What changed in this filing

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Item 1. Financial Statements

2023-07-17 compared with 2023-01-20 · 310 added, 585 removed, 825 unchanged (52% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, 2022

February 28, 2023 *

7 unchanged sentences

Fixed assets, net of accumulated depreciation of $ 227,103 and $ 182,002 , respectively

Investment at cost

Security deposit

2 unchanged sentences

Accounts payable and accrued expenses

Advances payable

Advances payable- related party

Customer deposits

1 unchanged sentence

Current portion of deferred variable payment obligation

Current portion of convertible notes payable, net of discount of $ 433,932 and $ 0 , respectively

Loan payable - related party

Incentive compensation plan payable

Current portion of loans payable, net of discount of $ 158,194 and $ 14,745 , respectively

Current portion of loans payable, net of discount of $ 1,348,996 and $ 1,651,597

Vehicle loan - current portion

Current portion of accrued interest payable

Derivative liability

Total current liabilities

8 unchanged sentences

15,545,650 shares authorized;

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

no shares issued and outstanding at May 31, 2023 and February 28, 2023, respectively

Series G Convertible Preferred Stock.

$ 0.001 par value;

100,000 shares authorized, no shares issued and outstanding at May 31, 2023 and February 28, 2023, respectively

Series E Preferred Stock, $ 0.001 par value;

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2,533 and 2,533 shares issued and outstanding, respectively

Series G Preferred Stock, $ 0.001 par value;

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;

4 unchanged sentences

( 116,808,904

( 112,253,711

Total stockholders' deficit

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

November 30, 2022

November 30, 2021

November 30, 2022

November 30, 2021

Cost of Goods Sold

Operating expenses:

Research and development (Note 10)

Research and development (including related party charges of $ 882,015 (2022-$ 1,001,734 ))

General and administrative

1 unchanged sentence

Operating lease cost and rent

(Gain) loss on disposal of fixed assets

Total operating expenses

1 unchanged sentence

Other income (expense), net:

Change in fair value of derivative liabilities

Interest expense

Gain (loss) on settlement of debt

Total other income (expense), net

Net income (loss)

Net income (loss) per share - basic

3 unchanged sentences

4,798,657,871

4,969,080,716

4,162,382,783

Weighted average common share outstanding - diluted

1 unchanged sentence

4,798,657,871

4,969,080,716

4,162,382,783

The accompanying notes are an integral part of

4 unchanged sentences

Preferred Stock

Shareholders'

Balance at February 28, 2021

3,229,426,884

Series F Preferred Shares issued with amendment agreement

Series F Preferred Shares Warrants issued with amendment agreement

Series F Preferred Shares cancelled in exchange for promissory notes

Series F preferred shares issued on exercise of warrants

Series F Preferred Shares converted to common shares

Relative fair value of warrants issued with debt

Stock based compensation

Balance at May 31, 2021

3,545,772,882

Adjustment to derivative liability

Common stock issued for debt conversion

Exercise of warrants

Relative fair value of warrants issued with debt

Cancellation of Series E Shares

Exchange of debt for common shares

Stock based compensation on issuable shares

Exchange of Series F Preferred Shares for debt

Balance at August 31, 2021

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

these unaudited condensed consolidated financial statements.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S

Preferred Stock

Stockholders’

2 unchanged sentences

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

Relative fair value of Series F warrants issued with loans payable

Stock based compensation

Balance at May 31, 2022

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

Balance at February 28, 2023

5,848,741,599

1 unchanged sentence

Issuance of shares, net of $ 81,285 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

Relative fair value of Series F warrants issued with loans payable

Stock based compensation

Balance at May 31, 2023

6,129,670,789

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

November 30, 2022

Nine Months Ended

November 30, 2021

CASH FLOWS USED IN OPERATING ACTIVITIES:

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

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Depreciation and amortization

Revenue earning device sold and expensed in cost of sales

Bad debts expense

2 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

(Gain) loss on settlement of debt

Increase in related party accrued payroll and interest

1 unchanged sentence

Accounts receivable

Prepaid expenses

Deposits on right of use asset

Prepaid expenses and deposits on inventory

Device parts inventory

Accounts payable and accrued expenses

Accrued expense -related party

Customer deposits

Operating lease liabilities

Current portion of deferred variable payment obligation for payments

Balance owed WeSecure

Operating lease liability payments

Current portion of deferred variable payment obligations for payments

Accrued interest payable

Net cash used in operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES:

