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Item 5. Market for Registrant’s Common Equity

2022-05-27 compared with 2021-06-01 · 538 added, 298 removed, 519 unchanged (62% of the section changed)

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Market Information

AITX’s common stock began trading on the “Over the Counter”

AITX’s common stock began

trading on the “Over the Counter”

Bulletin Board (“OTC”) under the symbol “AITX”

in June 2011 and as AITX on August 24, 2018.

The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter market, as reported and summarized by OTC Markets Group, Inc.

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

These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

There is an absence of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile, which may affect the prices listed below.

in June 2011 and

as AITX on August 24, 2018.

The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter

market, as reported and summarized by OTC Markets Group, Inc.

On August 24, 2018, the Company undertook a 100:1 reverse stock split and

on March 27, 2020 a 10,000:1 reverse 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.

These quotations represent inter-dealer

quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

There is an absence

of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile, which may

affect the prices listed below.

Fiscal Year Ended February 28, 2022:

8 unchanged sentences

Quarter ended May 31, 2020

On May 11, 2021, the closing price per share of the Company’s common stock as quoted on the OTC was $0.08.

To date, we have not paid dividends on shares of the Company’s common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future.

The payment of any dividends will depend upon our future earnings, if any, AITX’s financial condition, and other factors deemed relevant by its Board of Directors.

On May 12, 2022, the closing price

per share of the Company’s common stock as quoted on the OTC was $0.0126.

To date, we have not paid dividends

on shares of the Company’s common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable

The payment of any dividends will depend upon our future earnings, if any, AITX’s financial condition, and other factors

deemed relevant by its Board of Directors.

Holders of Common Stock

As of May 12, 2021, there were 12 holders of AITX’s common stock of which 12 were active.

The number of foregoing holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

The Company is authorized to issue 5,000,000,000 shares of common stock, with a par value of $0.00001.

The closing price of its common stock on May 11, 2021, as quoted by OTC Markets Group, Inc., was $0.0752.

As of May 12, 2022, there were

13 holders of AITX’s common stock of which 13 were active.

The number of foregoing holders does not include beneficial owners of

common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

The Company is authorized to issue

5,000,000,000 shares of common stock, with a par value of $0.00001.

The closing price of its common stock on May 12, 2022, as quoted by

OTC Markets Group, Inc., was $0.0126.

There were 4,833,110,360 shares of common stock issued and outstanding as of May 12, 2022.

All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting.

The common stock is not redeemable and has no conversion or preemptive rights.

The common stock currently outstanding is validly issued, fully paid and non-assessable.

In the event of liquidation of the Company, the holders of common stock will share equally in any balance of its assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any.

The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.

Our Articles of Incorporation, Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders of our securities.

During the years ended February 28, 2021 and February 29, 2020, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.

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

of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting.

stock is not redeemable and has no conversion or preemptive rights.

The common stock currently outstanding is validly issued, fully paid

and non-assessable.

In the event of liquidation of the Company, the holders of common stock will share equally in any balance of its assets

available for distribution to them after satisfaction of creditors and preferred shareholders, if any.

The holders of the Company’s

common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board

of Directors from funds legally available.

Our Articles of Incorporation,

Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders

of our securities.

During the years ended February

28, 2022 and February 28, 2021, there was no modification of any instruments defining the rights of holders of the Company’s common

stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any

other class of securities or the modification thereof.

On August 24, 2018, the Company

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

Non-cumulative voting

Holders of shares of the Company’s common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.

Securities Authorized for Issuance under Equity Compensation Plans

On April 14, 2021 the Company adopted an Incentive Stock Plan where full details are disclosed in Exhibit 10.1 of the Company’s 8K filing of April 20,2021.

Under the plan the Company may grant options to service providers and employees to acquire up to 5,000,000 shares of the Company’s common stock.

The options will be under the varying terms and conditions of an agreement but the exercise price cannot be lower than 100% to 110% of the fair value of the stock at date of grant and the term of the grant can be no longer than 5 years.

As of the date of this filing , no grants have been issued under this plan.

The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance.

Holders of shares of the Company’s

common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for

the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining

shares will not be able to elect any of our directors.

