February 28, 2021.

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

As at November 30, 2020 the investor had fully funded the $800,000 commitment .

On August 27, 2020 the Company and the first investor

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for the following:

the rate payment is revised to 14.25 % payable on revenues commencing the quarter ended August 31, 2020 and the

the rate payment is revised to 14.25 % payable on revenues commencing the quarter ended November 30, 2020 and the

Payments are secured by the assets of the Company.

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

As of August 31, 2021, the Company has not yet completed

As of November 30, 2021, the Company has not yet completed

its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these

1 unchanged sentence

28, 2023 filing.

As of August 31, 2021, and February 28, 2021, the balances under these agreements were $ 2,525,000 and $ 2,525,000 , respectively.

As of November 30, 2021, and February 28, 2021, the balances under these agreements were $ 2,525,000 and $ 2,525,000 , respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended August 31, 2021, the Company

has received $0 related to the deferred payment obligation as the balance remains $ 2,525,000 at August 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.

For the three months ended November 30, 2021, the

Company has received $0 related to the deferred payment obligation as the balance remains $ 2,525,000 at November 30, 2021.

ended February 28, 2021, $ 966,000 has been paid to the Company bringing the balance to $2,525,000 at February 28, 2021.

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.

of August 31, 2021, the Company has accrued $ 246,035 in Payments (February 28, 2021 -$ 91,857 ).

No amounts have been recorded to date as

interest on Payments, as the amounts are immaterial.

of November 30, 2021, the Company has accrued $ 265,227 in Payments (February 28, 2021 -$ 91,857 ).

No amounts have been recorded to date

as interest on Payments, as the amounts are immaterial.

CONVERTIBLE NOTES PAYABLE

2 unchanged sentences

July 18, 2016

July 18, 2017 *

December 31, 2016

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Current portion of convertible notes payable, net of discount

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

The indicated note was in default as of November 30, 2021.

Default interest rate 22%

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

During both the three months ended August 31, 2021

During both the three months ended November 30, 2021

and 2020, the Company incurred original issue discounts of $0, and debt discounts from derivative liabilities of $438,835 and $0, respectively

related to new or re-valued convertible notes payable.

During the three months ended August 31, 2021 and 2020, the Company recognized

During the three months ended November 30, 2021 and 2020, the Company recognized

interest expense related to the amortization of debt discount of $694,855 and $23,957, respectively.

The Company recorded penalty interest

of $0 and $445,277 during the three months ended August 31, 2021 and August 31, 2020, respectively.

of $0 and $494,428 during the three months ended November 30, 2021 and November 30, 2020, respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During both the six months ended August 31, 2021 and

2020, the Company incurred original issue discounts of $0 and debt discounts from derivative liabilities of $438,835 and $0, respectively

During both the nine months ended November 30, 2021

and 2020, the Company incurred original issue discounts of $0 and debt discounts from derivative liabilities of $438,835 and $0, respectively

related to new or re-valued convertible notes payable.

During the six months ended August 31, 2021and 2020, the Company recognized interest

expense related to the amortization of debt discount of $775,986 and $94,675, respectively.

The Company recorded penalty interest of $0

and $445,277 during the six months ended August 31, 2021 and August 31, 2020, respectively.

During the nine months ended November 30, 2021 and 2020, the Company recognized

interest expense related to the amortization of debt discount of $775,986 and $23,957, respectively.

The Company recorded penalty interest

of $0 and $939,705 during the nine months ended November 30, 2021 and November 30, 2020, respectively.

All the notes above are unsecured.

As of August 31,

As of November

30, 2021 and February 28, 2021, the Company had total accrued interest payable of $27,686 and $49,764, respectively, all of which is classified

During the six months ended August 31, 2021, the Company

also had the following convertible note activity:

During the nine months ended November 30, 2021, the

Company also had the following convertible note activity:

the Company amended the January 27, 2021 agreement with the lender whereby the conversion rate

7 unchanged sentences

RELATED PARTY TRANSACTIONS

For the six months ended August 31, 2021, the Company

For the nine months ended November 30, 2021, the Company

repaid net advances of $ 812,234 from its loan payable-related party.

For the six months ended August 31, 2020 the Company repaid net advances

of $ 75,328 .

