What changed in this filing

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Item 1. Financial Statements

2023-01-20 compared with 2022-10-21 · 331 added, 238 removed, 1079 unchanged (35% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2022

November 30, 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 August 31, 2022 and February 28, 2022, respectively

no shares issued and outstanding at November 30, 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 August 31, 2022 and February 28, 2022, respectively

4,350,000 shares authorized, no shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively

Common Stock, $ 0.00001 par value;

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

November 30, 2022

November 30, 2021

November 30, 2022

November 30, 2021

Cost of Goods Sold

11 unchanged sentences

Gain (loss) on settlement of debt

Total other expense net

Net loss per share - basic

Net loss per share - diluted

Total other income (expense), net

Net income (loss) per share - basic

Net income ( loss) per share - diluted

Weighted average common share outstanding - basic

14 unchanged sentences

Preferred Stock

Stockholders’

Preferred Stock

Shareholders'

Balance at February 28, 2021

3,229,426,884

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

Series F Preferred Shares issued with amendment agreement

Series F Preferred Shares Warrants issued with amendment agreement

Series F Preferred Shares cancelled in exchange for promissory notes

1 unchanged sentence

Series F Preferred Shares converted to common shares

Warrants issued as part of a debt issuance

Relative fair value of warrants issued with debt

Stock based compensation

3 unchanged sentences

Common stock issued for debt conversion

Stock based compensation on issuable shares

Exercise of warrants

Exchange of debt for common shares

Relative fair value of warrants issued with debt

Cancellation of Series E preferred shares

Cancellation of Series E Shares

Exchange of debt for common shares

Stock based compensation on issuable shares

Exchange of Series F Preferred Shares for debt

1 unchanged sentence

3,995,271,111

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

Cashless exercise of 100,000,000 warrants

Relative fair value of warrants issued with debt

Redemption of 19 Issuable Series F shares

Issuance of Series G preferred as equity awards per employment agreement

Redemption of Series G shares as compensation payment

Balance at November 30, 2021

4,435,210,360

The accompanying notes are an integral part of

19 unchanged sentences

( 102,988,805

Issuance of shares, net of $ 68,732 issuance costs

Relative fair value of Series F warrants issued with debt

Relative fair value of warrants issued with debt

Balance at November 30, 2022

5,260,515,892

( 107,074,465

The accompanying notes are an integral part of

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

August 31, 2022

Six Months Ended

August 31, 2021

Nine Months Ended

November 30, 2022

Nine Months Ended

November 30, 2021

CASH FLOWS USED IN OPERATING ACTIVITIES:

16 unchanged sentences

Prepaid expenses

Deposits on inventory

Deposits on right of use asset

Device parts inventory

9 unchanged sentences

Purchase of fixed assets

Acquisition of trademarks

Proceeds on disposal of fixed assets

7 unchanged sentences

Repayment of convertible debt

Series G preferred shares redeemed as payment on incentive plan payable

Dividend and redemption of cancelled issuable Series F preferred shares

Net borrowings (repayments) on loan payable - related party

17 unchanged sentences

Exercise of warrants

Series F preferred shares issued for debt

Series F preferred shares and warrants issued for debt

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

Cancellation of Series E preferred shares and common shares

9 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 a Limited Liability Company.

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

Corporation, Robotic Assistance Devices, Inc., through the issuance of 10,000 common shares to its sole shareholder.

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 Corporation, Robotic Assistance Devices, Inc., through the issuance of 10,000 common shares to its sole shareholder.

On August 28, 2017, AITX completed the acquisition

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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, 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.

As a result of the 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.

The Acquisition was treated as a reverse recapitalization

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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 August 31, 2022, the Company

For the nine months ended November 30, 2022, the Company

had negative cash flow from operating activities of $ 9,883,272 .

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

As of November 30, 2022, the Company has an accumulated deficit of $ 107,074,465 ,

and negative working capital of $ 1,046,707 .

