What changed in this filing

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Item 1. Financial Statements

2022-10-21 compared with 2022-07-12 · 354 added, 204 removed, 963 unchanged (37% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2022

February 28, 2022 *

1 unchanged sentence

Accounts receivable, net

Share proceeds receivable

Device parts inventory, net

29 unchanged sentences

15,545,650 shares authorized;

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

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

Series E Preferred Stock, $ 0.001 par value;

5 unchanged sentences

Series G Preferred Stock, $ 0.001 par value;

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

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

Common Stock, $ 0.00001 par value;

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

6,000,000,000 shares authorized 5,063,354,356 and 4,735,210,360 shares issued, issuable and outstanding, respectively

Additional paid-in capital

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

Cost of Goods Sold

Operating expenses:

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

Research and development (Note 10)

General and administrative

1 unchanged sentence

Operating lease cost and rent

(Gain) loss on disposal of fixed assets

Total operating expenses

3 unchanged sentences

Interest expense

(Loss) on settlement of debt

Total other income (expense), net

Net income (loss)

Net income (loss) per share - basic

Net income (loss) per share - diluted

Gain (loss) on settlement of debt

Total other expense net

Net loss per share - basic

Net loss per share - diluted

Weighted average common share outstanding - basic

1 unchanged sentence

3,890,453,905

4,884,349,362

3,689,985,691

Weighted average common share outstanding - diluted

1 unchanged sentence

3,890,453,905

4,884,349,362

3,689,985,691

The accompanying notes are an integral part of

7 unchanged sentences

3,229,426,884

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

6 unchanged sentences

3,545,772,882

Adjustment to derivative liability

Common stock issued for debt conversion

Stock based compensation on issuable shares

Exercise of warrants

Exchange of debt for common shares

Relative fair value of warrants issued with debt

Cancellation of Series E preferred shares

Exchange of Series F preferred shares for debt

Balance at August 31 2021

3,995,271,111

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S

Preferred Stock

Stockholders’

Balance at February 28, 2022

3 unchanged sentences

4,869,091,936

Issuance of shares, net of $ 95,293 issuance costs

Cashless exercise of warrants

Relative fair value of warrants issued with debt

Cancelled shares

Exchange of 955,000,000 warrants for debt

Shares as payment for services

Balance at August 31, 2022

5,063,354,356

( 102,988,805

The accompanying notes are an integral part of

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Six Months Ended

August 31, 2022

Six Months Ended

August 31, 2021

CASH FLOWS USED IN OPERATING ACTIVITIES:

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

Depreciation and amortization

4 unchanged sentences

Accretion of lease liability

(Gain) loss on disposal of fixed assets

Stock based compensation

Change in fair value of derivative liabilities

Interest expense related to penalties from debt defaults

Amortization of debt discounts

3 unchanged sentences

Accounts receivable

Prepaid expenses and deposits on inventory

Prepaid expenses

Deposits on inventory

Device parts inventory

Accounts payable and accrued expenses

Customer deposits

Accrued expense -related party

Operating lease liability payments

Customer deposits

Operating lease liabilities

Current portion of deferred variable payment obligation for payments

Balance owed WeSecure

Current portion of deferred variable payment obligations for payments

Accrued interest payable

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of fixed assets

Proceeds on disposal of fixed assets

Cash paid for security deposit

4 unchanged sentences

Repayment of loans payable

Proceeds from convertible debt and warrants issued

Repayment of convertible debt

9 unchanged sentences

Right of use asset for operating lease liability

Transfer from device parts inventory to fixed assets

Transfer from device parts inventory to revenue earning devices

Conversion of convertible notes and interest to shares of common stock

Release of derivative liability on conversion of convertible notes payable

Derivative debt discount on re-valuation on loan amendment

Exchange of notes payable for Series F preferred shares

Exchange of warrants for debt

Discount applied to face value of loans

Warrants issued as part of debt issuance

Warrants issued as part of debt

Exercise of warrants

Series F preferred shares issued for debt

Cancellation of Series E preferred shares and common shares

Series F preferred shares converted to common shares

8 unchanged sentences

On August 24, 2018, Artificial Intelligence Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).

Robotic Assistance Devices, LLC (“RAD”),

was incorporated in the State of Nevada on July 26, 2016 as an LLC.

Robotic Assistance Devices, LLC (“RAD”), was incorporated in

the State of Nevada on July 26, 2016 as a Limited Liability Company.