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets

Acquisition of trademarks

Proceeds on disposal of fixed assets

Cash paid for security deposit

Net cash (used in) investing activities

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Repayment of loans payable

Proceeds from convertible debt and warrants issued

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

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net change in cash

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Noncash investing and financing activities:

Right of use asset for operating lease liability

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

Transfer from device parts inventory to fixed assets

Discount applied to face value of loans

Warrants issued as part of debt

Exercise of warrants

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

Series F preferred shares converted to common shares

Series F preferred shares issued on exercise of warrants

Series F warrants issued as part of debt issuance

The accompanying notes are an integral part of

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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.

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

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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AITX’s prior business focus was transportation

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.

services, and AITX 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

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 nine months ended November 30, 2022, the Company

For the three months ended May 31, 2023, the Company

had negative cash flow from operating activities of $ 2,991,003 .

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

As of May 31, 2023, the Company has an accumulated deficit of $ 116,808,904 ,

and negative working capital of $ 21,819,216 .

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financial situation as follows:

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.

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.

In March 2023, the Company entered into an equity financing agreement whereby an

investor will purchase up to $ 30,000,000 of the Company’s common stock at a discount over a two-year period.

and April 2023 the Company reduced personnel that were working on far-future solutions as well as other department reductions.

with other cost cutting measures management estimates it reduced the monthly expense burn by $ 200,000 - $ 300,000 with little impact

on short and medium term operations.

Management believes that it has the necessary support to continue operations by continuing its funding

methods in the following ways :

growing revenues ,equity proceeds and non-convertible debt.

Management has had many recent conversations

with the Company’s primary debt holder and believes that the non-convertible debt on the balance sheet will be extended.

notes that non-convertible debt on the books has been extended by this debt holder twice in the past and notes that this debt holder has

been a strong supporter of the Company.

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 this fiscal period through to June 30, 2023 has raised an additional

$ 3.5 million net of issuance costs through the sale of its common shares.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

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

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

and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on June 14, 2023.

The unaudited

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for a fair presentation of such statements.

The results of operations for the six months ended November 30, 2022 are not necessarily indicative

The results of operations for the three months ended May 31, 2023 are not necessarily indicative

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

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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.

At May 31, 2023 there were $ 32,427,346 of loans payable,

$ 28,090,506 or 87 % of these loans to companies controlled by one individual.

At February 28, 2023 there were $ 31,254,345 of loans payable

$ 26,540,506 or 85 % of these loans to companies controlled by the same individual.

The Company considers all highly liquid investments

10 unchanged sentences

and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

There was an allowance of $ 109,890

and $ 33,890 provided as of November 30, 2022 and February 28, 2022, respectively.

There was an allowance of $ 16,000 and

$ 39,000 provided as of May 31, 2023 and February 28, 2023, respectively.

For the three months ended May 31, 2023 , two customers account

for 51 % of total accounts receivable .

For the three months ended May 31, 2022 , four customers account for 59 % of total accounts receivable.

Device Parts Inventory

9 unchanged sentences

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

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

As of both May 31, 2023 and February 28, 2023 there was a

valuation reserve of $ 195,000 and $ 195,000 , respectively.

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Depreciation is provided

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

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

Major repairs

1 unchanged sentence

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

Fixed assets consisted of the following:

Computer equipment and software

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

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

Company had no deferred development costs.

At May 31, 2023 and February 28, 2023, the Company

had no deferred development costs.

Contingencies

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Customers for additional information.

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

For the three months ended May 31, 2023 , three customers accounted for 57 % of total revenue.

the three months ended May 31, 2022, two customers accounted for 29 % of total revenue.

Income taxes are accounted for under the asset and

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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 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.