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financial situation as follows:

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.

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.

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.

In the near term, management plans to potentially

raise an additional $1 million to $3 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 November 30, 2022 had $713,493 of cash on

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.

For the fiscal period through

to November 30, 2022, the Company has raised an additional $4.7 million net of issuance costs through the sale of its common shares and

raised approximately $3.2 million in current debt.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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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 six months ended August 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 November 30, 2022 are not necessarily indicative

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

Use of Estimates

7 unchanged sentences

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

Concentrations

Loans payable

At November 30, 2022 there were $30,506,346 of loans

payable, $26,090,506 or 85% of these loans to companies controlled by one individual.

At February 28, 2022 there were $26,233,598 of loans

payable $21,709,459 or 83% of these loans to companies controlled by the same individual.

The Company considers all highly liquid investments

11 unchanged sentences

There was an allowance of $ 109,890

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

and $ 33,890 provided as of November 30, 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 August 31, 2022 and February 28, 2021 there was a valuation

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

As of November 30, 2022 and February 28, 2022 there was a

valuation reserve of $ 155,000 and $ 65,000 , respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Earning Devices

8 unchanged sentences

of the asset exceeds the fair value.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fixed assets are stated at cost.

22 unchanged sentences

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

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

had no deferred development costs.

At November 30, 2022 and February 28, 2022, the

Company had no deferred development costs.

Contingencies

14 unchanged sentences

of each agreement, with the following primary criteria determinative of whether the agreement constitutes a sale of future revenues or

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Does the agreement purport, in substance, to be a sale

10 unchanged sentences

the Company has determined that all such agreements are debt.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

15 unchanged sentences

Customers for additional information.

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

For the nine months ended November 30, 2022 , two customers accounted for 41% of total revenue (2021-

Income taxes are accounted for under the asset and

32 unchanged sentences

fair value of the underlying asset.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If at its inception, a lease meets any of the four

9 unchanged sentences

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

13 unchanged sentences

Company accounts for the financial instrument as permanent equity.

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.

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

20 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

5 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Measured on a Recurring Basis

2 unchanged sentences

Fair Value Measurement Using

August 31, 2022

November 30, 2022

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

22 unchanged sentences

conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

7 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In January 2020,

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rentals are accounted for under Topic 842 (which addresses lease accounting and was adopted on March 1, 2019).

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As disclosed in the revenue recognition section of

18 unchanged sentences

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

with customers disaggregated by product/service:

Three Months Ended

Six Months Ended

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

November 30, 2022

November 30, 2021

November 30, 2022

November 30, 2021

Device rental activities

11 unchanged sentences

Below is a summary of our lease assets and liabilities

at August 31, 2022 and February 28, 2022.

at November 30, 2022 and February 28, 2022.

Classification

August 31, 2022

November 30, 2022

February 28, 2022

13 unchanged sentences

Rent expense and operating lease cost was $ 61,005

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.

and $ 194,653 for the three and nine months ended November 30, 2022, respectively, and $ 103,115 and $ 207,201 for the three and nine months

ended November 30, 2021, respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

August 31, 2022

November 30, 2022

February 28, 2022

1 unchanged sentence

Accumulated depreciation

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended August 31, 2022

During the three and nine months ended November 30,

2022 the Company made total additions to revenue earning devices of $ 199,047 and $ 625,094 , 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 ,

During the three and nine months ended November 30, 2021, the Company made total additions to revenue earning devices of $ 310,009 and

$ 592,346 , 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.

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 sold.

Depreciation expense was $ 54,418 and $ 241,957 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,

the three and nine months ended November 30, 2022, respectively, and $ 61,976 and $ 138,815 for the three and nine months ended November

30, 2021, respectively.