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

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AITX’s prior business focus was transportation

services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships.

services, and was exploring the on-demand logistics market by developing a network of logistics partnerships.

As a result of the

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

As a result, AITX’s business going forward will consist of

closing of the Acquisition, AITX has succeeded to the business of RAD, and AITX’s business going forward will consist of

one segment activity, which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.

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

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

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

had negative cash flow from operating activities of $ 6,754,462 .

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

and working capital of $ 617,962 .

As of August 31, 2022, the Company has an accumulated deficit of $ 102,988,805 ,

and negative working capital of $ 169,680 .

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.

These factors raise a substantial doubt about the Company’s ability to continue as a going concern for the twelve months following

the issuance of these financial statements.

The Company does not have the resources at this time

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financial situation as follows:

In the near term, management plans to raise an additional

$ 15 million to $ 50 million before the end of the fiscal year.

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

dilutive funds.

There is no assurance that these funds will be able to be raised nor can we provide assurance that these possible raises

may not have dilutive effects.

The company 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.

In the near term, management plans to

potentially raise an additional $3 million to $5 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 its S-3 Registration Statement

this year and made improvements in paying off debt, investing in inventory and at August 31, 2022 had $363,073 of cash on hand.

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

1 unchanged sentence

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

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

For the fiscal period through to September

30, 2022, the Company has raised an additional $3.6 million net of issuance costs through the sale of its common shares and paid approximately

$1.2 million in current debt.

3 unchanged sentences

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”)

and in conformity with the condensing instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations

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

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

The accompanying unaudited condensed

consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United

States (“GAAP”) and in conformity with the condensing instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the

related rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with

the audited financial statements and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as

filed on 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, 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 six months ended August 31, 2022 are not necessarily indicative of the results that may be expected for the entire year.

Use of Estimates

20 unchanged sentences

There was an allowance of $ 218,890

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

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

Device Parts Inventory

9 unchanged sentences

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

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

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

As of August 31, 2022 and February 28, 2021 there was a valuation

reserve of $ 135,000 and $ 65,000 , respectively.

Revenue Earning Devices

12 unchanged sentences

Depreciation is provided

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

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

Major repairs

19 unchanged sentences

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

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

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

had no deferred development costs.

46 unchanged sentences

Customers for additional information.

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

For the six months ended August 31, 2022 , two customers accounted for 26% of total revenue (2021-

Income taxes are accounted for under the asset and

60 unchanged sentences

Company accounts for the financial instrument as permanent equity.

Our CEO and Chairman holds sufficient shares of the

Company’s voting preferred stock that give sufficient voting rights under the articles of incorporation and bylaws of the Company

such that the CEO and Chairman can at any time unilaterally vote to increase the number of authorized shares of common stock of the Company,

without the need to call a general meeting of common shareholders of the Company.

Our Chief Executive Officer/ Chairman holds sufficient shares of the Company’s

voting preferred stock that give sufficient voting rights under the articles of incorporation and bylaws of the Company such that the

CEO/ Chairman can at any time unilaterally vote to increase the number of authorized shares of common stock of the Company, without the

need to call a general meeting of common shareholders of the Company.

Initial Measurement

33 unchanged sentences

Fair Value Measurement Using

August 31, 2022

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

60 unchanged sentences

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.

The Company is currently evaluating the impact of

adoption on its consolidated financial statements.

In October 2021,

47 unchanged sentences

Three Months Ended

Six Months Ended

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

Device rental activities

11 unchanged sentences

Below is a summary of our lease assets and liabilities

at May 31, 2022 and February 28, 2022.

at August 31, 2022 and February 28, 2022.

Classification

August 31, 2022

February 28, 2022

12 unchanged sentences

and were expensed in general and administrative expenses as incurred.

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

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

Rent expense and operating lease cost was $ 63,681

and $ 133,648 for the three and six months ended August 31, 2022, respectively, and $ 75,212 and $ 104,086 for the three and six months ended

August 31, 2021, respectively.

REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

August 31, 2022

February 28, 2022

1 unchanged sentence

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

During the three and six months ended August 31, 2022

the Company made total additions to revenue earning devices of $ 251,946 and $ 426,047 , respectively, which were transfers from inventory.

During the three and six months ended August 31, 2021, the Company made total additions to revenue earning devices of $ 212,175 and $ 282,337 ,

respectively, which were transfers from inventory.