At August 31, 2021, the loan payable-related party was $ 910,095 and $ 904,806 at February 28, 2021.

Included in the balance

due to the related party at August 31, 2021 is $ 925,001 of deferred salary and interest, $ 762,000 of which bears interest at 12 %.

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

The accrued interest included in loan at August 31, 2021 and August 31, 2020 was $ 160,536 and $ 80,410 , respectively.

Pursuant to the amended Employment Agreement with its Chief Executive Officer

in Note 14, the Company accrued $ 1,022,000 of stock-based compensation with a corresponding adjustment to incentive compensation plan

payable due to the vesting cost of the equity awards.

These awards are payable through the issuance of Series G Preferred Shares which

are redeemable at the Company’s option at $ 1,000 per share.

The Company will classify these awards granted as Series G Preferred

Shares as a liability accordingly because of those terms.

During the three and six months ended August 31, 2021

the Company was charged $ 1,041,788 and $ 562,837 , respectively in consulting fees for research and development to a company partially owned

by a principal shareholder During the three and six months ended August 31, 2020, the Company was charged $ 61,121 and $ 111,816 , respectively

for consulting fees for research and development to a company owned by a principal shareholder.

For the nine months ended November 30, 2020 the Company repaid net

advances of $ 344,618 .

At November 30, 2021, the loan payable-related party was $ 134,234 and $ 904,806 at February 28, 2021.

Included in the balance due to the related party at November 30, 2021 is $ 54,000 of deferred salary and interest, $ 54,000 of which bears

interest at 12 %.

At February 28, 2021, included in the balance due to the related party is $ 883,710 of deferred salary and interest, $ 642,000

of which bears interest at 12 %.

The accrued interest included in loan at November 30, 2021 and November 30, 2020 was $ 540 and $ 84,418 ,

respectively.

Pursuant to the amended Employment Agreement with

its Chief Executive Officer in Note 14, the Company accrued $ 1,979,500 of stock-based compensation with a corresponding adjustment to

incentive compensation plan payable due to the vesting cost of the equity awards.

These awards are payable through the issuance of Series

G Preferred Shares which are redeemable at the Company’s option at $ 1,000 per share.

The Company will classify these awards granted

as Series G Preferred Shares as a liability accordingly because of those terms.

The Company issued and redeemed 1500 Series G Preferred

Shares for $1,500,000 as payment on achieved equity awards.

During the three and nine months ended November

30, 2021 the Company was charged $ 1,041,788

and $ 562,837 ,

respectively in consulting fees for research and development by a company partially owned by a principal shareholder The principal

shareholder with a minority interest in the related party has received no compensation from the related party company.

three and nine months ended November 30, 2020, the Company was charged $ 10,157

and $ 121,973 ,

respectively for consulting fees for research and development by a company owned by a principal shareholder, who received no compensation from the related party company.

OTHER DEBT – VEHICLE LOAN

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The remaining total balances of the amounts owed on the vehicle loans were $ 38,522 and $ 38,522

as of August 31, 2021 and February 28, 2021, respectively, of which all were classified as current.

as of November 30, 2021 and February 28, 2021, respectively, of which all were classified as current.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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LOANS PAYABLE

Loans payable at August 31, 2021 consisted of the

Loans payable at November 30, 2021 consisted of the

Schedule of loans payable

119 unchanged sentences

Promissory note

September 14, 2021

September 14, 2022

Promissory note

Less current portion of loans payable

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Note is in default.

No notice has been given by the note holder.

No notice has been given by the note holder to the Company at the time of

issuance of these financial statements.

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 .

The loan has been fully repaid.

The loan has been fully repaid this fiscal year.

The note may be pre-payable at any time.

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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 of $ 2,590 at

The note may be pre-payable at any time.

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

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

$ 257,000 Canadian loan.

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the quarter ended May 31, 2021.

This loan and accrued interest was fully repaid on November 15, 2021 for a cash payment of $443,978.

payment includes $168,659 of loan repayment $55,299 in accrued interest, $18,135 in interest expense, $18,492 in foreign exchange loss

and $157,249 in loss on settlement of debt.

The note may be pre-payable at any time.

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their respective values, a debt discount of $4,749.005 with a corresponding adjustment to paid in capital for the relative value of the

For the three months and six months ended August 31, 2021, the Company recorded amortization expense of $ 190,438 and $ 228,363 ,

respectively with an unamortized discount of $ 5,120,643 at August 31, 2021.

For the three months and nine months ended November 30, 2021, the Company recorded amortization expense of $933,213 and $1,161,576,

respectively with an unamortized discount of $4,187,429 at November 30, 2021.

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

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

For the three months and six months

ended August 31, 2021, the Company recorded amortization expense of $ 1,524 and $ 54,102 , respectively with an unamortized discount of $ 0

at August 31, 2021.

On June 2, 2021 the Company exchanged the $2,545,900 debt having a net book value of $2,321,870 for 39,167,693 common

shares having a fair value of $2,177,724.

For the three months and nine months

ended November 30, 2021, the Company recorded amortization expense of $ 1,524 and $ 54,102 , respectively with an unamortized discount of

$ 0 at November 30, 2021.

On June 2, 2021 the Company exchanged the $2,545,900 debt having a net book value of $2,321,870 for 39,167,693

common shares having a fair value of $2,177,724.

The Company recorded a gain on settlement of debt of $144,146.

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A fair value of the loan of $ 4,465,067 was determined with a debt discount off $ 535,808 .

For the three months and six months

ended August 31, 2021, the Company recorded amortization expense of $ 2,936 and $ 107,162 , respectively with an unamortized discount of

$0 at August 31, 2021.

For the three months and nine months

ended November 30, 2021, the Company recorded amortization expense of $ 2,936 and $ 107,162 , respectively with an unamortized discount of

$0 at November 30, 2021.

On June 2, 2021 the Company exchanged the $5,000,875 debt having a net book value $4,572,229 for 76,936,539 common

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The note may be pre-payable at any time.

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

The note balance includes an original issue discount of $ 3,000 at

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

2 unchanged sentences

The note balance includes an original issue discount

of $ 2,450 at issuance.

The note may be pre-payable at any time.

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

The note balance includes an original issue discount of $ 1,200 at

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 of $ 3,850 at

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 of $ 8,000 at

The note may be pre-payable at any time.

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

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

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

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

$ 25,000 repaid during the year.

Repaid in full.

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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 of $ 12,000 at

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 of $ 6,000 at

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 of $ 10,000 at

The note may be pre-payable at any time.

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

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

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

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

For the three months and nine months ended November 30, 2021, the Company recorded amortization expense of $6,024 and $17,563,

respectively with an unamortized discount of $21,067 at November 30, 2021.

Principal and interest repayable in 28 monthly instalments commencing December 6, 2020, the first 6 months

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For the three months

and six months ended August 31, 2021, the Company recorded amortization expense of $ 2,860 and $$ 5,470 , respectively with an unamortized

discount of $ 42,859 at August 31, 2021.

Principal and interest repayable in 21 monthly instalments commencing December 6, 2020 of $4,060 commencing

and nine months ended November 30, 2021, the Company recorded amortization expense of $ 3,134 and $ 8,605 , respectively with an unamortized

discount of $ 39,724 at November 30, 2021.

P rincipal and interest repayable in 21 monthly instalments commencing December 6, 2020 of $4,060 commencing

February 21, 2021.

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for the relative value of the warrant.

For the three months and six months ended August 31, 2021, the Company recorded amortization expense

of $ 7,999 and $ 15,244 , respectively with an unamortized discount of $ 128,556 at August 31, 2021.

For the three months and nine months ended November 30, 2021, the Company recorded amortization

expense of $ 8,830 and $ 24,074 , respectively with an unamortized discount of $ 119,726 at November 30, 2021.

The note may be pre-payable at any time.

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of the warrant.

For the three months and six months ended August 31, 2021, the Company recorded amortization expense of $ 2,207 and $ 4,051 ,

respectively with an unamortized discount of $ 56,519 at August 31, 2021.

For the three months and nine months ended November 30, 2021, the Company recorded amortization expense of $ 2,642 and

$ 6,694 , respectively with an unamortized discount of $ 53,877 at November 30, 2021.

This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $2,683,357 in

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fair value of $ 271,250 .

The discounts are being amortized over the term of the

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 and six months ended August 31, 2021, the

Company recorded amortization expense of $ 5,652 and $ 9,927 , respectively with an unamortized discount of $ 294,203 at August 31, 2021.

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 and nine months ended November 30, 2021, the Company recorded amortization expense of

$ 7,472 and $ 17,399 , respectively with an unamortized discount of $ 286,731 at November 30, 2021.

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 9,200 in convertible

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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 9 whereby $ 79,500 in convertible

notes and associated accrued interest of $ 28,925 totaling $ 108,425 was exchanged for this promissory note of $ 145,000 .

This note is secured

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 79,500

in convertible notes and associated accrued interest of $ 28,925 totaling $ 108,425 was exchanged for this promissory note of $ 145,000 .

This note is secured by a general security charging all of the Company’s present and after-acquired property.

The note may be pre-payable at any time.

The note balance includes an original issue discount of $ 250,000

and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3-year term and having a relative

fair value of $ 380,174 .

The note balance includes an original issue discount

of $ 250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3 -year term and

having a relative fair value of $ 380,174 .

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

After allocating these charges to debt and equity

according to their respective values, a debt discount of $380,174 with a corresponding adjustment to paid in capital.

For the three months

and six months ended August 31, 2021, the Company recorded amortization expense of $ 12,879 and $ 23,458 , respectively with an unamortized

discount of $ 401,998 at August 31, 2021.

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 and nine months ended November 30, 2021, the Company recorded amortization expense of $ 15,679 and $ 39,137 , respectively

with an unamortized discount of $ 386,319 at November 30, 2021.

The note may be pre-payable at any time.

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for the relative fair value of the warrant.

For the three months and six months ended August 31, 2021, the Company recorded amortization

expense of $ 16,039 and $ 27,595 with an unamortized discount of $ 1,464,983 at August 31, 2021.

For the three months and nine months ended November 30, 2021, the Company recorded amortization

expense of $ 22,259 and $ 49,854 with an unamortized discount of $ 1,442,724 at November 30, 2021.

The note may be pre-payable at any time.

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corresponding adjustment to paid in capital.

For the three months and six months ended August 31, 2021, the Company recorded amortization

expense of $ 135,404 with an unamortized discount of $ 2,149,630 at August 31, 2021.

For the three months and nine months ended November 30, 2021, the Company recorded amortization

expense of $ 296,511 and $ 431,915 with an unamortized discount of $ 1,853,119 at November 30, 2021.

This loan was in exchange for 184 Series F preferred shares from a former director.

2 unchanged sentences

The loan is unsecured.

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 250,000,000 shares at an exercise price of $ 0.037 per share with a 3-year term and having a

relative fair value of $ 1,284,783 using Black-Scholes with assumptions described in note 14.

The discounts are being amortized over the

term of the loan.

After allocating these charges to debt and equity according to their respective values, a debt discount of $1,284,783

with a corresponding adjustment to paid in capital.

For both the three months and nine months ended November 30, 2021, the Company recorded

amortization expense of $ 8,669 with an unamortized discount of $ 1,426,114 at November 30, 2021.

DERIVATIVE LIABILITIES

As of August 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 of $7,299.

As of November 30, 2021, the Company revalued the

fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible notes payable

and determined that it had a total derivative liability of $7,299.

The Company estimated the fair value of the derivative

liabilities using the multinomial lattice model using the following key assumptions during the three months ended August 31, 2021:

Schedule of derivative liabilities using

the Monte-Carlo

liabilities using the multinomial lattice model using the following key assumptions during the three months ended November 30, 2021:

Schedule of derivative liabilities using the Monte-Carlo

$ 0.04 - $ 0.026

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Expected term (years)

During the three months ended August 31, 2021, and

2020, the Company released $ 503,500 and $ 1,560,733 , and respectively, of the Company’s derivative liability to equity due to the

conversions of principal and interest on the associated notes and other debt settlements.

During the six months ended August 31, 2021, and 2020,

During the three months ended November 30, 2021, and

2020, the Company released $ 0 and $ 873,673 , and respectively, of the Company’s derivative liability to equity due to the conversions

of principal and interest on the associated notes and other debt settlements.

During the nine months ended November 30, 2021, and

2020, the Company released $ 503,500 and $ 2,601,903 , and respectively, of the Company’s derivative liability to equity due to the

conversions of principal and interest on the associated notes and other debt settlements.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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The changes in the derivative liabilities (Level 3

financial instruments) measured at fair value on a recurring basis for the three months ended August 31, 2021 were as follows:

financial instruments) measured at fair value on a recurring basis for the nine months ended November 30, 2021 were as follows:

Schedule of level 3 financial instruments

3 unchanged sentences

Change in fair value of derivative liabilities

Balance as of August 31, 2021

Balance as of November 30, 2021

STOCKHOLDERS’ EQUITY (DEFICIT)

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Series E Preferred Stock

During the six months ended August 31, 2021 Series

F shareholders had the following activity:

During the nine months ended November 30, 2021 Series

E shareholders had the following activity:

A shareholder cancelled 1,000,000 Class E shares.

1 unchanged sentence

Series F Preferred Stock

During the six months ended August 31, 2021 Series

During the nine months ended November 30, 2021 Series

F shareholders had the following activity:

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Summary of Preferred Stock Warrant Activity

Schedule of Summary of stock Option Activity

Number of Series F Preferred Warrants

3 unchanged sentences

Forfeited and cancelled

Outstanding at August 31, 2021

Outstanding at November 30, 2021

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 23, 2021, the Company filed amended

Series F preferred shares such that Series F preferred shares are not convertible into common stock by a holder until (A) August

23, 2023 or (B) the date on which such a conversion may be required for the purpose of (i) uplisting the Company to a new stock

exchange, or (ii) selling more than 50% of the Company’s assets.

On August 23, 2021, the Company filed amended Series

F preferred shares such that Series F preferred shares are not convertible into common stock by a holder until (A) August 23, 2023 or

(B) the date on which such a conversion may be required for the purpose of (i) uplisting the Company to a new stock exchange, or (ii)

selling more than 50% of the Company’s assets.

On July 22, 2020 the board of directors passed a resolution

whereby the sole director agreed to return for cancellation, 816 of his 1000 Series F preferred shares to the Company.

On December 1, 2020 the company issued 110 Series

F shares having a fair value of $362,084 to a consultant for services previously rendered which was recorded as professional fees with

a corresponding adjustment to accrued liabilities.

Unissued Series F Preferred Stock

During the quarter ending November 30, 2021 the Company redeemed

(through cancellation) 19 shares of issuable Series F preferred stock having a value of $ 74,984 for $500,000, with the difference

of $425,016 recorded as a dividend.

At November 30, 2021 there remains 46 issuable Series F preferred stock at a value of $99,086.

At February 28, 2021 there was 65 issuable Series F preferred stock at a value of $174,070.

Series G Preferred Stock

During the nine months ended November 30, 2021 Series

G shareholders had the following activity:

On achievement of objectives 3,4,5 and 8 of the equity awards described below the CEO was granted

1500 Series G Preferred shares which were redeemed immediately for $1,500,000

The Company has accrued $1,979,500 of the equity awards and incentive compensation plan payable with the balance

of $479,500 at November 30, 2021 after the $1,500,000 payment above.

Summary of Common Stock Activity

During the six months ended August 31, 2021 common

During the nine months ended November 30, 2021 common

shareholders had the following activity:

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

holders of certain convertible notes payable elected to convert a total of $ 825,000 of principal

and $ 71,955 accrued interest, and $ 1,750 of fees into 31,042,436 shares of common stock.

in June 2021, lenders (see note 12) exchanged debt having a face value of $ 7,546,775 and a net

book value of $ 6,894,099 for 116,104,232 common shares having a fair value of $ 6,455,396 .

A gain on settlement of debt of $ 438,703 was

the company entered into an investor relations contract whereby 2,100,000 shares are issuable

as of August 31, 2021.

Stock based compensation of $ 109,200 was recorded in the period ended August 31, 2021.

holders of certain convertible notes payable elected to convert a total of $ 825,000 of principal and $ 71,955

accrued interest, and $ 1,750 of fees into 31,042,436 shares of common stock.

in June 2021, lenders (see note 12) exchanged debt having a face value of $ 7,546,775 and a net book value

of $ 6,894,099 for 116,104,232 common shares having a fair value of $6,455,396.

