What changed in this filing

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Item 1. Financial Statements

2022-07-12 compared with 2022-01-19 · 428 added, 870 removed, 739 unchanged (64% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

February 28, 2022 *

Current assets:

Accounts receivable, net of allowance

Share proceeds receivable

Prepaid expenses

Device parts inventory

Accounts receivable, net

Device parts inventory, net

Prepaid expenses and deposits

Total current assets

Operating lease asset

Revenue earning devices, net of accumulated depreciation

of $ 365,119 and $ 226,459 , respectively

Fixed assets, net of accumulated depreciation of $ 38,981

and $ 67,113 , respectively

Revenue earning devices, net of accumulated depreciation of $ 506,075 and $ 434,661 , respectively

Fixed assets, net of accumulated depreciation of $ 71,646 and $ 49,065 , respectively

Security deposit

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Advances payable

Balance owed WeSecure

Customer deposits

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Current portion of deferred variable payment obligation

Current portion of convertible notes payable, net of

discount of $ 0 and $ 697,276 respectively

Incentive compensation plan payable

Current portion of convertible notes payable, net of discount of $ 0 and $ 0 , respectively

Loan payable - related party

Current portion of loans payable, net of discount of

$ 7,504,339 and $ 0 , respectively

Incentive compensation plan payable

Current portion of loans payable, net of discount of $ 0 and $ 14,745 , respectively

Vehicle loan - current portion

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Non-current operating lease liability

Loans payable, net of discount of $ 2,312,492 and $ 2,510,994

Loans payable, net of discount of $ 4,504,793 and $ 4,905,076 , respectively

Deferred variable payment obligation

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15,545,650 shares authorized;

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

no shares issued and outstanding at May 31, 2022 and February 28, 2022, respectively

Series E Preferred Stock, $ 0.001 par value;

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Series G Preferred Stock, $ 0.001 par value;

100,000 shares

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

4,350,000 shares authorized, no shares issued and outstanding at May 31, 2022 and February 28, 2022, respectively

Common Stock, $ 0.00001 par value;

5,000,000,000 shares

authorized 4,435,210,360 and 3,229,426,884 shares issued and outstanding, respectively

5,000,000,000 shares authorized 4,869,091,936 and 4,735,210,360 shares issued and outstanding, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

( 98,815,940 )

Total stockholders’ deficit

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Cost of Goods Sold

Operating expenses:

Research and development

Research and development (including related party charges of $ 1,001,734 (2021-$ 478,951 ))

General and administrative

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Operating lease cost and rent

(Gain) loss on disposal of fixed assets

Total operating expenses

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Interest expense

Gain (loss) on settlement of debt

(Loss) on settlement of debt

Total other income (expense), net

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Net income (loss) per share - diluted

Weighted average common share outstanding - basic and diluted

Weighted average common share outstanding - basic

4,798,657,871

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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S

Shareholders'

Balance at February 28, 2020

Adjustment to derivative liability

Common stock issued for debt conversion

Rounding shares

Balance at May 31, 2020

Contributed capital

Adjustment to derivative liability

Common stock issued for debt conversion

Cancellation of Series F Preferred Shares

Balance at August 31, 2020

Contributed capital

Adjustment to derivative liability

Common stock issued for debt conversion

1,359,543,219

Warrants issued with promissory notes

Balance at November 30, 2020

1,889,573,434

Shareholders'

Preferred Stock

Stockholders’

Balance at February 28, 2021

3,229,426,884

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

Issuance of shares, net of $117,157 issuance costs

Issuance of shares, net of $117,157 issuance costs (in shares)

Series F preferred shares and warrants issued with deferred variable payment obligation amendment agreement

Series F preferred shares cancelled in exchange for promissory notes

Series F preferred shares issued on exercise of warrants

Series F preferred shares converted to common shares

Relative fair value of warrants issued with debt

Warrants issued as part of a debt issuance

Stock based compensation

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3,545,772,882

Adjustment to derivative liability

Common stock issued for debt conversion

Exercise of warrants

Relative fair value of warrants issued with debt

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

Balance at August 31, 2021

Balance at February 28, 2022

4,735,210,360

Issuance of shares, net of $ 117,157 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

Balance at May 31, 2022

4,869,091,936

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Depreciation and amortization

(Gain) loss on disposal of fixed assets

Bad debts expense

Revenue earning device sold and expensed in cost of sales

Bad debts expense

Inventory provision

Reduction of right of use asset

1 unchanged sentence

Stock based compensation

Interest expense related to penalties from debt defaults

Change in fair value of derivative liabilities

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(Gain) loss on settlement of debt

Increase (decrease) in related party accrued payroll and

Increase in related party accrued payroll and interest

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses

Deposit on right of use asset

Prepaid expenses and deposits on inventory

Device parts inventory

Accounts payable and accrued expenses

Accrued expense, related party

Customer deposits

Accrued expense, related party

Operating lease liability payments

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Purchase of fixed assets

Acquisition of trademarks

Cash paid for security deposit

Proceeds on disposal of fixed assets

Net cash used in investing activities

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Share proceeds net of issuance costs

Settlement of convertible debt

Proceeds from deferred variable payment obligation

Proceeds from loans payable

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 party

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Noncash investing and financing activities:

Right of use asset for lease liability

Right of use asset for operating 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 revaluation of loan amendment

Settlement of convertible notes payable to accounts payable and accrued expenses

Exchange of notes payable for Series F preferred shares

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Warrants issued as part of debt issuance

Exercise of warrants

Series F preferred shares issued for debt

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 nine months ended November 30, 2021, the Company

For the three months ended May 31, 2022, the Company

had negative cash flow from operating activities of $ 3,621,572 .