Securities Authorized for Issuance under Equity

Compensation Plans

On April 14, 2021 the Company

adopted an Incentive Stock Plan where full details are disclosed in Exhibit 10.1 of the Company’s 8K filing of April 20,2021.

the plan the Company may grant options to service providers and employees to acquire up to 5,000,000 shares of the Company’s common

The options will be under the varying terms and conditions of an agreement but the exercise price cannot be lower than 100% to

110% of the fair value of the stock at date of grant and the term of the grant can be no longer than 5 years.

As of the date of this filing

, no grants have been issued under this plan.

The following table shows the

number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise

price of the outstanding options and warrants, and the remaining shares available for future issuance.

Plan Category

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Preferred Stock

The Company is authorized to issue up to 20,000,000 shares of $0.001 par value preferred stock.

The board of directors is authorized to designate any series of preferred stock up to the total authorized number of shares.

The Company is authorized to issue

up to 20,000,000 shares of $0.001 par value preferred stock.

The board of directors is authorized to designate any series of preferred

stock up to the total authorized number of shares.

Series E Preferred Stock

The Board of Directors has designated 4,350,000 shares of Series E Preferred Stock.

The Board of Directors has designated

4,350,000 shares of Series E Preferred Stock.

As of the date of this report, there are 3,350,000 shares of Series E Preferred Stock outstanding.

The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation.

The Series E preferred stock is non-redeemable, does not have rights upon liquidation of the Company and does not receive dividends.

The outstanding shares of Series E Preferred Stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of equity instruments with voting rights.

As a result, the holders of Series E Preferred Stock have 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.

The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution

or winding up of the Corporation.

The Series E preferred stock is non-redeemable, does not have rights upon liquidation of the Company

and does not receive dividends.

The outstanding shares of Series E Preferred Stock have the right to take action by written consent or

vote based on the number of votes equal to twice the number of votes of all outstanding shares of equity instruments with voting rights.

As a result, the holders of Series E Preferred Stock have 2/3rds of the voting power of all shareholders at any time corporate action

requires a vote of shareholders.

Series F Convertible Preferred Stock

The Board of Directors has designated 4,350 shares of Series F Convertible Preferred Stock with a par value of $1.00 per share.

As of the date of this report, there are 2,716 shares of Series F Convertible Preferred Stock outstanding.

The Series F Convertible Preferred Stock is non-redeemable, does not have rights upon liquidation of the Company, does not have voting rights and does not receive dividends.

Each holder may, at any time and from time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis.

So long as any shares of Series F Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders:

(a) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible preferred stock;

The Board of Directors has designated

4,350 shares of Series F Convertible Preferred Stock with a par value of $1.00 per share.

As of the date of this report, there are 2,532

shares of Series F Convertible Preferred Stock outstanding.

The Series F Convertible Preferred Stock is non-redeemable, does not have

rights upon liquidation of the Company, does not have voting rights and does not receive dividends.

Each holder may, at any time and from

time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number of fully paid and

nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company

on the date of conversion by three and 45 100ths (3.45) on a pro rata basis.

So long as any shares of Series F Convertible Preferred Stock

are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders:

(a) alter or change the rights,

preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible preferred stock;

(b) create any Senior Securities;

(d) do any act or thing not authorized or contemplated by the Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time to time amended, (or otherwise suffer to exist any such taxation as a result thereof).

(d) do any act or thing not authorized or contemplated by the

Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section

305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time

to time amended, (or otherwise suffer to exist any such taxation as a result thereof).

Series G Preferred Stock

The board of directors has designated 1,000 shares of Series G Preferred Stock.

The board of directors has designated

100,000 shares of Series G Preferred Stock.

As of the date of this report, there are no shares of Series G Preferred Stock outstanding.

1 unchanged sentence

Transfer Agent and Registrar

The Transfer Agent for our capital stock is Transhare with an address at 15500 Roosevelt Boulevard, Suite 302, Clearwater, Florida 33760.

Their telephone number is Office phone:

The Transfer Agent for our capital

stock is Transhare with an address at 15500 Roosevelt Boulevard, Suite 302, Clearwater, Florida 33760.

Their telephone number is Office

303-662-1112.

Recent Sales of Unregistered Securities

The following is a summary of transactions by AITX involving sales of its securities that were not registered under the Securities Act.

The following is a summary of

transactions by AITX involving sales of its securities that were not registered under the Securities Act.