Initial Measurement

33 unchanged sentences

Fair Value Measurement Using

November 30, 2022

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

Derivative liability – conversion features pursuant to convertible notes payable

February 28, 2023

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

Derivative liability – conversion features pursuant to convertible notes payable

The carrying amounts of the Company’s financial

17 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

Adopted Accounting Standards

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

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

and deferred tax liabilities;

Recently Adopted Accounting Standards

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

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

tax liabilities;

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

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

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

The Company adopted the new guidance effective February

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In January 2020,

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on the Company’s consolidated financial statements upon adoption.

Issued Accounting Standards Not Yet Adopted

Recently Issued Accounting Standards Not Yet Adopted

In March 2020,

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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,

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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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents revenues from contracts

with customers disaggregated by product/service:

November 30, 2022

November 30, 2021

November 30, 2022

November 30, 2021

Three Months Ended

Device rental activities

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Below is a summary of our lease assets and liabilities

at November 30, 2022 and February 28, 2022.

at May 31, 2023 and February 28, 2023.

Classification

November 30, 2022

February 28, 2023

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and were expensed in general and administrative expenses as incurred.

Rent expense and operating lease cost was $ 61,005

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

Operating lease cost and rent was $ 62,542 and $ 69,967

for the three months ended May 31, 2023 and May 31, 2022, respectively.

REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

November 30, 2022

February 28, 2023

1 unchanged sentence

Accumulated depreciation

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 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 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.

During the three months ended May 31, 2023 the Company

made total additions to revenue earning devices of $ 444,412 which were transfers from inventory.

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.

Depreciation expense was $ 122,841 and $ 71,414 for

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.

the three months ended May 31, 2023, and 2022 respectively.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fixed assets consisted of the following:

November 30, 2022

February 28, 2023

Manufacturing equipment

Computer equipment and software

Machinery and equipment

Computer equipment

Office equipment

Furniture and fixtures

Warehouse equipment

1 unchanged sentence

Accumulated depreciation

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 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 .

During the three months ended May 31, 2023 the Company

made additions of $ 32,173 of which $ 28,710 were transfers from inventory with remaining additions of $ 3,463 .

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 .

Depreciation expense was $ 45,101 and $ 22,581 for the

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.

three months ended May 31, 2023, and 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.

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

On November 18, 2019, the Company entered into another

similar arrangement with the (February 1, 2019) investor above whereby the investor would advance up to $ 225,000 in exchange for a perpetual

On November 18, 2019 the Company entered into an arrangement

similar to the (February 1, 2019 agreement above) investor above whereby the investor would advance up to $ 225,000 in exchange for a perpetual

2.25 % rate Payment on the Company’s quarterly Revenues (commencing on quarter ending May 31, 2020).

1 unchanged sentence

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

On December 30, 2019, the Company entered into another

similar arrangement with a new investor whereby the investor would advance up to $ 100,000 in exchange for a perpetual 1.00 % rate Payment

on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020).

At February 29, 2020, the investor has advanced

$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.

On April 22, 2020, the Company entered into another

similar arrangement with the (first May 9, 2019) investor above whereby the investor would advance up to $ 100,000 in exchange for

a perpetual 1.00 % rate Payment on the Company’s quarterly Revenues.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 30, 2019 the Company entered into an arrangement

with a new investor whereby the investor would advance up to $ 100,000 in exchange for a perpetual 1.00 % rate Payment on the Company’s

quarterly Revenues (commencing quarter ended November 30, 2020).

At February 29, 2020 the investor has advanced $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.

On April 22, 2020 the Company entered into an arrangement

with the (first May 9, 2019) investor above whereby the investor would advance up to $ 100,000 in exchange for a perpetual 1.00 % rate

Payment on the Company’s quarterly Revenues.

At May 31, 2020 the investor has fully funded this commitment.

On July 1, 2020, the Company entered into a similar

agreement with the first investor whereby the investor would pay up to $ 800,000 in exchange for a perpetual 2.75 % rate payment (Payment)

on the Company’s reported quarterly revenue.

These Payments are to be made 90 days after the fiscal quarter with the first payment

being due no later than May 31, 2021.

On July 1, 2020 the Company entered into an agreement

with the first investor whereby the investor would pay up to $ 800,000 in exchange for a perpetual 2.75 % rate payment (Payment) on the

Company’s reported quarterly revenue.