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

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.

As of May 31, 2022, the Company has an accumulated deficit of $ 98,815,940 ,

and working capital of $ 617,962 .

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

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financial situation as follows:

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.

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 began raising money through it’s

S-3 this year and made improvements in paying off debt, investing in inventory and at May 31, 2022 had $921,629 of cash on hand.

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

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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.

The Company this fiscal period through to

June 30, 2022 has raised an additional $2.5 million net of issuance costs through the sale of its common shares and paid approximately

$1.6 million in current debt.

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 the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements

and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on June 1, 2021.

and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on May 27, 2022.

The unaudited

condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Robotic Assistance

Devices, Inc., Robotic Assistance Devices Group, Inc., and Robotic Assistance Devices Mobile, Inc.

All significant intercompany accounts

and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements reflect all adjustments, consisting

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

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

Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile, Inc., On the Move Experience, LLC and On the

OMV Transports, LLC.

All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited consolidated

financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary

for a fair presentation of such statements.

The results of operations for the three months ended May 31, 2022 are not necessarily indicative

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

Use of Estimates

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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 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

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 $138,890

and $33,890 provided as of May 31, 2022 and February 28, 2022, respectively.

Device Parts Inventory

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

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

no valuation reserve.

As of both May 31, 2022 and February 28, 2021 there was a

valuation reserve of $90,000 and $65,000, respectively.

Revenue Earning Devices

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

Computer equipment

Computer equipment and software

Office equipment

Manufacturing equipment

Warehouse equipment

Leasehold improvements

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

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

Company had no deferred development costs.

At May 31, 2022 and February 28, 2022, the Company

had no deferred development costs.

Contingencies

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heavily on estimates and assumptions.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sales of Future Revenues

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Is the investors rate of return is implicitly limited by the terms of the agreement

Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate

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

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the Company has determined that all such agreements are debt.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

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

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

the modified retrospective method.

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

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

Refer to Note 4 – Revenue from Contracts with

Customers for additional information.

For the three months ended May 31, 2022 , two customers accounted for 29% of total revenue (2021-

Income taxes are accounted for under the asset and

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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

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax

Act”) was signed into law.

ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws

and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation

The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from

A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act

will result in reductions to the Company’s net operating loss carryforward and valuation allowance.

The Company will continue to

analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s

fiscal year ending February 28, 2023, but the Company does not expect the Tax Act to have a material impact on the Company’s 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 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.

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

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Fair Value Measurement Using

November 30, 2021

Incentive compensation plan payable- revaluation of equity awards payable

in Series G shares

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

Derivative liability – conversion features pursuant to convertible notes payable

February 28, 2022

Incentive compensation plan payable- revaluation of equity awards payable

in Series G shares

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 the multinomial

lattice model used in determining fair value.

The carrying amounts of the Company’s financial

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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

Adopted Accounting Standards

December 2019, the Financial Accounting Standards Board (FASB) issued amended guidance on the accounting and reporting of income taxes.

The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations

and deferred tax liabilities;

clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination;

and reflecting enacted changes in tax laws or rates in the annual effective tax rate.

The Company adopted the new guidance effective February

There was no impact to the Company’s consolidated financial statements upon adoption.

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

In September 2016, the FASB issued ASU 2016-13, Financial

Instruments-Credit Losses .

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

financial instruments and changes the loss impairment methodology.

ASU 2016-13 is effective for reporting periods beginning after December

15, 2019 using a modified retrospective adoption method.

A prospective transition approach is required for debt securities for which an

other-than-temporary impairment had been recognized before the effective date.

The Company is currently assessing the impact this accounting

standard will have on its financial statements and related disclosures.

The Company adopted this on March 1, 2020.

In January 2020,

the FASB issued new guidance intended to clarify certain interactions between accounting standards related to equity securities, equity

method investments and certain derivatives.

The guidance addresses accounting for the transition into and out of the equity method of

accounting and measuring certain purchased options and forward contracts to acquire investments.

The Company adopted the new guidance

effective February 1, 2021.

There was no impact to the Company’s consolidated financial statements upon adoption.

In August 2020,

the FASB issued amended guidance on the accounting for convertible instruments and contracts in an entity’s own equity.

removes the separation model for convertible debt instruments and preferred stock, amends requirements for conversion options to be classified

in equity as well as amends diluted earnings per share (EPS) calculations for certain convertible debt instruments.

The amended guidance

is effective for interim and annual periods in 2022.

The application of the amendments in the new guidance are to be applied either on

a modified retrospective or a retrospective basis.

We are currently assessing the effect that the adoption of this standard will have

on the Company’s consolidated financial statements upon adoption.

Issued Accounting Standards Not Yet Adopted

In March 2020,

the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform

on financial reporting and subsequently issued clarifying amendments.

The guidance provides optional expedients and exceptions for accounting

for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference

rate expected to be discontinued because of reference rate reform.

The optional guidance is effective upon issuance and can be applied

on a prospective basis at any time between January 1, 2020 through December 31, 2022.

The Company is currently evaluating the impact

of adoption on its consolidated financial statements.

In October 2021,

the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business

combination in accordance with existing revenue recognition guidance.

The amended guidance is effective for interim and annual periods

in 2023 and is to be applied prospectively.

Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of

The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements for prior

acquisitions;

however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future

business combinations.