Fixed assets consisted of the following:

August 31, 2022

November 30, 2022

February 28, 2022

5 unchanged sentences

Accumulated depreciation

During the three months ended August 31, 2022, the

During the three months ended November 30, 2022, the

Company made additions of $ 31,365 of which $ 19,961 were transfers from inventory with remaining additions of $11,404.

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 .

During the nine

months ended November 30, 2022, the Company made additions of $ 265,041 of which $ 47,440 were transfers from inventory with remaining additions

During the three months and nine months ended November 30, 2021, the Company made additions of $ 2,372 and $ 34,534 , respectively.

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 .

Depreciation expense was $ 38,437 and $ 90,686 for the

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.

three and nine months ended November 30, 2022, respectively, and $ 5,951 and $ 14,446 for the three and nine months ended November 30, 2021,

respectively.

DEFERRED VARIABLE PAYMENT OBLIGATION

6 unchanged sentences

arrangements with two investors:

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

6 unchanged sentences

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

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later than February 28, 2021.

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

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

On August 27, 2020, the Company and the first investor

3 unchanged sentences

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

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

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.

11 unchanged sentences

43.77 % to 33.77%

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Payments will first become payable on June 30,

1 unchanged sentence

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

is $ 1,925,000 revised his agreements as follows:

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

investment is $ 1,925,000 revised his agreements as follows:

The rate payment was reduced from 14.25 % to 9.65 %

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

1 unchanged sentence

a five-year term and an exercise price of $ 1.00 .

During the three months ended May 31, 2021, the warrant holder exercised warrants to acquire

38 shares of Series F Convertible Preferred Stock.

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.

During the three months ended May 31, 2021, the warrant holder exercised warrants to

acquire 38 shares of Series F Convertible Preferred Stock.

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 Company retains total involvement in the generation

1 unchanged sentence

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

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

As of November 30, 2022, and February 28, 2022, the

long-term balances other than Payments already owed is the cash received of $ 2,525,000 a nd $ 2,525,000 , respectively.

For both the three months and nine months ended November

30, 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 balance remains $ 2,525,000 at both November 30, 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 August 31, 2022, the Company has accrued $ 431,720 in Payments (February 28, 2022 -$ 325,600 ).

At August 31, 2022, and February 28, 2022

of November 30, 2022, the Company has accrued $ 497,150 in Payments (February 28, 2022 -$ 325,600 ).

At November 30, 2022, and February 28,

2022 the Company was in default on $ 265,226 and $ 90,300 of those Payments.

18 unchanged sentences

Subject to adjustment for dilutive issuances

During both the three and six months ended August

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During both the three and nine months ended November

30, 2022, the Company incurred original issue discounts of $75,000, and relative fair value discounts debt discounts from derivative liabilities

of $393,949 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.

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

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

During the three and nine months ended November 30, 2022,

the Company recognized interest expense related to the amortization of debt discount of $78,149 and $90,767.

During the three and nine

months ended November 30, 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 August 31, 2022

As of November 30, 2022

and February 28, 2022, the Company had total accrued interest payable of $51,458 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.

During the nine months ended November 30, 2022, the

Company also had the following convertible note activity:

The 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.

4 unchanged sentences

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:

During the nine months ended November 30, 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;

2 unchanged sentences

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.

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 .

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

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

For the nine months ended November 30, 2022, the Company

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

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

advances of $ 118,342 .

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 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 August 31, 2022 and August 31, 2021 was $ 9,180 and $ 160,536 respectively.

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

net advances of $ 812,234 .

At November 30, 2022, the loan payable-related party was $ 203,276 and $ 193,556 at February 28, 2022.

in the balance due to the related party at November 30, 2022 is $ 126,744 of deferred salary and interest, $ 108,000 of which bears interest

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 November 30, 2022 and November 30, 2021 was $ 12,420 and $ 540 respectively.

Pursuant to the amended Employment Agreement with

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

its Chief Executive Officer, for the three months and nine months ended November 30, 2022, the Company accrued $138,000 and $362,500 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.