Transaction (*)

15 unchanged sentences

June 12, 2017

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

June 14, 2017

24 unchanged sentences

Number of shares outstanding February 28, 2018

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

April 16, 2018

13 unchanged sentences

August 27, 2018

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

August 29, 2018

24 unchanged sentences

October 9, 2018

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

October 10, 2018

30 unchanged sentences

December 27, 2018

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

December 28, 2018

20 unchanged sentences

January 29, 2019

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

January 30, 2019

17 unchanged sentences

August 12, 2019

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

August 12, 2019

16 unchanged sentences

September 3, 2019

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

September 4, 2019

26 unchanged sentences

Number of shares outstanding February 29, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

March 29, 2020

38 unchanged sentences

June 17, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

June 17, 2020

17 unchanged sentences

June 25, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

June 25, 2020

21 unchanged sentences

July 22, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

July 23, 2020

12 unchanged sentences

July 30, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

July 30, 2020

38 unchanged sentences

October 5, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

October 5, 2020

7 unchanged sentences

October 26, 2020

Transaction (*)

Principal Converted

Interest Converted

Fees Converted

Total Amount Converted

Shares Issued**

October 29, 2020

22 unchanged sentences

3,229,426,884

* Conversions occur at discounts ranging from 40-50% of average market price

Consideration

Shares Issued

March 3, 2021

Conversion of Series F Preferred Shares

40 Series F shares converted

March 23, 2021

Conversion of Series F Preferred Shares

18 Series F shares converted

April 8, 2021

Conversion of Series F Preferred Shares

20 Series F shares converted

Exercise of warrants

Cashless exercise of 188,000,000 warrants

June 15, 2021

Exercise of warrants

Cashless exercise of 11,000,000 warrants

June 15, 2021

Debt exchange

$2,545,900 in debt exchanged for common shares

June 15, 2021

Debt Exchange

$5,000,875 in debt exchanged for common shares

July 21, 2021

Exercise of warrants

Cashless exercise of 112,000,000 warrants

July 26, 2021

Common stock issued at previous day bid price per note conversion agreement

Convert a note payable including $275,000 of principal, $16,955 of interest, and $1,750 of fees

August 5, 2021

Common stock issued at previous day bid price per note conversion agreement

Convert a note payable including $550,000 of principal, and $55,000 of interest

September 16, 2021

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period

$0.03 per share for gross proceeds of $601,499 and net proceeds (after issuance costs) of $563,849

September 24, 2021

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period

$0.03 per share for gross proceeds of $770,141 and net proceeds (after issuance costs) of $691,336

October 7, 2021

Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period

$0.02 per share for gross proceeds of $1,182,004 and net proceeds (after issuance costs) of $1,170,788

October 14, 2021

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period

$0.02 per share for gross proceeds of $1,155,997 and net proceeds (after issuance costs) of $1,090,557

October 19, 2021

Exercise of warrants

Cashless exercise of 52,985,075 warrants

October 25, 2021

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period

$0.03 per share for gross proceeds of $2,708,457 and net proceeds (after issuance costs) of $2,600,119

October 27, 2021

Exercise of warrants

Cashless exercise of 47,014,925 warrants

November 11, 2021

Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period

$0.03 per share for gross proceeds of $1,358,600 and net proceeds (after issuance costs) of $1,345,014

November 24, 2021

Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period

$0.03 per share for gross proceeds of $1,016,515 and net proceeds (after issuance costs) of $1,006,349

January 3, 2022

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period

$0.01 per share for gross proceeds of $1,275,000 and net proceeds (after issuance costs) of $1,183,725

January 19, 2022

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period

$0.02 per share for gross proceeds of $1,697,110 and net proceeds (after issuance costs) of $1,577,312

February 8, 2022

Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period

$0.01 per share for gross proceeds of $1,412,700 and net proceeds (after issuance costs) of $1,312,811

Number of shares outstanding February 28, 2022

4,733,110,360

* Conversions occur at discounts ranging from 40-50% of average market

** Shares adjusted for reverse stock splits:

1 on August 24, 2018 and 10,000:1 on March 27, 2020

1 on August 24, 2018

and 10,000:1 on March 27, 2020

*** Total proceeds $600

**** Total proceeds $8,922

In connection with the foregoing, the Registrant relied upon the exemption from registration under the Securities Act of 1933, as amended and the rules and regulations of the Securities and Exchange Commission thereunder, in reliance upon Section 4(a)(2) thereof and Regulation D thereunder.

***** At February 28, 2022 there were 2,100,000 issuable shares

In connection with the foregoing,

the Registrant relied upon the exemption from registration under the Securities Act of 1933, as amended and the rules and regulations

of the Securities and Exchange Commission thereunder, in reliance upon Section 4(a)(2) thereof and Regulation D thereunder.

Penny Stock Regulations

The Securities and Exchange Commission has adopted regulations which generally define “penny stock”

to be an equity security that has a market price of less than $5.00 per share.

Our Common Stock falls within the definition of penny stock and therefore is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction.

Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market.

The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.

In addition, the broker-dealer must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.

Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

The Securities and Exchange Commission

has adopted regulations which generally define “penny stock”

to be an equity security that has a market price of less than

$5.00 per share.

Our Common Stock falls within the definition of penny stock and therefore is subject to rules that impose additional

sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors

(generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of

such securities and have received the purchaser’s prior written consent to the transaction.

Additionally, for any transaction, other

than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document

mandated by the Securities and Exchange Commission relating to the penny stock market.

The broker-dealer must also make a special written

determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the

In addition, the broker-dealer must disclose the commissions payable to both the broker-dealer and the registered representative,

current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and

the broker-dealer’s presumed control over the market.

Finally, monthly statements must be sent disclosing recent price information

for the penny stock held in the account and information on the limited market in penny stocks.

Consequently, the “penny stock”

rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

In addition to the “penny stock”

rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.

Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.

Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.

The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’

ability to buy and sell our stock.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers

We have not repurchased any shares of our common stock during the fiscal year ended February 28, 2021.

rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common

Stock in the secondary market.

In addition to the “penny

rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”)

has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing

that the investment is suitable for that customer.

Prior to recommending speculative low-priced securities to their non-institutional

customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,

investment objectives and other information.

Under interpretations of these rules, FINRA believes that there is a high probability that

speculative low-priced securities will not be suitable for at least some customers.

The FINRA requirements make it more difficult for

broker-dealers to recommend that their customers buy our common stock, which may limit the investors’

ability to buy and sell our

Purchases of Equity Securities by the Registrant

and Affiliated Purchasers

We have not repurchased any shares

of our common stock during the fiscal years ended February 28, 2022 or 2021.

SELECTED FINANCIAL DATA

Not applicable.

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

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial 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 the Risk Factors, Forward-Looking Statements and Business sections in this report.

We use words such as “anticipate,”

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our

financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to

those financial 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 the Risk Factors, Forward-Looking Statements and Business sections in this report.

We use words such as

“anticipate,”

“estimate,”

11 unchanged sentences

and similar expressions to identify forward-looking statements.

AITX was incorporated in Florida on March 25, 2010.

AITX was incorporated in Florida

on March 25, 2010.

AITX reincorporated into Nevada on February 17, 2015.

fiscal year end is February 28 (February 29 during leap year).

fiscal year end is February 28 (February 29 during

AITX is located at 10800 Galaxie Ave ,Ferndale Michigan , 48220, and our telephone number is 877-767-6268.

Results of Operations

The following table shows our results of operations for the years ended February 28, 2021 and February 29, 2020.

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

The following table shows our

results of operations for the years ended February 28, 2022 and February 28, 2021.

The historical results presented below are not necessarily

indicative of the results that may be expected for any future period.

February 28, 2022

3 unchanged sentences

Other income (expense), net

Total revenue for the year ended February 28, 2021 was $360,888, which represented an increase of $100,120 compared to total revenue of $260,768 for the year ended February 29, 2020.

Although limited by resources the Company continues its efforts to grow its business.

The Company deployed an additional 33 revenue earning devices during the year ended February 28, 2021.

Total gross profit for the year ended February 29, 2021 was $262,721, which represented an increase of $85,713 compared to total gross profit of $177,008 for the year ended February 29, 2020.

The increase is a result of the increase in revenues above.

The following table presents revenues

from contracts with customers disaggregated by product/service:

February 28, 2022

February 28, 2021

Device rental activities

Direct sales of goods and services

Total revenue for the year ended

February 28, 2022 was $1.447,109, which represented an increase of $1,086,221 compared to total revenue of $360,888 for the year ended

February 28, 2021.

This large increase in direct sales totaling $798,114 is a result of unit sales which includes sales of new units totaling

$688,180 with the remaining increase a result in higher training revenue.

Rental activities increased by 95% as the Company continues

to grow its product line and customer base.

Total gross profit for the year

ended February 28, 2022 was $974,183, which represented an increase of $711,462 compared to total gross profit of $262,721 for the year

ended February 28, 2021.