In November 2021, the FASB

issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution

accounting model by analogy.

The guidance requires annual disclosures of such transactions to include the nature of the transactions and

the significant terms and conditions, the accounting treatment and the impact to the company’s financial statements.

is effective for annual periods beginning in 2022 and is to be applied on either a prospective or retrospective basis.

The Company is

currently evaluating the impact of adoption on its consolidated financial statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents revenues from contracts

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Three Months Ended

November 30, 2021

Nine Months Ended

November 30, 2021

Device rental activities

Direct sales of goods and services

Three Months Ended

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:

November 30, 2021

February 28, 2021

Revenue earning devices

Accumulated depreciation

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 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:

November 30, 2021

February 28, 2021

Computer equipment

Office equipment

Leasehold improvements

Accumulated depreciation

During the three months and nine months ended November

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

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 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.

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non-lease components.

Most leases include one or more options to renew,

with renewal terms that can extend the lease term by 10 years or more.

The exercise of lease renewal options is at our sole discretion.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title

or purchase option reasonably certain of exercise.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2021 and February 28, 2021.

There is no lease renewal.

The depreciable life of

assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably

certain of exercise.

Below is a summary of our lease assets and liabilities

at May 31, 2022 and February 28, 2022.

Classification

November 30, 2021

February 28, 2022

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As most of our leases do not provide an implicit

rate, we use our incremental borrowing rate of 10% based on the information available at commencement date in determining the present

value of lease payments.

The weighted average remaining lease term is 8.9 years.

rate, we use our incremental borrowing rate of 10% which for the leases noted above was based on the information available at commencement

date in determining the present value of lease payments.

We compare against loans we obtain to acquire physical assets and not loans we

obtain for financing.

The loans we obtain for financing are generally at significantly higher rates and we believe that physical space

or vehicle rental agreements are in line with physical asset financing agreements.

CAM charges were not included in operating lease expense

and were expensed in general and administrative expenses as incurred.

The Company’s leases are accounted for as operating

Rent expense and operating lease cost are recorded over the lease terms on a straight-line basis.

Rent expense and operating lease

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.

Operating lease cost and rent was $ 69,967 and $ 28,874

for the three months ended May 31, 2022 and May 31, 2021, respectively.

REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

February 28, 2022

Revenue earning devices

Accumulated depreciation

During the three months ended May 31, 2022 the Company

made total additions to revenue earning devices of $ 174,101 which were transfers from inventory.

During the three months ended May 31,

2021, the Company made total additions to revenue earning devices of $ 70,162 which were transfers from inventory.

During the three months

ended May 31, 2021 the Company sold a revenue earning device having a net book value of $ 3,411 for revenues of $ 30,600 and included the

$ 3,411 in cost of goods sold.

Depreciation expense was $ 71,414 and $ 33,005 for the

three months ended May 31, 2022, and 2021 respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fixed assets consisted of the following:

February 28, 2022

Manufacturing equipment

Computer equipment and software

Office equipment

Warehouse equipment

Leasehold improvements

Accumulated depreciation

During the three months ended May 31, 2022 the Company

made additions of $ 93,730 of which $ 5,516 were transfers from inventory with remaining additions of $88,214.

During the three months ended

May 31, 2021 the Company made additions of $ 15,362 .

Depreciation expense was $ 22,581 and $ 4,638 for the

three months ended May 31, 2022, and 2021 respectively.

DEFERRED VARIABLE PAYMENT OBLIGATION

On February 1, 2019 the Company entered into an agreement

with an investor whereby the investor would pay up to $ 900,000 (including $ 192,500 paid in January and February 2019) in exchange for

a perpetual 9 % rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses

from financial instruments (Revenues).

If the total investor advances turns out to be less than $900,000, this would not constitute a

breach of the agreement, rather the 9% rate would be adjusted on a pro-rata basis.

The investor has agreed to pay the remaining balance

in minimum $ 60,000 monthly installments , concluding November 30, 2019 .

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

with an investor whereby the investor would pay up to $ 900,000 in exchange for a perpetual 9 % rate payment (Payments) on the Company’s

reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues).

At February 29, 2020 the

investor has advanced the full $900,000.

On May 9, 2019 the Company entered into two similar

arrangements with two investors:

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

reported quarterly Revenues.

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

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

The investor has agreed to pay the remaining balance in four

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

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

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

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

reported quarterly Revenues.

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

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

The investor has agreed to pay the remaining balance in four monthly

installments of $ 8,014 starting July 1, 2019 .

The investor would pay up to $ 50,000 in exchange for a perpetual 1.11 % rate Payment on the Company’s reported quarterly Revenues.

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

13 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On November 18, 2019 the Company entered into another

3 unchanged sentences

has advanced $ 109,000 and the investor advanced the $ 116,000 remainder as of May 2020.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 30, 2019 the Company entered into another

3 unchanged sentences

$50,000 with the remainder to be advanced no later than June 30, 2020.

If the total investor advances turns out to be less than $100,000,

this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.

If the total investor advances turns out to

be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.

On April 22, 2020 the Company entered into another

10 unchanged sentences

later than February 28, 2021.

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

On August 27, 2020 the Company and the first investor

referred to above consolidated the three separate agreements of February 1, 2019 for $900,000, November 18, 2019 for $225,000 and July

1, 2020 for $800,000 into a new agreement for a total of $ 1,925,000 .

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

for the following:

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

Payments are secured by the assets of the Company.

This interest may be secured by UCC filing but is subordinated to equipment

financing on the products the Company leases to its customers.