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

At November 30, 2022 and February 28, 2022 there was $ 842,000 and $ 479,500 of incentive compensation payable.

During the three months ended November 30, 2022 and

2021, the Company was charged $ 794,460 and $ 647,465 , 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

During the nine months ended November 30, 2022 and

2021, the Company was charged $ 2,735,589 and $ 1,689,253 , 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 August 31, 2022 and February 28, 2022, respectively, of which all were classified as current.

as of November 30, 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 August 31, 2022 consisted of the

Schedule of loans payable

Loans payable at November 30, 2022 consisted of the

Interest Rate

101 unchanged sentences

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

September 8, 2022

September 8, 2023

Promissory note

October 13, 2022

October 13, 2023

Promissory note

October 28, 2022

October 31, 2026

Promissory note

November 9, 2022

October 31, 2026

Promissory note

November 10, 2022

October 31, 2026

Promissory note

November 15, 2022

October 31, 2026

Promissory note

current portion of loans payable

discount on non-current loans payable

Non-current loans payable, net of discount

Current portion of loans payable

discount on current portion of loans payable

Current portion of loans payable, net of discount

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

33 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 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.

For both the three and six months ended November 30, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 0 at November 30, 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.

60 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 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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 22,829 and $ 53,156 , respectively, with an unamortized discount of $ 223,697 at November 30, 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 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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 34,441 and $ 85,968 , respectively, with an unamortized discount of $ 281,264 at November 30, 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 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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 82,582 and $ 184,959 , respectively, with an unamortized discount of $ 1,309,454 at November 30, 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 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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 120,297 and $ 319,016 , respectively, with an unamortized discount of $930,729 at November 30, 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.

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

For the quarter and nine months ended November 30, 2022 there was repayments $ 27,800 and $ 63,800 , respectively on the note.

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

1 unchanged sentence

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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 59,646 and $ 122,486 respectively.

with an unamortized discount of $ 1,279,947 at November 30, 2022.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 4,589 and $ 6,048 with an unamortized discount of $ 13,952 at November 30, 2022.

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

2 unchanged sentences

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.

For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 10,691 with an unamortized discount of $ 39,309 at November 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.

1 unchanged sentence

Principal and interest due at maturity.

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

For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 4,248 , with an unamortized discount of $ 35,252 at November 30, 2022

Original $ 475,000 note may be pre-payable at any time.

The note balance includes an original issue discount of $ 75,000 .

Principal and interest due at maturity.

Secured by a general

security charging all of RAD’s present and after-acquired property.

For both the three and nine months ended November 30, 2022,

the Company recorded amortization expense of $ 16,473 with an unamortized discount of $ 58,527 at November 30, 2022.

Original $ 350,000 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 the Company’s s

present and after-acquired property.

For both the three and nine months ended November 30, 2022, the Company recorded amortization

expense of $ 3,593 with an unamortized discount of $ 46,407 at November 30, 2022.

On October 28, 2022 the Company entered into an loan

facility with a lender for up to $4,000,000 including an original issue discount of $500,000.

In exchange the Company will issue one series

F Preferred Share, extended 329 series F warrants with a March 1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10

tranches with each trance of $400,000, with cash proceeds of $350,000 an original issue discount of $50,000, October 31, 2026 maturity,

and 61 Series F warrants with a October 31, 2033 maturity.

Secured by a general security charging all of the Company’s present and

after-acquired property.

At November 30, 2022 the Company has issued 4 tranches as follows:

October 28, 2022, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $299,399.

three and nine months ended November 30, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 349,399

at November 30, 2022.

November 9, 2022, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants e having a relative fair value of $299,750.

For both the three and nine months ended

November 30, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 349,750 at November 30, 2022.

November 10, 2022, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants e having a relative fair value of $302,020.

For both the three and nine months ended

November 30, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 352,020 at November 30, 2022.

November 15, 2022, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants e having a relative fair value of $299,959.

For both the three and nine months ended

November 30, 2022, the Company recorded amortization expense of $ 0 with an unamortized discount of $ 349,959 at November 30, 2022.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DERIVATIVE LIABILITIES

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

As of November 30, 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 .

For the three and nine months ended

November 30, 2022, the Company recorded a change in fair value of derivative liabilities of $ 0 and $ 3,595 , respectively and a gain on settlement

of debt (with a corresponding adjustment to derivative liabilities) of $ 0 and $ 3,992 , respectively.

STOCKHOLDERS’ EQUITY (DEFICIT)

Series F Preferred Shares

Each holder of Series E Convertible Preferred Shares

may, at any time and from time to time convert all, but not less than all, of their shares into a number of fully paid and nonassessable

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

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

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.

Summary or Preferred Stock Activity

No preferred stock activity during the period.

There was 1 Series F Preferred Share issued along

with debt to a lender.

Summary of Preferred Stock Warrant Activity

5 unchanged sentences

Forfeited and cancelled

Outstanding at August 31, 2022

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Outstanding at November 30, 2022

Summary of Common Stock Activity

1 unchanged sentence

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

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

During the nine months ended, November 30, 2022, the

Company issued 522,734,247 common shares with gross proceeds of $ 4,939,161 and net proceeds of $ 4,657,979 after issuance costs of $ 282,182 ,

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.

issued 9,688,179 shares through the cashless exercise of 61,378,210 warrants, cancelled 17,116,894 shares as a result of an SEC enforcement

action against a lender and issued 10,000,000 shares for $118,500 as payment for services.

The table below represent the common shares issued,

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

issuable and outstanding at November 30, 2022 and February 28, 2022:

Common shares

August 31, 2022

November 30, 2022

February 28, 2022

4 unchanged sentences

4,735,210,360

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Common Stock Warrant Activity

6 unchanged sentences

( 955,000,000

Outstanding at August 31, 2022

Outstanding at November 30, 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

For the three months and nine months ended November

30, 2022 and November 30, 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.

4 unchanged sentences

Summary of Common Stock Option Activity

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 .

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.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease

15 unchanged sentences

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s leases are accounted for as operating

1 unchanged sentence

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.

cost was $61,005 and $194,653for the three and nine months ended November 30, 2022, respectively, and $103,115 and $207,201 for the three

and nine months ended November 30, 2021, respectively.

Maturity of Lease Liabilities

August 31, 2023

August 31, 2024

August 31, 2025

August 31, 2026

August 31, 2027

August 31, 2028 and after

November 30, 2023

November 30, 2024

November 30, 2025

November 30, 2026

November 30, 2027

November 30, 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

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Net income (loss) available to common shareholders

1 unchanged sentence

interest expense on convertible debt

amortization of debt discount

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

16 unchanged sentences

Net income (loss) per share – diluted

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The anti-dilutive shares of common stock equivalents

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

for the three and six months ended November 30, 2022 and 2021 were as follows :

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Convertible notes and accrued interest

Convertible Series F Preferred Shares *

13,783,685,333

Stock options and warrants

1 unchanged sentence

1,237,643,136

* 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.

Had these Series F preferred shares been convertible at November 30, 2022 and 2021 the dilutive

effects would be as follows:

Had Series F Preferred shares been convertible the dilutive

effects would be as follows:

For the Three and Nine Months Ended

Convertible Series F Preferred Shares

18,148,779,827

1 unchanged sentence

SUBSEQUENT EVENTS

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.

Subsequent to November 30, 2022 through to January

— The Company issued 117,488,819 common

shares pursuant to a share purchase agreement for gross proceeds of $ 713,811 , issuance costs of $ 30,174 and net proceeds of $ 683,638 .

— On December 23, 2022 the Company entered

into a Simple Agreement for Future Equity (SAFE) contract to invest $ 50,000 to acquire shares of a company’s capital stock at a

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