What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-21 compared with 2022-07-12 · 163 added, 80 removed, 97 unchanged (71% of the section changed)

2 unchanged sentences

Forward-Looking Statements

The following discussion of our financial condition

and results of operations for the three months ended May 31, 2022 and May 31, 2021 should be read in conjunction with our unaudited consolidated

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

Our discussion includes forward-looking

statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result

of a number of factors, including those set forth under Item 1A.

Risk Factors appearing in our Annual Report on Form 10-K for the year

ended February 28, 2022, as filed on May 27, 2022 with the SEC.

We use words such as “anticipate,” “estimate,”

“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”

“intend,” “may,” “will,” “should,” “could,” and similar expressions to identify

forward-looking statements.

The following discussion of our financial condition and results of operations

for the three and six months ended August 31, 2022 and August 31, 2021 should be read in conjunction with our unaudited consolidated financial

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

Our discussion includes forward-looking statements

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

results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number

of factors, including those set forth under Item 1A.

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

2022, as filed on May 27, 2022 with the SEC.

We use words such as “anticipate,” “estimate,” “plan,”

“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”

“may,” “will,” “should,” “could,” and similar expressions to identify forward-looking

Unless expressly indicated or the context requires

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Results of Operations for the Three Months Ended

May 31, 2022 and 2021

August 31, 2022 and 2021

The following table shows our results of operations

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

for the three months ended August31, 2022 and 2021.

The historical results presented below are not necessarily indicative of the results

that may be expected for any future period.

August 31, 2022

August 31, 2021

Operating expenses

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Other income (expense), net

Net income (loss)

The following table presents revenues from contracts

with customers disaggregated by product/service:

August 31, 2022

August 31, 2021

Device rental activities

Direct sales of goods and services

Total revenue for the three-month period ended May

31, 2022 was $385,157 which represented a decrease of $175,177 compared to total revenue of $560,334 for the three months ended May 31,

This decrease is a result of unusually high unit sales in the previous year’s quarter.

Rental activities increased by 90%

over the prior year’s quarter as the Company continues to grow its core business.

Total revenue for the three-month period ended August

31, 2022 was $267,484 which represented an increase of $125,912 compared to total revenue of $141,572 for the three months ended August

This increase is a result of higher rental sales in the current year’s quarter.

Rental activities increased by 85% over

the prior year’s quarter as the Company continues to grow its core business.

Direct sales was driven by an increase in training

revenue and grew by 116% over last year’s quarter.

Total gross profit for the three-month period ended

May 31, 2022 was $91,433 which represented a decrease of $357,975 compared to gross profit of $449,408 for the three months ended May

The decrease resulted primarily from inventory adjustments totaling $177,475 broken down as $152,475 in inventory adjustments

due to shrinkage and obsolescence and a $25,000 increase in the inventory provision to account for obsolescence.

The gross profit %

of 24% for the three-month period ended May 31, 2022 was lower than the gross profit % of 80% for the prior year’s corresponding

period due to inventory adjustments previously mentioned.

After accounting for those inventory adjustments totaling $177,475, the adjusted

gross profit for the three months ended May 31, 2022 would be 70%.

August 31, 2022 was $233,270, which represented an increase of $133,652 compared to gross profit of $99,618 for the three months ended

August 31, 2021.

The gross profit increased due to the higher sales and inventory changes.

The gross profit % of 87% for the three-month

period ended August 31, 2022 was higher than the gross profit % of 70% for the prior year’s corresponding period.

Operating Expenses

August 31, 2022

August 31, 2021

Research and development

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Operating lease cost and rent

Gain loss on disposal of fixed assets

Operating expenses

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Our operating expenses during the three-month

period ended May 31, 2022 and May 31, 2021, were $3,588,089 and $2,600,954, respectively.

period ended August 31, 2022 and August 31, 2021, were $3,411,702 and $3,383,990, respectively.

The overall increase of $27,712 was primarily

attributable to the following changes in operating expenses of:

General and administrative expenses increased by $500,600.