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

On August 27, 2020 the Company and the first

investor referred to above consolidated the three separate agreements of February 1, 2019 for $900,000, November 18, 2019 for

$225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $ 1,925,000 .

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

the rate payment is revised to 14.25 %

payable on revenues commencing the quarter ended August 31, 2020.

Upon an event of default that we are unable to cure in the time allotted under the agreements, these Payments may be secured with a priority lien by UCC filing against all of our assets, but is subordinated to equipment financing or leasing agreements on the products the Company leases to its customers.

In summary of all agreements mentioned above if in

7 unchanged sentences

of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.

As of March 1, 2021 as a result of the amendment with the first investor noted below, this aggregate asset disposition % was reduced from

As of March 1, 2021 as a result of the amendment with the first investor noted below.

This aggregate asset disposition % was reduced from

43.77 % to 33.77%

The Payments will first become payable on June 30,

2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and will accrue every quarter thereafter.

As of February 28, 2022, the Company has accrued approximately $325,600 in Payments (February 28, 2021 -$91,587).

On March 1, 2021 the first investor referred to above whose aggregate investment

12 unchanged sentences

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

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

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

28, 2023 filing.

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

As of May 31, 2022, and February 28, 2022, the long-term

balances other than Payments already owed is the cash received of $ 2,525,000 and $ 2,525,000 , respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

For the three months ended May 31, 2022 and year ended

February 28, 2022 , the Company has received $0 related to the deferred payment obligation since there were no new agreements during this

The balance remains $ 2,525,000 at both May 31, 2022 and February 28, 2022.

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 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.

of May 31, 2022, the Company has accrued $ 388,227 in Payments (February 28, 2022 -$ 325,600 ).

At May 31, 2022, and February 28, 2022 the

Company was in default on $ 181,410 and $ 90,300 of those Payments.

No notices have been sent to the Company.

CONVERTIBLE NOTES PAYABLE

3 unchanged sentences

July 18, 2017 *

December 31, 2016

December 31, 2020

January 19, 2021

January 19, 2022

January 27,2021

January 27, 2022

current portion of convertible notes payable

4 unchanged sentences

Current portion of convertible notes payable, net of discount

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

This note was in default as of May 31, 2022.

Default interest rate 22%

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

evaluated under ASC 480 as discussed in Note 3.

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

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

this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall be equal to $0.10 per

share (the “Fixed Conversion Price”);

provided, however, that if, the lowest traded price on the date six (6) months

from the issue date hereof is below the Fixed Conversion Price, and no default exists, the conversion shall be $0.05 (the “Alternative

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

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

or (ii) seventy percent (70%)

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

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

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

During both the three months ended May 31, 2022 and

2021, the Company incurred original issue discounts of $0, and debt discounts from derivative liabilities of $0 related to new convertible

notes payable.

During the three months ended May 31, 2022 and 2021, the Company recognized interest expense related to the amortization

of debt discount of $0 and $81,131, respectively.

The note above is unsecured.

As of May 31, 2022 and

February 28, 2022, the Company had total accrued interest payable of $28,454 and $28,104, respectively, all of which is classified as

During the three months ended May 31, 2022, the Company

had no convertible note activity

During the three months ended May 31, 2021, the Company

also had the following convertible note activity:

The company settled convertible notes of $65,000 and accrued interest $22,525 for a cash payment of $93,984.

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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 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 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

was changed from $0.10 to $0.03 as a result of a dilutive issuance.

This resulted a derivative discount of $438,835 and a loss on extinguishment

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.

gain or loss was recognized on conversions as these conversions occurred within the terms of the agreement that provided for conversion.

the conversion rate of the January 19, 2021 note included above was reduced to $0.027 due to the dilutive

issuance provision in the January 19, 2021 agreement.

RELATED PARTY TRANSACTIONS

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

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

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

For the three months ended May 31, 2022, the Company

had no repayments of net advances from its loan payable-related party.

For the three months ended May 31, 2021 the Company repaid net

advances of $ 121,147 .

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

At May 31, 2022, the loan payable-related party was $ 196,796 and $ 193,556 at February 28, 2022.

Included in the

balance due to the related party at May 31, 2022 is $ 113,940 of deferred salary and interest, $ 108,000 of which bears interest at 12 %.

At February 28, 2022, included in the balance due to the related party is $ 110,700 of deferred salary and interest, $ 90,000 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.

The accrued interest included in loan at May 31, 2022 and May 31, 2021 was $ 5,940 and $ 138,858 , 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.

its Chief Executive Officer, for the three months ended May 31, 2022 the Company accrued $161,500 of incentive compensation plan payable

with a corresponding recognition of stock based compensation due to the expectation of additional awards being met.

This will be payable

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

At May 31, 2022 and February 28,

2022 there was $ 641,000 and $ 479,500 of incentive compensation payable.

During the three months ended May 31, 2022 and 2021,

the Company was charged $ 1,001,734 and $ 478,951 , respectively for fees for research and development from a company partially owned by a

principal shareholder.