The increase is a result of the increase in revenues above , partially offset by the increase in the relatively

lower margin direct sales.

Operating expenses

Operating expenses for the years ended February 28, 2021 and February 29, 2020 comprised of the following:

Operating expenses for the years

ended February 28, 2022 and February 28, 2021 comprised of the following:

February 28, 2022

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Depreciation and amortization

Operating lease cost

Loss (gain) on disposal of fixed assets

Operating lease cost and rent

(Gain) loss on disposal of fixed assets

Operating expenses

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

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

Our operating expenses during the years ended February 28, 2021 and February 29, 2020 were $3,257,590 and $1,959,814, respectively.

The overall $1,297,776 increase in operating expenses was primarily attributable to the following increases in operating expenses of:

Research and development expenses increased by $45,716 which was due primarily by the increase in R&D Design costs for the ROAMEO prototypes as well as upgrades in the Wally and Rosa product lines.

Our operating expenses were comprised

of general and administrative expenses, research and development, depreciation and amortization, and a (gain) loss on disposal of

fixed assets.

General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries

and wages, travel expenses and rent.

Our operating expenses during the years ended February 28, 2022 and February 28, 2021 were $14,346,069

and $3,257,590, respectively.

The overall $11,088,479 increase in operating expenses was primarily attributable to the following increases

in operating expenses of:

Research and development expenses increased by $2,583,158 which was due funding development of new products,(such as the ROAMEO, AVA , and TOM ) as well as upgrades of existing products.

General and administrative expenses increased by $8,156,635 primarily due to the following increases:

Professional fees increased by $98,626 due to higher reporting costs in 2021.

Stock based payments for fees paid to lenders and consultants was $362,084 for the year ended February 28, 2021, and nil for the prior year.

Wages, salaries and payroll levies increased by $146,170 as a result of settlements with back pay owed on some employees.

Subcontractors increased by $404,300 as well due to the increase in revenues and expansion into new products.

Stock based compensation to CEO in equity awards was $2,048,850 fees with $109,200 paid to consultants all totaling $2,158,050 for the year ended February 28, 2022, compared with stock based compensation paid to lenders and consultants $362,084 for the prior year.

This represents an increase of $1,795,966 in stock based compensation.

Professional fees increased by $757,466 due to increases in financial reporting of $171,384, increase in legal of $200,993 with the remaining increase due increases in regulatory, investor relations and consulting costs.

Wages, salaries and payroll levies increased by $2,578,216 as a result of the hiring of more staff to operate the new manufacturing facility.

This is partially offset by a decrease in subcontractors of $200,381 due to employees now performing many of those tasks.

Additionally, base compensation (including payroll levies) to the CEO increased by $33,620 with an addition bonus paid of $1,429,328.

Advertising and marketing costs increased by $131,157 as the Company began efforts to promote its products.

Supplies increased by approximately $104,953 through their use in new prototypes and designs.

Rent and operating lease cost increased by approximately $9,000 due to the new operating lease.

Trade shows and travel decreased by $98,227 as a result of travel restrictions due to the Covid-19 pandemic.

In general, the Company experienced an increase in operating expenses as a result of the factors above as well as other small increase in advertising , and other general and administrative expenses.The Company expects significant increases in future periods as it ramps up its spending levels for advertising and promotion,

Trade shows and travel increased by $325,937 as a result of promotional and business travel in fiscal 2022.

In fiscal 2021 there were travel restrictions due to the Covid-19 pandemic, so the charges that year were minimal.

The remaining increases were distributed amongst other general and administrative accounts such a software costs, freight, office expenses, insurance , repairs and maintenance, and utilities amongst others.

In general, these large increases in general and administrative expenses may be explained due to the large ramp up in costs this fiscal year to operate the new manufacturing facility and the hiring of 18 additional full-time employees.

In addition, the expenses of the prior year’s corresponding period were also much lower due to the Covid 19 pandemic and the limited cash that was available at that time.

Operating lease cost and rent increased by $266,324 due to the new operating lease for the new manufacturing facility.

Depreciation and amortization increased by $112,040 due to the increase in revenue earning devices and the new vehicle in fixed assets.

Loss (gain) on disposal of fixed assets increased by $12,068 due to disposals in 2020 that generated small gains.

(Gain) loss on disposal of fixed assets increased by $29,678 due to a vehicle disposal in 2022 that yielded a gain.

Other income (expense)

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

Other income (expense) during the years ended February 28, 2021 and February 29, 2020, was ($2,904,042) and ($4,430,843), respectively.

The change in other income (expense) was due to the following:

Change in fair value of derivative liabilities increased by $1,891,144 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 and the decrease in convertible notes payable through debt conversions to common stock and settlements.

Interest expense decreased by $85,265 due to the loan settlements in fiscal 2021offset by increased penalties in the current year

Loss on settlement of debt increased by $449,608 due to losses recorded in 2021 versus gains recorded in 2020.

The Company’s loss from operations for the year ended February 28, 2021 was $2,994,869, which represented an increase in loss of $1,212,063 compared to $1,782,806 for the year ended February 29, 2020.

Other income (expense) consisted

of the change of fair value of derivative instruments interest expense and gain on settlement of debt.

Other income (expense) during the

years ended February 28, 2022 and February 28, 2021, was ($48,825,598) and ($2,904,042), respectively.

The change in other income (expense)

was due to the following:

Change in fair value of derivative liabilities decreased by $391,811 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 and the decrease in convertible notes payable through debt conversions to common stock and settlements.

Interest expense increased by $12,749,666 due to an aggregate increase in short and long term debt of approximately $13 million in fiscal 2022.

For the year ended February 28, 2022, interest expense related to the issuance of warrants for debt extensions was $5,415,000 (2021-$0) and amortization of debt discounts was $7,597,242 (2021-$201,567).

Loss on settlement of debt increased by $32,780,079 due to the fiscal 2022 valuation of Series F shares and warrants given in exchange for an amendment to a deferred variable payment obligation disclosed in Note 7 that resulted in a loss of $33,015,215.

The difference can be attributed to smaller gains and losses on other debt settlements.

The Company’s loss from operations for the year ended February 28,

2022 was $13,371,886, which represented an increase in loss of $10,377,017 compared to a loss of $2,994,869 for the year ended February

The higher revenues in 2022 were offset by significantly higher operating expenses for the reasons set out above.

Note that the Company had a net loss of $5,898,911 for the year ended February 28, 2021 as compared to net loss of $6,213,649 for the year ended February 29, 2020.

This change is mostly attributable to the changes in the derivative liability as well as the reasons set out above..

the Company had a net loss of $62,197,484 for the year ended February 28, 2022 as compared to net loss of $5,898,911 for the year ended

February 28, 2021.

This change is mostly attributable to the loss on settlement of debt, increase in interest expense and an increase

in general and administrative costs.

Going Concern

The accompanying 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 year ended February 28, 2021, the Company had negative cash flow from operating activities of $3,073,325.

As of February 28, 2021 the Company has an accumulated deficit of $31,521,754 and negative working capital of $3,203,677.

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.

The accompanying 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 year ended February 28,

2022, the Company had negative cash flow from operating activities of $14,825,442.

As of February 28, 2022 the Company has an accumulated

deficit of $94,144,254 and working capital of $2,502,718.

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 all 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 raise an additional $ 15 million

to $ 50 million before the end of the fiscal year.

Management has plans to address

the Company’s financial situation as follows:

The company began raising money

through it’s S-3 this year and made improvements in paying off debt, investing in inventory and at February 28, 2022 had $4.6 million

of cash on hard.

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 next fiscal year’s revenues will

be between 5 and 15 times greater than this fiscal year’s revenues.

This projection is based on the following factors:

an anticipated

significant increase in the orders expected to be received after this fiscal year;

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 this 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.

After the end of this fiscal year, the Company increased its sales team from one full-time salesperson to five full-time salespersons.

The Company expects to finish the next fiscal year with between 8-12 full-time salespersons.

In addition, the Company expects that some planned promotional moves will raise the Company’s stature in the market and industry in the next fiscal year.

The Company is also increasing staffing in its subsidiaries and expects to considerably increase its technology over the next fiscal year.

Over 60% of the Company’s current staff are engaged in research and development activities.

The Company expects to increase its research and development activities by opening a second Canadian research and development office in British Columbia, Canada, in the next fiscal year.

The Company expects to announce at least one significant end-user device relationship in the next fiscal year.

Similar to the EAGL relationship (RAD integration of their technology into our ecosystem), RAD will take another vendor’s solution and put it into the RAD ecosystem.

The Company has a number of technology projects in process at this time.