In comparing the three months ended May 31, 2022 and May 31, 2021 this increase was primarily due to increases in wages and salaries of $587,855 due to staffing of new manufacturing facility and increases in office and management staff , stock based compensation of $92,150, insurance of $102,815 due to health plan for new employees and increased liability and property insurance due to new manufacturing facility, office expenses of $35,947, travel $175,538 and advertising , marketing of $55,604 and bad debts expense due to a general provision of $105,000 on slow payers due to present economic factors.

These increases were partially offset by decreases in production supplies by $183,904 due to better inventory management, professional fees of $292,374 mostly due to the severance costs of a former director in the prior year’s quarter, software and technology costs of $50,642 and subcontractor fees of $117,228 due to increase in staffing.

General and administrative expenses decreased by $352,478.

In comparing the three months ended August 31, 2022 and August 31, 2021 this decrease was primarily due to these changes increases in the following:

wages and salaries of $350,555 due to staffing of new manufacturing facility and increases in office and management staff , insurance of $75,282 due to health plan for new employees and increased liability and property insurance due to new manufacturing facility, advertising , sales and marketing of $158,699, office expenses of $36,400 and bad debts expense due to a general provision of $40,000 on slow payers due to present economic factors.

These increases offset these following decreases:

stock based compensation of $949,700 for prior charges based on CEO incentive plan and travel $41,983 .

Research and development increased by $264,494 due to funding development of new products as well as upgrades of existing products.

Depreciation and amortization increased by $56,352 due to the acquisition of ERP computer software, and computer equipment and 34 new revenue earning devices.

Operating lease cost and rent increased by $41,093 due to a new office lease for the 3 months ended May 31, 2022 leases and only one month of the new manufacturing facility for the three months ended May 31, 2021 as compared to a three full months for the three months ended May 31, 2022.

Included in that increase is the increase in research and development paid to a related party of $394,557.

Depreciation and amortization increased by $98,102 due to the acquisition of ERP computer software, computer equipment tooling, and 18 new revenue earning devices.

Operating lease cost and rent decreased by $11,531 due to one less office lease for the three months ended August 31, 2022 comparing to the three months ended August 31, 2021

Other Income (Expense)

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fair value of derivative instruments, loss on settlement of debt and interest.

Other income (expense) during the three months ended May

31, 2022 and May 31, 2021, was ($1,175,030) and ($33,753,372), respectively.

Other income (expense) during the three months ended August

31, 2022 and August 31, 2021, was ($994,433) and ($1,548,001), respectively.

The $553,568 increase in other income was primarily attributable

to the loss on settlement of debt realized in the prior year’s quarter.

In comparing the three months ended May 31, 2022 and the three months ended May 31, 2021, the change in fair value of derivative liabilities decreased by $179,439.

This represents the change in fair value for the three months ended May 31, 2021.

There was no change in fair value of derivative liabilities for the three months ended May 31, 2022 as most of the underlying convertible debt has been repaid with only $3,500 remaining.

The change in fair value of derivative liabilities in 2021 was due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock.

Interest expense increased by $226,580 due to an increase in both debt amortization expense and interest expense because of increases in loans payable

Loss on settlement of debt was $32,984,361 the quarter ended May 31, 2021 and nil in the quarter ended May 31, 2022.

The amendment of the deferred variable payment obligation during the prior year’s quarter led to a $33,015,215 loss which was partially offset by gains from accrued liabilities settlements.

This loss on settlement of debt was non-cash and had no effect on the cash flows of the Company.

In comparing the three months ended August 31, 2022 and the three months ended August 31, 2021, the change in fair value of derivative liabilities decreased by $189,468.

The change in fair value of derivative liabilities was due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock.

As there was no derivative liabilities resulting from the conversion features of the convertible debt at August 31, 2022 the corresponding change in fair value was significantly lower when comparing the prior year’s quarter.

Interest expense decreased by $811,753 due to a decrease in debt amortization expense.

The three months ended August 31, 2021 had higher amortization due to debt settlements.