OTHER DEBT – VEHICLE LOAN

17 unchanged sentences

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

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

as of May 31, 2022 and February 28, 2022, respectively, of which all were classified as current.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

1 unchanged sentence

LOANS PAYABLE

Loans payable at November 30, 2021 consisted of the

Loans payable at May 31, 2022 consisted of the following:

Schedule of loans payable

3 unchanged sentences

Promissory note

August 10, 2018

September 1, 2018

Promissory note

August 16, 2018

August 16, 2019

Promissory note

August 16, 2018

October 1, 2018

Promissory note

October 11, 2018

October 11, 2019

Promissory note

January 31, 2019

1 unchanged sentence

Promissory note

January 24, 2019

January 24, 2021

June 30, 2019

27 unchanged sentences

Promissory note

April 3, 2020

April 3, 2021

Promissory note

August 13, 2020

August 13, 2021

Promissory note

September 15, 2020

1 unchanged sentence

Promissory note

September 15, 2020

September 15, 2022

Promissory note

October 6, 2020

34 unchanged sentences

Promissory note

December 31, 2021

December 31, 2024

Promissory note

January 14, 2021

7 unchanged sentences

Promissory note

March 23, 2021

March 23, 2022

Promissory note

March 23, 2021

March 23, 2022

Promissory note

July 12, 2021

4 unchanged sentences

Promissory note

Less current portion of loans payable

Less discount on loans payable

( 4,504,793 )

Loans payable

Current portion of loans payable

Less discount on loans payable

Current portion of loans payable, net of discount

(#) Loans with a principal balance of $ 1,661,953 along with associated

accrued interest of $ 342,138 totaling $ 2,004,091 were paid in March 2022, with a remaining accrued liability of $62,979.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note is in default.

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 this fiscal year.

The note may be pre-payable at any time.

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

Repayable in 12 monthly instalments of $ 4,562 commencing August 11, 2018 and secured by revenue earning devices

having a net book value of at least $ 48,000 .

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

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

The note may be pre-payable at any time.

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

The note may be pre-payable at any time.

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

$ 257,000 Canadian loan.

Interest payable every calendar quarter commencing June 30, 2019, if unpaid accrued

interest to be paid at maturity.

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

2020 and 2021 shall be payable March 31, 2020 and March 31, 2021, respectively.

Secured by a general security charging all of RAD’s

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

the lender’s security

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

Additional funding of $ 26,146 during

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.

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

Original $ 78,432 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Repayable in 12 monthly instalments of $ 4,562 commencing August 11, 2018 and secured by revenue earning devices having a net book value of at least $ 48,000 .

The loan and accrued interest were fully paid in March 2022.

Original $ 7,850 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 86,567 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 79,104 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 12,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 11,000 note may be pre-payable at any time.

The note balance includes an original issue discount of $ 2,450 at issuance.

The loan and accrued interest were fully paid in March 2022.

Original $ 5,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 13,000 note may be pre-payable at any time.

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

The loan and accrued interest were paid in March 2022.

The unsecured note may be pre-payable at any time.

Cash proceeds of $ 5,400,000 were received.

The note balance

of $6,000,000 includes an original issue discount of $ 600,0000 and was issued with a warrant to purchase 300,000,000 shares at an exercise

price of $0.135 per share with a 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described

The note balance of $6,000,000 includes an original issue discount of $ 600,000 and was issued with a warrant to purchase 300,000,000 shares at an exercise price of $ 0.135 per share with a 3 -year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note 13.

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

After allocating these charges to debt and equity according to

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

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

$ 2,545,900 .

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

For the three months 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.

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

$ 5,000,875 .

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

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

shares having a fair value of $4,277,672.

The Company recorded a gain on settlement of debt of $294,557.

The note may be pre-payable at any time.

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

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 4,749,005 with a corresponding adjustment to paid in capital for the relative value of the warrant.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 0 at May 31, 2022.

The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase 150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term.

These warrants have a fair value of $2,850,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

Original $ 43,500 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 85,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 62,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 31,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 50,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

Original $ 42,000 note may be pre-payable at any time.

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

The loan and accrued interest were fully paid in March 2022.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note may be pre-payable at any time.

The note balance includes an original issue discount

of $ 2,450 at issuance.

The note may be pre-payable at any time.

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 at

The note may be pre-payable at any time.

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 at

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

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

Principal repayable in one year.

Interest repayable in 10 monthly instalments of $460 commencing January 11,

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

Repaid in full.

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

loan over the remaining 10 months.

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

By consent of all parties,

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

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

during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

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

The note may be pre-payable at any time.

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 at

The note may be pre-payable at any time.

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

the loan over the remaining 10 months.

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

By consent of all parties,

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

Total loan of $7,381 (in $USD) and related accrued interest paid

during the quarter ended May 31, 2021.

The note may be pre-payable at any time.

Original $ 300,000 note may be pre-payable at any time.

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

Interest payable monthly, principal due at maturity.

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

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

at $2,000 per month, the remaining 22 payments at $ 8,500 per month .

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

The loan and accrued interest were fully paid in March 2022.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 14,745 with an unamortized discount of $ 0 at May 31, 2022.

Original principal of $ 150,000 and interest repayable in 28 monthly instalments commencing December 6, 2020, the first 6 months at $2,000 per month, the remaining 22 payments at $ 8,500 per month.

Secured by revenue earning devices.

The note may be pre-payable at any time.

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

was issued with a warrant to purchase 70,000,000 shares at an exercise price of $ 0.00165 per share, with a 3 -year term and having a relative

fair value of $41,176.

The loan and accrued interest were fully paid in March 2022.

Original $ 110,000 note may be pre-payable at any time.

The note balance includes an original issue discount of $ 10,000 and was issued with a warrant to purchase 70,000,000 shares at an exercise price of $ 0.00165 per share, with a 3 -year term and having a relative fair value of $41,176.

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

After allocating these charges to debt and equity

according to their respective values, a debt discount of $ 41,176 with a corresponding adjustment to paid in capital.