During the six months ended August 31, 2021 the Company sold a revenue earning device

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

Depreciation expense was $ 116,125 and $ 187,539 for

the three and six months ended August 31, 2022, respectively, and $ 43,834 and $ 76,839 for the three and six months ended August 31, 2021,

respectively.

Fixed assets consisted of the following:

August 31, 2022

February 28, 2022

5 unchanged sentences

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 .

During the three months ended August 31, 2022, the

Company made additions of $ 139,946 of which $ 20,693 were transfers from inventory with remaining additions of $118,983.

During the six

months ended August 31, 2022, the Company made additions of $ 233,676 of which $ 26,479 were transfers from inventory with remaining additions

During the three months and six months ended August 31, 2021, the Company made additions of $ 16,800 and $ 32,162 , respectively.

the six months ended August 31, 2021, the Company sold a vehicle having a net book value of $875 for fair value proceeds of $ 30,000 and

recorded a gain on disposal of fixed assets of $ 29,125 .

Depreciation expense was $ 29,668 and $ 52,249 for the

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

three and six months ended August 31, 2022, respectively, and $ 3,857 and $ 8,495 for the three and six months ended August 31, 2021, respectively.

DEFERRED VARIABLE PAYMENT OBLIGATION

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may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the event that at least 10% of the assets of the

13 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

11 unchanged sentences

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.

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.

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

17 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In consideration for the above changes, the investor

8 unchanged sentences

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

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 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.

As of August 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.

For both the three months and six months ended August

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 period.

The balance remains $ 2,525,000 at both August 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 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.

of August 31, 2022, the Company has accrued $ 431,720 in Payments (February 28, 2022 -$ 325,600 ).

At August 31, 2022, and February 28, 2022

the Company was in default on $ 204,430 and $ 90,300 of those Payments.

No notices have been sent to the Company.

4 unchanged sentences

July 18, 2017 *

August 9, 2022

August 9, 2023

current portion of convertible notes payable

4 unchanged sentences

Current portion of convertible notes payable, net of discount

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

This note was in default as of February 28, 2022.

Default interest rate 22%

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

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

Effective in August 2022 this note (and accrued interest) was no longer convertible.

Subject to adjustment for dilutive issuances

During both the three and six months ended August

31, 2022, the Company incurred original issue discounts of $75,000, and relative fair value discounts debt discounts from derivative liabilities

of $404,373 and fees of $55,750 related to new convertible notes payable.

During both the three and six months ended August 31, 2021 the

Company recognized debt discounts from derivative liabilities of $438,835.

During both the three and six months ended August 31, 2022,

the Company recognized interest expense related to the amortization of debt discount of $12,618.

During the three and six months ended

August 31, 2021, the Company recognized interest expense related to the amortization of debt discount of $694,855 and $775,986, 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.

As of August 31, 2022

and February 28, 2022, the Company had total accrued interest payable of $31,944 and $28,104, respectively, all of which is classified

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended August 31, 2022,

the Company also had the following convertible note activity:

Company transferred the above July 18, 2016 $3,500 note to loans payable as the note was no longer convertible.

This was a result of

an SEC action against the debt holder who was also a common stockholder.

On August 9, 2022 the Company entered into a new convertible note for $750,000 with a one year maturity, interest rate of 12%, with a warrant (Warrant 1) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.01, and an additional warrant (Warrant 2) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.008 to be cancelled and extinguished if the note balance is $375,000 or less by February 9.

The Company received $619,250 in cash proceeds, recorded an original issue discount of $75,000, recognized $404,373 based on a relative fair value calculation as debt discount with a corresponding adjustment to paid-in capital for the attached warrants, and transaction fees of $55,750.

The discount is amortized over the term of the loan.

This Note shall have priority over all unsecured indebtedness of the Company.

The note has certain default provisions such as failure to pay any principal or interest when due and failure to maintain a minimum market capitalization of $30 million.

In the event of these or any other default provisions, the note becomes due and payable at 125%.

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

the Company 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 of $360,125.

Holders of certain convertible notes payable elected

to convert a total of $825,000 of principal and $71,955 accrued interest, and $1,750 of fees into 31,042,436 shares of common stock;

no gain or loss was recognized on conversions as these conversions occurred within the terms of the agreement that provided for conversion.

The conversion rate of the January 19, 2021 note included above was reduced to $0.027 due to the dilutive issuance provision in the January 19, 2021 agreement.