Gain on settlement of debt was $3,992 the quarter ended August 31, 2022 and $72,709 in the quarter ended August 31, 2022.

We had a net loss of $4,172,865 for the three months

ended May 31, 2022, compared to a net loss of $35,904,918 for the three months ended May 31, 2021.

ended August 31, 2022, compared to a net loss of $4,832,373 for the three months ended August 31, 2021.

The decrease in net loss of $659,508 is primarily as a result

higher revenues and lower other expense in the three months ended August 31, 2022 as well as and other items discussed above.

Results of Operations for the Six Months Ended

August 31, 2022 and 2021

The following table shows our results of operations

for the six months ended August 31, 2022 and 2021.

The historical results presented below are not necessarily indicative of the results

that may be expected for any future period.

August 31, 2022

August 31, 2021

Operating expenses

Loss from operations

Other income (expense), net

The following table presents revenues from contracts

with customers disaggregated by product/service:

August 31, 2022

August 31, 2021

Device rental activities

Direct sales of goods and services

Total revenue for the six-month period ended August

31, 2022 was $652,641 which represented a decrease of $49,265 compared to total revenue of $701,996 for the six months ended August 31,

The small decrease was a result of unusually large unit sales which includes sales of new units totaling $434,342 which occurred

in the six months ended August 31, 2021 .This was partially offset by a 115% increase in rental activities increased as the Company continues

to grow its rental business.

Total gross profit for the six-month period ended

August 31, 2022 was $324,703 which represented a decrease of $224,323, compared to gross profit of $549,026 for the six months ended August

The decrease resulted both from lower revenues noted above as well as cost of sales increases in 2022 due to inventory changes.

The gross profit percentage of 50% for the six-month period ended August 31, 2022 was lower than the margin of 78% for the prior year’s

corresponding period was primarily due to inventory adjustments due to shrinkage and obsolescence totaling $152,475, which occurred in

the first quarter.

Before these adjustments the gross profit % for the six months ended August 31, 2022 would have been a comparable 73%.

Operating Expenses

August 31, 2022

August 31, 2021

Research and development

General and administrative

Depreciation and amortization

Operating lease cost and rent

(Gain) loss on disposal of fixed assets

Operating expenses

Our operating expenses were comprised of general and

administrative expenses, research and development, and depreciation.

General and administrative expenses consisted primarily of professional

services, automobile expenses, advertising, salaries and wages, travel expenses and consultants.

Our operating expenses during the six-month

period ended August 31, 2022 and August 31, 2021, were $6,999,791 and $5,984,944, respectively.

The overall increase of $1,014,847 was

primarily attributable to the following changes in operating expenses of:

General and administrative expenses increased by $148,122.

In comparing the six months ended August 31, 2022 and August 31, 2021 may be partially explained by the following increases:

wages and salaries by $1,004,437, sales and marketing by $231,205, travel by $97,118, insurance by $178,077, duty and freight by $29,837, and office expense by $78,308.

These were partially offset by decreases in the following accounts:

production supplies by $109,037, professional fees by $408,682, subcontractor fees $100,294 and stock-based compensation $857,550.

Research and development increased by $653,584 due to funding development of new products as well as upgrades of existing products.

Included in that increase is the increase in research and development paid to a related party of $917,341.

Depreciation and amortization increased by $154,454 due to the acquisition of ERP computer software, computer equipment tooling, and 54 new revenue earning devices.

Operating lease cost and rent increased by $29,562 due the manufacturing facility lease, six full months for the six months ended August 31, 2022 compared to only 4 months for the six months ended August 31, 2021.

(Gain) loss on disposal of fixed assets increase by $29,125 due to a vehicle sold in the prior year.

Other Income (Expense)

Other income (expense) during the six months ended

August 31, 2022 and August 31, 2021, was ($2,169,463) and ($35,301,373), respectively.

The $33,131,910 increase in other income was primarily

attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.

In comparing the six months ended August 31, 2022 and the six months ended August 31, 2021, the change in fair value of derivative liabilities decreased by $368,907 due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock as well as reductions in derivative liability as a result of settlements on the underlying debt.