For the three months

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.

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 41,176 with a corresponding adjustment to paid in capital.

The loan and accrued interest were fully paid in March 2022.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 36,290 with an unamortized discount of $ 0 at May 31, 2022.

Original principal of $ 65,000 and interest repayable in 21 monthly instalments of $4,060 commencing February 23, 2021.

Secured by revenue earning devices.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note may be pre-payable at any time.

The note balance includes an original issue discount

of $ 25,000 and was issued with a warrant to purchase 230,000,000 shares at an exercise price of $ 0.00165 per share with a 3 -year term

and having a relative fair value of $125,814.

The loan and accrued interest were fully paid in March 2022.

Original $ 300,000 note may be pre-payable at any time.

The note balance includes an original issue discount of $ 25,000 and was issued with a warrant to purchase 230,000,000 shares at an exercise price of $ 0.00165 per share with a 3 -year term and having a relative fair value of $125,814.

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

After allocating these charges

to debt and equity according to their respective values, a debt discount of $ 125,814 with a corresponding adjustment to paid in capital

for the relative value of the warrant.

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.

The note balance includes an original issue discount of 7,500 and

was issued with a warrant to purchase 100,000,000 shares at an exercise price of $ 0.002 per share with a 3 -year term and having a relative

fair value of $54,545.

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 125,814 with a corresponding adjustment to paid in capital for the relative value of the warrant.

The loan and accrued interest were fully paid in March 2022.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 109,977 with an unamortized discount of $ 0 at May 31, 2022

Original $ 82,500 note may be pre-payable at any time.

The note balance includes an original issue discount of 7,500 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $ 0.002 per share with a 3 -year term and having a relative fair value of $54,545.

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

After allocating these charges to debt and equity

according to their respective values, a debt discount of $ 54,545 with a corresponding adjustment to paid in capital for the relative value

of the warrant.

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

convertible notes and associated accrued interest of $ 1,237,811 totaling $ 3,921,168 was exchanged for this promissory note of $ 3,921,168 ,

and a warrant to purchase 450,000,000 shares at an exercise price of $ .002 per share and a three -year maturity having a relative fair

value of $ 990,000 .

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 54,545 with a corresponding adjustment to paid in capital for the relative value of the warrant.

The loan and accrued interest were fully paid in March 2022.

For the three months ended May 31, 2022 the Company recorded amortization expense of $ 50,714 with an unamortized discount of $ 0 at May 31, 2022.

This promissory note was issued as part of a debt settlement whereby $ 2,683,357 in convertible notes and associated accrued interest of $ 1,237,811 totaling $ 3,921,168 was exchanged for this promissory note of $ 3,921,168 , and a warrant to purchase 450,000,000 shares at an exercise price of $ .002 per share and a three-year maturity having a relative fair value of $ 990,000 .

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

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 1,460,794 in

convertible notes and associated accrued interest of $ 1,593,544 totaling $ 3,054,338 was exchanged for this promissory note of $ 3,054,338 ,

and a warrant to purchase 250,000,000 shares at an exercise price of $ .002 per share and a three-year maturity having a relative fair

value of $ 550,000 .

This promissory note was issued as part of a debt settlement whereby $ 1,460,794 in convertible notes and associated accrued interest of $ 1,593,544 totaling $ 3,054,338 was exchanged for this promissory note of $ 3,054,338 , and a warrant to purchase 250,000,000 shares at an exercise price of $ .002 per share and a three-year maturity having a relative fair value of $ 550,000 .

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

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 103,180 in convertible

notes and associated accrued interest of $ 62,425 totaling $ 165,605 was exchanged for this promissory note of $165,605, and a warrant to

purchase 80,000,000 shares at an exercise price of $ .002 per share and a three-year maturity having a fair value of $ 176,000 .

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 235,000 in convertible

notes and associated accrued interest of $ 75,375 totaling $ 310,375 was exchanged for this promissory note of $310,375, and a warrant to

purchase 25,000,000 shares at an exercise price of $ .002 per share and a three-year maturity having a fair value of $ 182,500 .

This promissory note was issued as part of a debt settlement as disclosed in Note 9 whereby $ 100,000 in convertible

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

Loan fully repaid

at May 31,2021.

The note may be pre-payable at any time.

The note balance includes an original issue discount of $ 35,000 and

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

fair value of $ 271,250 .

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

notes and associated accrued interest of $ 6,944 totaling $ 16,144 was exchanged for this promissory note of $ 25,000 .

This note is secured

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

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

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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note may be pre-payable at any time.

The note balance includes an original issue discount

of $ 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, with an original principal amount of $ 350,000 , may be pre-payable at any time.

The note balance includes an original issue discount of $ 35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3 -year term and having a relative fair value of $271,250.

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

After allocating these charges

to debt and equity according to their respective values, a debt discount of $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.

The note balance includes an original issue discount of $ 150,000

and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $ 0.135 per share with a 3 -year term and having a

relative fair value of $ 1,342,857 .

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 13,060 with an unamortized discount of $ 263,793 at May 31, 2022.

This promissory note was issued as part of a debt settlement whereby $ 9,200 in convertible notes and associated accrued interest of $ 6,944 totaling $ 16,144 was exchanged for this promissory note of $ 25,000 .

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

This promissory note was issued as part of a debt settlement whereby $ 79,500 in convertible notes and associated accrued interest of $ 28,925 totaling $ 108,425 was exchanged for this promissory note of $ 145,000 .

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

The note, with an original principal amount of $ 550,000 , may be pre-payable at any time.