These Payments are to be made 90 days after the fiscal quarter with the first payment being

due no later than May 31, 2021.

If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred.

1 unchanged sentence

later than February 28, 2021.

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

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

On August 27, 2020 the Company and the first investor

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save for the following:

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.

the rate payment is revised to 14.25 % payable on revenues commencing the quarter ended August 31, 2020 and

the Payments are secured by the assets of the Company.

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

financing on the products the Company leases to its customers.

In summary of all agreements mentioned above if in

10 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,

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

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

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

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

The Payments will first become payable on June 30, 2019 (unless otherwise

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

As of May 31,

2023, the Company has accrued approximately $ 604,811 in Payments, of which $ 388,226 is in arrears.

As of February 28, 2023, the Company

has accrued approximately $ 542,177 in Payments, of which $ 325,600 is in arrears.

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 %

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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 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 November 30, 2022 and February 28, 2022.

As of February 28, 2023, 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 years ended February 28, 2023 and February

28, 2022, the Company has received $ 0 related to the deferred payment obligation as the balance remains $ 2,525,000 at both February 28,

2023 and February 28, 2022.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended May 31, 2023 and year ended

February 28, 2023 , 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, 2023 and February 28, 2023.

The Payments first become payable on June 30, 2019

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

of November 30, 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.

of May 31, 2023, the Company has accrued $ 388,227 in Payments (February 28, 2023 -$ 542,177 ).

At May 31, 2023, and February 28, 2023 the

Company was in default on $ 388,226 and $ 325,600 of those Payments.

No notices have been sent to the Company.

CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

Rate per Share

July 18, 2016

July 18, 2017 *

August 9, 2022

August 9, 2023

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

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

Default interest rate 22%

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

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 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 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

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.

The Company received $619,250 in cash proceeds, recorded an original issue discount of $75,000, recognized $393,949 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 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;

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;

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 nine months ended November 30, 2022, the Company

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

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.

For both the three months ended May 31, 2023 and May

31, 2022 , the Company had no repayments of net advances from its loan payable-related party.

At May 31, 2023, the loan payable-related

party was $ 243,256 and $ 206,516 at February 28, 2023.

Included in the balance due to the related party at May 31, 2023 is $ 139,250 of

deferred salary and interest, $ 133,000 of which bears interest at 12 %.

At February 28, 2023 there was $ 108,000 of deferred salary with

$ 108,000 bearing interest at 12 %.

The accrued interest included in loan at May 31, 2023 and February 28, 2022 was $ 19,275 and $ 15,660 ,

respectively.

Pursuant to the amended Employment Agreement with

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

its Chief Executive Officer, for the three months ended May 31, 2023 the Company accrued $ 63,000 (three months ended May 31 2022-$ 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 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 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.

At May 31, 2023 and February 28, 2023 there was $ 1,042,000 and $ 979,000 of incentive compensation payable.

During the three months ended May 31, 2023 and 2022,

the Company was charged $ 882,015 and $ 1,001,734 , respectively for fees for research and development from a company partially owned by

a principal shareholder.

OTHER DEBT – VEHICLE LOAN

17 unchanged sentences

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

as of November 30, 2022 and February 28, 2022, respectively, of which all were classified as current.

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

1 unchanged sentence

LOANS PAYABLE

Loans payable at November 30, 2022 consisted of the

Loans payable at May 31, 2023 consisted of the following:

Interest Rate

2 unchanged sentences

Promissory note

June 11, 2018

June 11, 2019

Promissory note

January 31, 2019

June 30, 2019

Promissory note

June 30, 2019

Promissory note

June 30, 2019

Promissory note

June 26, 2019

June 26, 2020

Promissory note

September 24, 2019

June 24, 2020

Promissory note

January 30, 2020

January 30, 2021

Promissory note

February 27, 2020

February 27, 2021

Promissory note

April 16, 2020

April 16, 2021

Promissory note

June 12, 2020

June 12, 2021

Promissory note

June 16, 2020

June 16, 2021

Promissory note

September 15, 2020

September 15, 2022

Promissory note

October 6, 2020

March 6, 2023

Promissory note

November 12, 2020

November 12, 2023

Promissory note

November 23, 2020

October 23, 2022

Promissory note

November 23, 2020

November 23, 2023

Promissory note

December 10, 2020

13 unchanged sentences

Promissory note

December 30, 2020

December 30, 2023

Promissory note

December 31, 2021

December 31, 2024

January 1, 2021

January 1, 2024

Promissory note

December 31, 2021

December 31, 2024

January 1, 2021

January 1, 2024

Promissory note

42 unchanged sentences

Promissory note

January 11, 2023

October 31,2026

Promissory note

February 6, 2023

October 31, 2026

Promissory note

October 31, 2026

Promissory note

October 31, 2026

Promissory note

October 31, 2026

Promissory note

current portion of loans payable

4 unchanged sentences

Current portion of loans 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The loan and accrued interest were paid in March 2022.

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

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

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

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

Interest payable monthly, principal due at maturity.

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

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

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

Secured by revenue earning devices.

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

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

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

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

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

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

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

Secured by revenue earning devices.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This promissory note was issued as part of a debt settlement whereby $ 103,180 in convertible notes and associated accrued interest of $ 62,425 totaling $ 165,605 was exchanged for this promissory note of $ 165,605 , and a warrant to purchase 80,000,000 shares at an exercise price of $.

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

This promissory note was issued as part of a debt settlement whereby $ 235,000 in convertible notes and associated accrued interest of $ 75,375 totaling $ 310,375 was exchanged for this promissory note of $ 310,375 , and a warrant to purchase 25,000,000 shares at an exercise price of $.

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

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

This promissory note was issued as part of a debt

settlement 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 .

The note, with an original principal amount of $ 350,000 , 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 $ 271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant.

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.

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 39,904 , respectively, with an unamortized discount of $ 153,611 at May 31, 2023.

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 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.

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 51,045 respectively, with an unamortized discount of $ 188,291 at May 31, 2023.

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 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.

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

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 159,064 respectively, with an unamortized discount of $ 953,197 at May 31, 2023.

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

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

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

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

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

This note has been fully amortized.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The note, with an original principal balance of $ 2,750,000 , 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 $ 2,035,033 with a corresponding adjustment to paid in capital.

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.

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

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 154,910 respectively, with an unamortized discount of $ 639,308 at May 31, 2023.

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

1 unchanged sentence

The loan is unsecured.

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.

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 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.

For the three months ended May 31, 2023 there were repayments of $ 27,000 on the note.

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 months ended May 31, 2023, the Company

recorded amortization expense of $ 86,930 respectively, with an unamortized discount of $ 1,27,501 at May 31, 2023.

Original $ 170,000 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.

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.

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 5,287 respectively, with an unamortized discount of $ 3,739 at May 31, 2023.

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.

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 4,557 respectively, with an unamortized discount of $ 26,312 at May 31, 2023.

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.

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.

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.

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

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 12,342 respectively, with an unamortized discount of $ 15,479 at May 31, 2023.

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

1 unchanged sentence

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.

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

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 18,930 respectively, with an unamortized discount of $ 17,799 at May 31, 2023.

Original $ 350,000 note may be pre-payable at any time.

The note balance includes an original issue

discount of $ 50,000 .

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.

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

For the three months ended May 31, 2023, the Company recorded amortization expense of $ 12,290 respectively, with an unamortized discount of $ 20,620 at May 31, 2023.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 28, 2022 the Company entered into an loan

2 unchanged sentences

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,

tranches with each tranche 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.

4 unchanged sentences

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.

For the three

months ended May 31, 2023, the Company recorded amortization expense of $ 1,866 respectively, with an unamortized discount of $ 346,157

at May 31, 2023.

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.

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

For the three months ended May 31, 2023, the

Company recorded amortization expense of $$ 1,838 respectively, with an unamortized discount of $ 346,600 at May 31, 2023.

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.

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

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 16,678 respectively, with an unamortized discount of $ 349,214 at May 31, 2023.

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.

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

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 1,881 respectively, with an unamortized discount of $ 345,914 at May 31, 2023.