A gain on settlement of debt of $438,703 was recorded.

the Company entered into an investor relations contract whereby 2,100,000 shares are issuable as of November

Stock based compensation of $ 109,200 was recorded in the period ended November 30, 2021.

the Company issued 345,168,473 common shares with gross proceeds of $ 8,723,814 and cash proceeds of $ 7,463,654

after issuance costs of $253,811 with the balance of $1,006,349 recorded as share proceeds receivable see Note 16.

warrant holders exercised warrants to acquire 411,000,000 shares on a cashless basis for 395,022,447 common

shares with a corresponding adjustment to paid in capital.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Common Stock Warrant Activity

5 unchanged sentences

Forfeited and cancelled

Outstanding at August 31, 2021

For both the three and six months ended August 31,

2021 and August 31, 2020, the Company recorded a total of $ 1,200,550 and $ 0 , respectively, to stock-based compensation for options and warrants

with a corresponding adjustment to additional paid-in capital.

During the six months ended August 31, 2021 warrant

Outstanding at November 30, 2021

For both the three and nine months ended November 30, 2021 and November

30, 2020 the Company recorded a total of $ 0 and $ 0 respectively, to stock-based compensation for options, warrants and shares with a corresponding

adjustment to additional paid-in capital.

During the nine months ended November 30, 2021 warrant

holders had the following activity:

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in conjunction with debt disclosed in Note 12 (44), the Company issued warrants to a lender to purchase 170,000,000

shares at an exercise price of $ 0.064 per share with a 3-year term and having a relative fair value of $ 2,035,033 and in in conjunction

with debt disclosed in Note 12 (10), the Company issued warrants to a lender 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 both using the Black-Scholes model with assumptions described

shares at an exercise price of $0.064 per share with a 3-year term and having a relative fair value of $2,035,033, in conjunction with

debt disclosed in Note 12 (10), the Company issued warrants to a lender 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,andin conjunction with debt disclosed in Note 12 (46), the

Company issued warrants to a lender to purchase 250,000,000 shares at an exercise price of $0.037 per share with a 3-year term and having

a relative fair value of $1,284,783 all using the Black-Scholes model with assumptions described below:

Schedule of black scholes model with

assumption strike price

$ 0.135 - $ 0.037

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Expected term (years)

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Common Stock Option Activity

On April 9, 2021 the Company 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 :

Agreement with Chief Executive Officer, Steven Reinharz with a three- year term under the following terms whereby stock option awards

will be granted if certain conditions are met :

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

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trading period.

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 :

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Objective #5 :

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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.

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.

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

The fair value the first two awards was obtained

through the use of the Monte Carlo method was $ 69,350

The fair value of the first two awards was

obtained through the use of the Monte Carlo method was $ 69,350

with a charge to stock- based compensation and a corresponding charge to paid in capital.

The fair value of the remaining rewards

was determined by calculating the vesting amounts of each reward and totaled $ 1,022,000 with a charge to stock-based compensation

and a corresponding charge to incentive compensation plan payable.

was determined by calculating the vesting amounts of each reward and then determining for each reporting period the requisite

service rendered and applying that against the cash redemption value of the number of shares of Series G issuable for each tier in

the agreement.

For the period ended November 30, 2021 that amount totaled $1,979,500 with a charge to stock-based compensation and a

corresponding charge to incentive compensation plan payable.

With the achievement of objectives 3,4,5 and 8 of the equity awards

described above the CEO was granted 1,500 Series G Preferred shares which were redeemed in the reporting period for $1,500,000 in

As part of the grant, the Company is responsible for grossing up the award value and has accrued additional compensation for

the estimated taxes to be paid by the executive.

On April 14, 2021, the Shareholders of Series E Preferred

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The purpose of the 2021 Plan is to promote the success

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Termination will not affect awards then outstanding.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

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On August 15 ,2021 the Company entered into a memorandum

of understanding with Ghost Robotics whereby the Company will modify and resell a Ghost Robotics (“Ghost”) product (“V50”) in development in exchange for the following:

of understanding with Ghost Robotics whereby the Company will modify and resell a Ghost Robotics (“Ghost”) product (“V50”)

in development in exchange for the following:

the Company will pay Ghost a non refundable marketing fee of $ 500,000 with $ 100,000 payable September

2 unchanged sentences

will be credited against future purchases of 6 V50’s that the Company will modify and resell.