RELATED PARTY TRANSACTIONS

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

For the six months ended August 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

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

advances of $ 118,342 .

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

At August 31, 2022, the loan payable-related party was $ 200,036 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 %.

balance due to the related party at August 31, 2022 is $ 123,504 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 %.

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

The accrued interest included in loan at August 31, 2022 and August 31, 2021 was $ 9,180 and $ 160,536 respectively.

Pursuant to the amended Employment Agreement with

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.

its Chief Executive Officer, for the three months and six ended August 31, 2022, the Company accrued $63,000 and $224,500 of incentive

compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being

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

31, 2022 and February 28, 2022 there was $ 704,000 and $ 479,500 of incentive compensation payable.

During the three months ended August 31, 2022 and

2021, the Company was charged $ 957,395 and $ 562,837 , respectively for fees for research and development from a company partially owned

by a principal shareholder.

During the six months ended August 31, 2022 and 2021,

the Company was charged $ 1,959,129 and $ 1,041,788 , respectively for fees for research and development from a company partially owned by

a principal shareholder.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

as of August 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 May 31, 2022 consisted of the following:

Loans payable at August 31, 2022 consisted of the

Schedule of loans payable

Interest Rate

July 18, 2016

July 18, 2017

Promissory note

June 11, 2018

88 unchanged sentences

Promissory note

Less discount on loans payable

( 4,504,793 )

Loans payable

(#) 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.

July 28, 2022

July 28, 2023

Promissory note

August 30, 2022

August 30,2024

Promissory note

September 7, 2022

September 7, 2023

Promissory note

current portion of convertible notes payable

discount on noncurrent convertible notes payable

Noncurrent convertible notes payable, net of discount

Current portion of convertible notes payable

discount on current portion of convertible notes payable

Current portion of convertible notes payable, net of discount

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Default interest rate 22%

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

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

29 unchanged sentences

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.

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

12 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

6 unchanged sentences

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.

6 unchanged sentences

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.

3 unchanged sentences

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 .

2 unchanged sentences

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 .

002 per share and a three-year maturity having a fair value of $ 176,000 .

002 per share and a three-year maturity having a fair value of $ 182,500 .

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

4 unchanged sentences

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.

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 17,267 and $ 30,238 , respectively, with an unamortized discount of $ 246,525 at August 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 .

6 unchanged sentences

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.

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 28,290 and $ 51,527 , respectively, with an unamortized discount of $ 315,705 at August 31, 2022.

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

2 unchanged sentences

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.

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 59,503 and $ 102,378 , respectively, with an unamortized discount of $ 1,309,454 at August 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.

4 unchanged sentences

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.

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 106,009 and $ $ 198,719 , respectively, with an unamortized discount of $1,051,026 at August 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.

3 unchanged sentences

The loan is unsecured.

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.

For the quarter ended August 31, 2022 there was a $ 36,000 repayment on the note.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The note balance includes an original issue discount of $ 150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $ 0.037 per share with a 3 -year term and having a relative fair value of $1,284,783, The discounts are being amortized over the term of the loan.

After allocating these charges to debt and equity according to their respective values, a debt discount of $ 1,284,783 with a corresponding adjustment to paid in capital.

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 31,420 and $ 62,840 , respectively.

with an unamortized discount of $ 1,339,594 at August 31, 2022.

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

Original $ 170,000 note may be pre-payable at any time.

The note balance includes an original issue discount of $ 20,000 .

Principal and interest due at maturity.

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

For the three and six months ended August 31, 2022, the Company recorded amortization expense of $ 1,459 with an unamortized discount of $ 18,541 at August 31, 2022.

Original $ 400,000 note may be pre-payable at any time.

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

Principal and interest due at maturity.

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

As the note is dated after August 31, 2022 there was no amortization expense an unamortized discount of $ 50,000 at August 31, 2022.

A warrant holder exchanged 955,000,000 warrants for a promissory note of $3,000,000, bearing interest at 15% with a two year maturity.

The fair value of the warrants was determined to be $ 2,960,500 with a corresponding adjustment to paid-in capital and a debt discount of $ 39,500 which will be amortized over the term of the loan.

Principal and interest due at maturity.

There was no amortization expense and an unamortized discount of $ 39,500 at August 31, 2022.

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.

As of August 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 $ 0 , and $ 7,587 , respectively.