January 11, 2023, $ 400,000 loan, original issue discount

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

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 1,925 respectively, with an unamortized discount of $ 345,265 at May 31, 2023.

February 6, 2023, $ 400,000 loan, original issue discount

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

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 1,836 respectively, with an unamortized discount of $ 346,590 at May 31, 2023.

April 5, 2023, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $296,245.

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 751 respectively, with an unamortized discount of $ 345,494 at May 31, 2023.

April 20, 2023, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $302,219.

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 196 respectively, with an unamortized discount of $ 352,023 at May 31, 2023.

May 11, 2023, $ 400,000 loan, original issue discount

of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $348,983.

For the three months ended May 31, 2023, the

Company recorded amortization expense of $ 0 respectively, with an unamortized discount of $ 398,983 at May 31, 2023.

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DERIVATIVE LIABILITIES

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 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

There was 1 Series F Preferred Share issued along

with debt to a lender.

No preferred stock activity during the period.

Summary of Preferred Stock Warrant Activity

Schedule of Summary of stock Option Activity

Number of Series C Preferred Warrants

Number of Series F Preferred Warrants

Weighted Average Exercise Price

2 unchanged sentences

Forfeited and cancelled

Outstanding at November 30, 2022

Outstanding at May 31, 2023

During the three months ended May 31, 2023, as part

of debt issuance the Company issued 183 Series F Preferred Warrants to a lender for a relative fair value of $ 947,447 .

(see Note 11)

Summary of Common Stock Activity

The Company increased authorized common shares from

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

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 as a result of an SEC enforcement

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

For the three months ended May 31, 2023 , the Company

issued 280,929,190 common shares with gross proceeds of $ 1,400,094 and net proceeds of $ 1,318,809 after issuance costs of $ 81,285 .

The table below represent the common shares issued,

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

issuable and outstanding at May 31, 2023 and February 28, 2023:

Common shares

November 30, 2022

February 28, 2023

4 unchanged sentences

5,848,741,599

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Common Stock Warrant Activity

2 unchanged sentences

Weighted Average Remaining Years

Outstanding at March 1, 2022

1,216,845,661

Forfeited, extinguished and cancelled

( 955,000,000

Outstanding at November 30, 2022

Required dilution adjustment per warrant agreement

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.

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

Outstanding at February 28, 2023

Forfeited and cancelled

Outstanding at May 31, 2023

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

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

adjustment to additional paid-in capital.

Summary of Common Stock Option Activity

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 .

Number of Warrants

Weighted Average Exercise Price

Weighted Average Remaining Years

Outstanding at February 28 , 2023

Forfeited, extinguished and cancelled

Outstanding at May 31, 2023

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

26 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 $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.

cost was $ 62,542 for the three months May 31, 2023 and $ 69,967 for the three months May 31, 2022.

Maturity of Lease Liabilities

November 30, 2023

November 30, 2024

November 30, 2025

November 30, 2026

November 30, 2027

November 30, 2028 and after

May 31, 2029 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 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

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

Net income (loss) adjusted for common stock equivalents

2 unchanged sentences

4,798,657,871

4,969,080,716

4,162,382,723

Net income (loss) per share – basic

Dilutive effect of common stock equivalents:

Convertible Debt

Preferred shares

Weighted average shares – diluted

1 unchanged sentence

4,798,657,871

4,969,080,716

4,162,382,723

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 November 30, 2022 and 2021 were as follows :

for the three months ended May 31, 2023 and 2022 were as follows:

For the Three Months Ended

For the Nine Months Ended

Convertible notes and accrued interest

3 unchanged sentences

1,223,938,916

* 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

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 May 31, 2023 and 2022 the dilutive effects would be as follows:

Series F Preferred shares been convertible the dilutive effects would be as follows:

For the Three Months Ended

Convertible Series F Preferred Shares

2 unchanged sentences

SUBSEQUENT EVENTS

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

Subsequent to May 31, 2023 through to July 14, 2023:

— the Company issued 441,502,460

common shares pursuant to a share purchase agreement for gross proceeds of $ 2,922,520 ,

issuance costs of $ 132,591

and net proceeds of $ 2,789,929 .

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