The note balance includes an original issue discount of $ 250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3 -year term and having a relative fair value of $380,174.

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

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 380,174 with a corresponding adjustment to paid in capital.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 23,238 with an unamortized discount of $ 343,995 at May 31, 2022.

The note, with an original principal balance of $ 1,650,000 , may be pre-payable at any time.

The note balance includes an original issue discount of $ 150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $ 0.135 per share with a 3 -year term and having a relative fair value of $1,342,857.

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

After allocating these charges

to debt and equity according to their respective values, a debt discount of $1,342,857 with a corresponding adjustment to paid in capital

for the relative fair value of the warrant.

For the three 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.

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

was issued with a warrant to purchase 170,000,000 shares at an exercise price of $ 0.064 per share with a 3 -year term and having a relative

fair value of $ 2,035,033 using Black-Scholes with assumptions described in note 14.

The discounts are being amortized over the term of

After allocating these charges to debt and equity according to their respective values, a debt discount of $2,035,033 with a

corresponding adjustment to paid in capital.

For the three 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.

The interest and principal

are payable at maturity.

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 42,874 with an unamortized discount of $ 1,368,957 at May 31, 2022.

The maturity date was extended from February 22, 2022 to February 22, 2024 on February 28, 2022 in exchange for warrants to purchase 50,000,000 at an exercise price of $.0164 and a 3 year term.

These warrants have a fair value of $950,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

The note, with an original principal balance of $ 2,750,000 , may be pre-payable at any time.

The note balance includes an original issue discount of $ 50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $ 0.064 per share with a 3 -year term and having a relative fair value of $2,035,033.

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

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 2,035,033 with a corresponding adjustment to paid in capital.

For the three months ended May 31, 2022, the Company recorded amortization expense of $ 92,711 with an unamortized discount of $ 1,157,035 at May 31, 2022.

The maturity date was extended from June 8, 2022 to June 8, 2024 on February 28, 2022 in exchange for warrants to purchase 85,000,000 at an exercise price of $.0164 and a 3 year term.

These warrants have a fair value of $1,615,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

This loan, with an original principal balance of $ 4,000,160 , was in exchange for 184 Series F preferred shares from a former director.

The interest and principal are payable at maturity.

The loan is unsecured.

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 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 November 30, 2021:

Schedule of derivative liabilities using the Monte-Carlo

$ 0.04 - $ 0.026

Fair value of Company common stock

$ 0.6320 - $ 0.4285

Dividend yield

Expected volatility

125.3 % - 107.7 %

Risk free interest rate

0.15 % - 0.13 %

Expected term (years)

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.

The note, with an original principal balance of $ 1,650,000 , may be pre-payable at any time.

The note balance includes an original issue discount of $ 150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $ 0.037 per share with a 3 -year term and having a relative fair value of $1,284,783 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 the three months ended May 31, 2022, 2022, the Company recorded amortization expense of $ 31,420 with an unamortized discount of $ 1,371,013 at May 31, 2022.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The changes in the derivative liabilities (Level 3

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

Schedule of level 3 financial instruments

Balance as of February 28, 2021

Reduction of derivative liability due to debt settlement

Derivative discount on loan amendment

Change in fair value of derivative liabilities

Balance as of November 30, 2021

DERIVATIVE LIABILITIES

As of both May 31, 2022, and February 28, 2022 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 $ 7,587 .

There was no change during the period.

STOCKHOLDERS’ EQUITY (DEFICIT)

Summary of Preferred Stock Activity

Series E Preferred Stock

During the nine months ended November 30, 2021 Series

E shareholders had the following activity:

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

The company recorded an adjustment to paid in capital.

Series F Preferred Stock

During the nine months ended November 30, 2021 Series

F shareholders had the following activity:

40 Series F Preferred Shares and a warrant to purchase 367 Series F Preferred Shares with a five-year

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

as disclosed in Note 8.

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

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

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

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

Two Series F Preferred shareholders exchanged 83 Series F Preferred Shares for two promissory notes as disclosed

in point (11) and (12) in Note 12 on March 23, 2021.

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

These notes were subsequently exchanged on June 2, 2021 for a total of 116,104.232 common shares.

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

for a note payable from the Company of $4,000,160 bearing interest at 7% per annum with a 5 year term, maturing July 12, 2026.

On August 24, 2021the Series F preferred warrant holder agreed to not exercise his warrant privileges on his

remaining 329 warrant shares before September 1, 2023.

Summary or Preferred Stock Activity

No preferred stock activity during the period

Summary of Preferred Stock Warrant Activity

Schedule of Summary of stock Option Activity

Number of Series F Preferred Warrants

Number of Series C Preferred Warrants

Weighted Average Exercise Price

2 unchanged sentences

Forfeited and cancelled

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 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.

Outstanding at May 31, 2022

Summary of Common Stock Activity

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 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

The Company issued 133,881,576 common shares with gross proceeds of $1,762,379

and net proceeds of $ 1,645,222 after issuance costs of $117,157

Summary of Common Stock Warrant Activity

5 unchanged sentences

Forfeited and cancelled

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:

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.

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, 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

Fair value of Company’s common stock

$ 0.146 - $ 0.0071

Dividend yield

Expected volatility

411.0 % - 403.33 %

Risk free interest rate

Outstanding at May 31, 2022

1,216,845,661

Expected term (years)

For the three months ended May 31, 2022 and May 31,

2021, the Company recorded a total of $ 0 and $ 0 , respectively, to stock-based compensation for options and warrants with a corresponding

adjustment to additional paid-in capital.