Ghost agrees not to sell it’s V50 to three specific customers for a three-year period commencing after

the first commercial sales of the V50.

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ghost agrees not to sell its V50 to three specific customers for a three-year period commencing after the

first commercial sales of the V50.

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

Operating Lease

8 unchanged sentences

paid a security deposit of $ 15,880 .

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On September 30, 2021, the Company entered into a

3-year lease agreement for a vehicle commencing September 30, 2021 through to April 30, 2031 with a minimum base rent of $1,538 per month.

The Company paid a down payment of $18,462 .

Maturity of Lease Liabilities

August 31, 2022

August 31, 2023

August 31, 2024

August 31, 2025

August 31, 2026

August 31, 2027 and after

November 30, 2022

November 30, 2023

November 30, 2024

November 30, 2025

November 30, 2026

November 30, 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.

Penalties earned through

August 31, 2021 have been recorded in these financial statements.

EARNINGS (LOSS) PER SHARE

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Net income (loss) available to common shareholders

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Net income (loss) per share – diluted

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The anti-dilutive shares of common stock equivalents

for the three and six months ended August 31, 2021 and August 31, 2020 were as follows:

for the three and nine months ended November 30, 2021 and November 30, 2020 were as follows:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Convertible notes and accrued interest

11 unchanged sentences

20,551,701,667

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUBSEQUENT EVENTS

Subsequent to August 31, 2021 through to October

On September 2, 2021 the Company filed a Form S-3 statement indicating its intention to issue

a public offering of shares of its securities in a prospectus for an aggregate value of $ 30,000,000 .

The prospectus describes the general

terms of these securities and the general manner in which these securities will be offered.

The Company will provide the specific terms

of these securities in supplements to this prospectus.

The prospectus supplements will also describe the specific manner in which these

securities will be offered and may also supplement, update or amend information contained or incorporated by reference in this prospectus.

The Company may offer these securities in amounts, at prices and on terms determined at the time of offering.

On September 15, 2021 the Company and GHS Investments, LLC (“the investor”) entered into a share

purchase agreement whereby the investor would purchase up to $ 10,000,000 of the Company’s common stock over the next year.

would receive 112.5 % of the purchased shares at a price of 90 % of the lowest volume weighted average price over the five

days prior to purchase date.

Pursuant to this agreement the investor has so far acquired 44,193,332 common shares for net proceeds

of $ 1,257,175 .

On September 14, 2021 the Company entered into a promissory note for $ 1,650,000 with cash proceeds of $ 1,500,000

and an original issue discount of $ 150,000 .

The loan bears interest at 12 % per annum and matures on September 14, 2024 .

Along with the

note the lender received a warrant to purchase 250,000,000 shares of common stock at an exercise price of $0.037 per share and a three

On September 15, 2021 the Company and White Lion Capital , LLC (“White Lion”) entered into a share

purchase agreement whereby the investor would purchase up to $ 10,000,000 of the Company’s common stock over the next year.

price of the common stock is 92 % of the lowest volume weighted average price over the three days prior to purchase date.

Company will pay $3,000 for each purchase transaction to cover clearing costs.

Pursuant to this agreement on October 7, 2021

the investor acquired 49,000,000 common shares for expected net proceeds of $ 1,182,640 .

In September 2021 the Company repaid to its Chief Executive Officer approximately $ 800,000 in

deferred salary and associated interest.

Subsequent to November 30, 2021 through to January

- On December 26, 2021 the

Company and GHS Investments, LLC (“the investor”) entered into a share purchase agreement whereby the investor would purchase

up to 400,000,000 shares of the Company’s common stock over the next year.

The investor would receive 100 % of the purchased shares

at a price of 85% of the lowest volume weighted average price over the ten days prior to purchase date.

Pursuant to this agreement

the investor has so far acquired 100,000,000 common shares for net proceeds of $ 1,183,825 .

- In December 2021, the Company

received payment on $ 1,006,349 share proceeds receivable .

- On January 3, 2022

the shareholders approved a proposed amendment effectuating the policy that the Corporation will not institute a reverse stock split

of its Common Stock before January 1, 2024 unless the Corporation uplists to a NASDAQ exchange or the NYSE.

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