The Company expects to file applications for several different types of patents throughout the next fiscal year.

Moreover, the Company currently expects that RAD-G will introduce at least one solution to the market by the end of next fiscal year.

Management of the Company hopes that some of its solutions, successes and promotional efforts will lead to national press coverage during the next fiscal year, similar to August 2020 when 15 major media markets syndicated KTLA’s RAD-face-mask-analytic story.

The Company currently expects that its new Michigan ‘REX’

(RAD Excellence Center) will provide manufacturing expansion to over 100 various devices per month;

the Company is taking significant steps to increase sales volume to match.

The Company also expects that REX will become the foremost testing center for the Company’s mobility devices, ground and air, in the next fiscal year.

The Company has embarked on its ‘RAD 3.0’

program in 2021.

This program is called ’3.0’

as it will represent the next stage of development.

The Company considers RAD 1.0 to be the early stage with the foreign robot and considers RAD 2.0 to be the current stage.

The RAD 2.0 current stage is characterized by growing adoption of the Company’s stationary line, market adoption of its first mobility solution (ROAMEO), significant increases in all areas of Company performance (engineering, production, sales), and the Company’s reputation within the industry that RAD’s solutions perform as promised.

RAD 3.0 will be characterized by enhanced internal any cyber controls with fully implemented SOC2 Type 2, implementation and adoption of an ERP, design overhaul, and conversion of some operating elements from the Windows OS platform to the Linux platform.

The Company expects that completion of the RAD 3.0 elements, along with the Company’s anticipated financing efforts, will allow the Company to continue its status as a going concern.

The Company plans to improve the trading market for its shares by uplisting the shares to the OTCQB during the next fiscal year.

The Company plans to continue regular communication with shareholders and other interested parties through the CEO’s Twitter account (@SteveReinharz), regular press releases and on-time SEC filings.

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 February 28, 2022 has raised approximately $12.5 million net of issuance costs through the sale of its common shares and $9.4 in proceeds

from debt issuances.

The Company plans to improve the

trading market for its shares by uplisting the shares to the OTCQB during the next fiscal year.

Capital Resources

The following table summarizes total current assets, liabilities and working capital for the period indicated:

The following table summarizes

total current assets, liabilities and working capital for the period indicated:

February 28, 2022

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Working capital

As February 28, 2021 and February 29, 2020, current liabilities included approximately $0.4 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 February 28, 2021 and February 29, 2020, we had a cash balance of $1,044,418 and $13,307, respectively.

As February 28, 2022 and February 28, 2021, current liabilities included approximately $7,587 and $444,666, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms.

As of February 28, 2022 and February

28, 2021, we had a cash balance of $4,648,146 and $1,044,418, respectively.

Summary of Cash Flows

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Net cash provided by financing activities

Net cash used in operating activities for the year ended February 28, 2021

was $3,073,325, which included a net loss of $5,898,911, non-cash activity such as the change in fair value of derivative liabilities

of ($764,025), loss on settlement of debt of $288,234, interest expense related to penalties from debt defaults of $939,705, amortization

of debt discount of $201,567, stock based payments of $362,084, loss on disposal of fixed assets $553, loss on debt settlements of $294,744,bad

debts expense $24,868, depreciation and amortization of $120,846 and change in operating assets and liabilities of $1,357.010.

Net cash used in operating activities

for the year ended February 28, 2021 was $14,825,442, which included a net loss of $62,197,484, non-cash activity such as the change in

fair value of derivative liabilities of ($372,214), gain on settlement of debt of $33,068,313, interest expense related to the issuance

of warrants for debt extensions of $5,415,000, amortization of debt discount of $7,597,242, stock based payments of $2,158,050, gain on

disposal of fixed assets ($29,125),revenue earning device sold and expensed in cost of sales $3,410,reduction in right of use asset $110,148,

accretion of lease liability $122,930, increase in related party accrued payroll and interest $264,331, inventory provision of $65,000,

bad debts expense $9,022, depreciation and amortization of $232,886 and change in operating assets and liabilities of ($1,272,951).

Net cash used in investing activities.

Net cash used in investing activities for the year ended February 28, 2021

This consisted primarily of the purchase of fixed assets of $37,764 and cash paid for security deposit of $ 3,859 offset

by proceeds of disposal of fixed assets of $1,000.

Net cash used in investing activities

for the year ended February 28, 2022 was $129,200.