Summary of Common Stock Option Activity

1 unchanged sentence

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

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

over a 30 day trading period.

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

price of $ $ 0.25 per share if the trading share price of the Company reaches an average of $ 0.50 per share for ten days over a 30 day

trading period.

Objective #3 :

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

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

Objective #4 :

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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Objective #5 :

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

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

Objective #6 :

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

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

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

Objective #7 :

The price per share of common stock has increased to and maintains a price of Twenty Cents ($0.20)

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

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

Objective #8 :

The RAD 3.0 products are launched into the marketplace by November 30, 2021.

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

Objective #9 :

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

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

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 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

The purpose of the 2021 Plan is to promote the success

of the Company by authorizing incentive awards to retain Directors, executives, selected Employees and Consultants, and reward participants

for making major contributions to the success of the Company.

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

restricted stock units, stock appreciation rights and stock awards.

A total of five million (5,000,000) shares of common stock may be

issued under the 2021 Plan.

All awards under the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback

or similar policy of the Company in effect from time to time, as well as any similar provisions of applicable law, which could in certain

circumstances require repayment or forfeiture of awards or any shares of stock or other cash or property received with respect to the

awards, including any value received from a disposition of the shares acquired upon payment of the awards.

The 2021 Plan will be administered

by the Board or any Committee authorized by the Board, if applicable, which will have the sole authority to, among other things:

and interpret the 2021 Plan;

make rules and regulations relating to the administration of the 2021 Plan;

select participants;

and establish

the terms and conditions of awards, all in accordance with the terms of the 2021 Plan.

The 2021 Plan will remain in effect until April

14, 2031, unless sooner terminated by the Board.

Termination will not affect awards then outstanding.

will be granted if the following conditions are met:

A stock option award (option 1) will be granted to the employee to purchase 10,000,000 shares at an exercise price of $ $ 0.15 per share if the trading share price of the Company reaches an average of $ 0.30 per share for ten days over a 30 day trading period.

A stock option award (option 2) will be granted to the employee to purchase 30,000,000 shares at an exercise price of $ $ 0.25 per share if the trading share price of the Company reaches an average of $ 0.50 per share for ten days over a 30 day trading period.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

10 unchanged sentences

heavily on estimates and assumptions.

In March 2021, the Company settled with former landlords

for $ 30,000 .

The Company had accrued $ 62,552 at February 28, 2021.

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

In April 2019 the principals of WeSecure filed a lawsuit

against the Company in California Superior Court seeking a total of $ 199,358 plus attorney’s fees and damages.

The total included

claims for the non-payment of a balance from the sale of WeSecure assets to the Company, unpaid consulting fees payable to the two principals

of WeSecure, and labor code violations.

In June 2019, the parties settled all claims for $180,000, payable in 14 monthly installments,

and a full release.

The $122,000 balance owing at February 28, 2021 was paid in full on March 17, 2021.

The related legal costs are expensed as incurred.

3 unchanged sentences

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

1, 2021 with the remaining $400,000 to be paid in instalments of $ 40,000 per month over the following 10 months commencing October 1,

the Company will pay Ghost a non refundable marketing fee of $ 500,000 with $ 100,000 payable September 1, 2021 with the remaining $400,000 to be paid in instalments of $ 40,000 per month over the following 10 months commencing October 1, 2021.

the Company will purchase $ 85,000 of other Ghost products for research and development purposes.

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

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.

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

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.

5 unchanged sentences

On March 10, 2021, the Company entered into a 10 year

lease agreement for a manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to

lease agreement for q manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to

April 30, 2031 with a minimum base rent of $ 15,880 per month.

1 unchanged sentence

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

1 unchanged sentence

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

On January 28, 2022, the Company entered into a 2-year

lease agreement for office space at 1516 E Edinger, Santa Ana, California, 92705, commencing on February 1, 2022 through to January 31,

2024 with a minimum base rent of $1,500 per month.

The Company paid a security deposit of $1,500 .

The Company’s leases are accounted for as operating

Rent expense and operating lease cost are recorded over the lease terms on a straight-line basis.

Rent expense and operating lease

cost was $ 69,967 for the three months May 31, 2022 and $ 30,064 for the three months May 31, 2020.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturity of Lease Liabilities

November 30, 2022

November 30, 2023

November 30, 2024

November 30, 2025

November 30, 2026

November 30, 2027 and after

May 31, 2028 and after

Total lease payments

3 unchanged sentences

determined as follows:

For the Three Months Ended

For the Nine Months Ended

For the Year Ended

Net income (loss) available to common shareholders

( 3,634,660 )

Effect of common stock equivalents

interest expense on convertible debt

Add Penalty interest on convertible debt

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

9 unchanged sentences

The anti-dilutive shares of common stock equivalents

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

For the Three Months Ended

For the Nine Months Ended

for the three months ended May 31, 2022 and 2021 were as follows:

For the Year Ended

Convertible notes and accrued interest

13,732,671,277

Convertible Class F Preferred Shares

1 unchanged sentence

12,232,916,443

15,294,230,742

6,519,028,347

Stock options and warrants

2 unchanged sentences

12,906,512,276

20,551,701,667

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUBSEQUENT EVENTS

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.

Subsequent to May 31, 2022 through to July 12, 2022:

— in June 2022, the Company issued 78,975,759

common shares pursuant to a share purchase agreement for gross proceeds of $ 902,499 , issuance costs of $ 48,200 and net proceeds of $ 854,299 .

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