For both the three and six months

ended August 31, 2022, the Company recorded a change in far value of derivative liabilities of $ 3,595 and a gain on settlement of debt

(with a corresponding adjustment to derivative liabilities) of $ 3,992 .

STOCKHOLDERS’ EQUITY (DEFICIT)

8 unchanged sentences

Forfeited and cancelled

Outstanding at May 31, 2022

Outstanding at August 31, 2022

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Common Stock Activity

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

The Company increased authorized common shares from

5,000,000,000 to 6,000,000,000 on July 8, 2022.

During the six months ended, August 31, 2022, the

Company issued 325,572,711 common shares with gross proceeds of $ 3,748,939 and net proceeds of $ 3,536,489 after issuance costs of $ 212,450 ,

issued 9,688,179 shares through the cashless exercise of 61,378,210 warrants, cancelled 17,116,894 shares and issued 10,000,000 shares

for $118,500 as payment for services.

As of August 31, 2022 proceeds receivable

from an offering of $281,000 was collected prior to the issuance of these financials statements.

The table below represent the common shares issued,

issuable and outstanding at August 31, 2022 and February 28, 2022:

Common shares

August 31, 2022

February 28, 2022

5,051,254,356

4,733,110,360

Issued, issuable and outstanding

5,063,354,356

4,735,210,360

Summary of Common Stock Warrant Activity

4 unchanged sentences

1,216,845,661

Forfeited and cancelled

Outstanding at May 31, 2022

Forfeited, extinguished and cancelled

( 955,000,000

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.

Outstanding at August 31, 2022

Required dilution adjustment per warrant agreement

For the three months and six months ended August 31,

2022 and August 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.

On August 30, 2022 a warrant holder exchanged 955,000,000

warrants for a promissory note of $ 3,000,000 , bearing interest at 15 % with a two year maturity.

The fair value of the warrants was determined

to be 2,960,500 with a corresponding adjustment to paid-in capital and a debt discount of $ 39,500 which will be amortized over the term

Summary of Common Stock Option Activity

On April 9, 2021 the Company entered into an Employment

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

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 11, 2022 the Company amended its 2021 Incentive Stock Option

Plan increasing the maximum number of shares applicable to the Plan from 5,000,000 to 100,000,000 .

COMMITMENTS AND CONTINGENCIES

9 unchanged sentences

The related legal costs are expensed as incurred.

Purchase Commitment

On August 15 ,2021 the Company entered into a memorandum

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

in development in exchange for the following:

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.

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.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease

18 unchanged sentences

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

cost was $ 63,681 and $ 133,648 for the three and six months ended August 31, 2022, respectively, and $ 75,212 and $ 104,086 for the three

and six months ended August 31, 2021, respectively.

Maturity of Lease Liabilities

May 31, 2028 and after

August 31, 2023

August 31, 2024

August 31, 2025

August 31, 2026

August 31, 2027

August 31, 2028 and after

Total lease payments

Present value of lease liabilities

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS (LOSS) PER SHARE

1 unchanged sentence

determined as follows:

For the Year Ended

For the Three Months Ended

For the Six Months Ended

Net income (loss) available to common shareholders

1 unchanged sentence

interest expense on convertible debt

Add (less) loss (gain) on settlement of debt

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

3 unchanged sentences

3,890,435,903

4,884,349,362

3,689,985,692

Net income (loss) per share – basic

Dilutive effect of common stock equivalents:

Convertible Debt

Preferred shares

Weighted average shares – diluted

1 unchanged sentence

3,890,435,903

4,884,349,362

3,689,985,692

Net income (loss) per share – diluted

The anti-dilutive shares of common stock equivalents

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

For the Year Ended

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

For the Three Months Ended

For the Six Months Ended

Convertible notes and accrued interest

Convertible Class F Preferred Shares

Convertible Series F Preferred Shares

13,783,685,333

4 unchanged sentences

1,237,643,136

14,604,991,439

SUBSEQUENT EVENTS

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 .

Subsequent to August 31, 2022 through to October 20,

— The Company issued

83,066,855 common shares pursuant to a share purchase agreement for gross proceeds of $ 592,623 , issuance costs of $ 34,756 and net proceeds

of $ 557,866 .

— On September 8, 2022 the Company

issued a promissory note to a lender for $ 475,000

with cash proceeds of $ 400,000

and an original issue discount of $ 75,000 .

The loan bears interest at 15 %,

matures in 1 year and has a general security charging all of the Company’s present and after-acquired property.

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