This consisted primarily of the purchase of fixed assets and trademarks of $115,493

and $26,327, respectively, and cash paid for security deposit of $17,380 offset by proceeds of disposal of fixed assets of $30,000.

Net cash provided by financing activities.

Net cash provided by financing activities was $4,145,059 for the year ended

February 28, 2021.

This consisted of proceeds from convertible notes payable of $692,650, proceeds from loans payable $3,603,623 and proceeds

from deferred variable payment obligation of $966,000 and offset by settlements of convertible notes of $250,000,

net borrowings from loan payable –

Net cash provided by financing

activities was $18,558,370 for the year ended February 28, 2022.

This consisted of share proceeds net of issuance costs of $12,521,932,and

proceeds from loans payable $9,426,146 offset by settlements of convertible notes of $65,000, dividend upon redemption of Series F preferred

shares of $500,000, redemption of Series G preferred shares as payment for incentive plan $1,500,000, net repayments to loan payable –

related party of $808,394 and repayments of loan payable $516,314.

Off-Balance Sheet Arrangements

We do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

We do not have any outstanding

off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts.

Furthermore, we do not have any retained

or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such

We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support

to us or that engages in leasing, hedging or research and development services with us.

Significant Accounting Policies

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.

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.

Revenue Earning Devices

Revenue earning devices are stated at cost.

Revenue earning devices are stated

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.

The Company continually evaluates

revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated

useful life or whether the devices should be evaluated for possible impairment.

The Company uses a combination of the undiscounted cash

flows and market approaches in assessing whether an asset has been impaired.

The Company measures impairment losses based upon the amount

by which the carrying amount of the asset exceeds the fair value.

Fixed assets 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.

Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.

Minor replacements and maintenance and repairs which do not improve or extend

asset lives are expensed currently.

Computer equipment

Office equipment

Warehouse equipment

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.

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 February 28, 2021 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 February 28, 2022

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

Sales of Future Revenues

The Company has entered into transactions, as more fully described in footnote 11, 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 11, 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

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 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 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.

event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method.

As of the date

of these financial statements, the Company has determined that all such agreements are debt.

Revenue Recognition

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”

, supersedes the revenue recognition requirements and industry specific guidance under Revenue Recognition (Topic 605) .

Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted in the United States of America (“U.S.

GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The Company adopted Topic 606 on March 1, 2018, using the modified retrospective method.

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

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

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.

While the Company does not expect fiscal year 2020 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning March 1, 2018.

While the Company

does not expect fiscal year 2020 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain

changes to the presentation of revenues and related expenses beginning March 1, 2018.

Refer to Note 3 –

Revenue from Contracts with Customers for additional information.

Revenue from Contracts with

Customers for additional information.

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 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).

The Company will determine the liability

classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies

a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that

a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented

between the liability section and the equity section of the balance sheet (“temporary equity”).

The Company will determine

temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e.

at the option

of the holder).

Otherwise, the Company accounts for the financial instrument as permanent equity.

Our CEO and Chairman holds sufficient

shares of the Company’s voting 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).

Financial Instruments

Classified as Liabilities

The Company records the fair value

of its financial instruments classified as liabilities at each subsequent measurement date.

The changes in fair value of its financial

instruments classified as liabilities are recorded as other income (expenses).

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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

ASC Topic 820, Fair Value

Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally

accepted accounting principles.

ASC Topic 820 defines fair value

as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date.

ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions

developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market

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

The fair value hierarchy consists

of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities

(Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under ASC Topic 820 are

described as follows:

Level 1 –

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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

February 28, 2022

Incentive compensation plan payable- revaluation of equity awards payable in Series G shares

Derivative liability –

1 unchanged sentence

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

See Note 12 for specific inputs 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.

See Note 12 for specific inputs 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.

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

See discussion of the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”

In May 2017, the FASB issued ASU 2017-09, Modification Accounting for Share-Based Payment Arrangements .

The standard amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718.

The new standard is effective for fiscal years beginning after December 15, 2017.

There was no impact on the financial statements of adopting this new standard on March 1, 2018.

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 but does not expect any material impact on the financial statements because the leases commencing March 1, 2019 are month to month.

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

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.

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 standard did not materially impact our consolidated

net loss, accumulated deficit, and had no impact on cash flows.

The Company has adopted this on March 1, 2020.

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-K

Item 5. Market for Registrant’s Common Equity