Interest expense increased by $585,173 due to increases in loan and convertible notes payable

Gain (loss) on settlement of debt was $3,992 the six months ended August 31, 2022 and ($32,911,652) in six months ended August 31, 2022.

This current period the gain was a result of the reduction of the derivative liability , the prior year’s period has an amendment of the deferred variable payment obligation that led to a $33,015,215 loss which was partially offset by gains from accrued liabilities settlements and the debt exchange for common shares.

This loss on settlement of debt was non-cash and has no effect on the cash flows of the Company.

We had a net loss of $8,844,551 for the six months

ended August 31, 2022, compared to a net loss of $40,737,291 for the six months ended August 31, 2021.

The change is primarily the result

of the loss on settlement in the three months ended May 31, 2021 as well as and other items discussed above.

of the loss on settlement in the six months ended August 31, 2021 as well as the change in the fair value of the derivative liabilities

and other items discussed above.

Liquidity, Capital Resources and Cash Flows

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generated revenue and are trying to achieve positive cash flows from operations.

As of May 31, 2022, we had a cash balance of $921,629,

As of August 31, 2022, we had a cash balance of

$363,073, accounts receivable of $442,652, device parts inventory of $1,640,891 and $3,466,248 in current liabilities.

At the current cash

consumption rate, we will need to consider additional funding sources going forward.

We are taking proactive measures to reduce operating

expenses and drive growth in revenue.

current cash consumption rate, we will need to consider additional funding sources going forward.

We are taking proactive measures

to reduce operating expenses and drive growth in revenue.

The successful outcome of future activities cannot

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liabilities and working capital (deficit) for the periods indicated:

August 31, 2022

February 28, 2022

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Working capital

As of May 31, 2022 and February 28, 2022, we had a

cash balance of $921,629 and $4,648,146, respectively.

As of August 31, 2022 and February 28, 2022, we had

a cash balance of $363,073 and $4,648,146, respectively.

Summary of Cash Flows

August 31, 2022

August 31, 2021

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net cash used in operating activities.

Net cash used in operating activities for the three

months ended May 31, 2022 was $3,621,572, which included a net loss of $4,671,686, non-cash activity such as the bad debts expense of

$105,000, inventory provision $25,000, reduction of right of use asset of $30,046, accretion of lease liability $36,355, stock based compensation

of $161,500, change in operating assets of $179,948, amortization of debt discount of $415,029, increase in related party accrued payroll

and interest of $3,240 and depreciation and amortization of $93,995 to derive the uses of cash in operations.

Net cash used in operating activities for the six

months ended August 31, 2022 was $6,754,462, which included a net loss of $8,844,551, non-cash activity such as the bad debts expense

of $145,000, inventory provision $70,000, reduction of right of use asset of $56,854, accretion of lease liability $72,090, stock based

compensation of $343,000, change in value of derivative liabilities of ($3,595), gain on settlement of debt of ($3,992) , change in operating

assets of $492,871, amortization of debt discount of $671,594, increase in related party accrued payroll and interest of $6,480 and depreciation

and amortization of $239,786 to derive the uses of cash in operations.

Net cash used in investing activities.

Net cash used in investing activities for the three

months ended May 31, 2022 was $88,214, which was the purchase of fixed assets,

Net cash used in financing activities.

Net cash used in financing activities was $16,731

for the three months ended May 31, 2022.

This consisted of share proceeds net of issuance costs of $1,645,222, reduced by repayments on

loans payable of $1,661,953.

Net cash used in investing activities for the six

months ended August 31, 2022 was $207,197, which was the purchase of fixed assets,

Net cash provided by financing activities.

Net cash provided by financing activities was $2,676,586

for the six months ended August 31, 2022.

This consisted of share proceeds net of issuance costs of $3,255,289,procees from convertible

notes payable of $619,250, proceeds from loans payable of $500,000, reduced by repayments on loans payable of $1,697,953.

Off-Balance Sheet Arrangements

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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 consulting 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis