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Item 2. Management’s Discussion and Analysis

2023-10-12 compared with 2023-07-17 · 152 added, 73 removed, 92 unchanged (71% of the section changed)

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The following discussion of our financial condition

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

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

Our discussion includes forward-looking

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

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

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

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

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

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

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

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

forward-looking statements.

and results of operations for the three and six months ended August 31, 2023 and August 31, 2022 should be read in conjunction with our

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

Our discussion

includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,

expectations and intentions.

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

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

Risk Factors appearing in our Annual Report on

Form 10-K for the year ended February 28, 2023, as filed on June 14, 2023 with the SEC.

We use words such as “anticipate,”

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

“believe,” “intend,” “may,” “will,” “should,” “could,” and similar

expressions to identify forward-looking statements.

Unless expressly indicated or the context requires

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Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms.

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Management Discussion and Analysis

Results of Operations for the Three Months Ended

May 31, 2023 and 2022

August 31, 2023 and 2022

The following table shows our results of operations

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

for the three months ended August31, 2022 and 2021.

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

that may be expected for any future period.

August 31, 2023

August 31, 2022

Operating expenses

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with customers disaggregated by product/service:

August 31, 2023

August 31, 2022

Device rental activities

Direct sales of goods and services

Total revenue for the three-month period ended May

31, 2023 was $385,208 which represented a small increase of $51 compared to total revenue of $385,157 for the three months ended May 31,

Total revenue for the three-month period ended August

31, 2023 was $386,363 which represented an increase of $118,879 compared to total revenue of $267,484 for the three months ended August

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

Rental activities increased by 51% over

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

Total gross profit for the three-month period ended

May 31, 2023 was $293,697 which represented an increase of $202,264 compared to gross profit of $ 91,433 for

the three months ended May 31, 2022.

The increase resulted primarily from inventory adjustments incurred in the prior three month period

ended May 31, 2022 totaling $177,475.

This was broken down as $152,475 in inventory adjustments due to shrinkage and obsolescence and

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

The gross profit % of 24% for the three-month period ended

May 31, 2022 was lower than the gross profit % of 76% for the three month period ended May 31, 2023 due to inventory adjustments previously

After accounting for those inventory adjustments totaling $177,475, the adjusted gross profit for the three months ended May

31, 2022 would have been 70% for comparative purposes.

August 31, 2023 was $297,349, which represented an increase of $64,079 compared to gross profit of $233,270 for the three months ended

August 31, 2022.

The gross profit increased due to the higher sales..

The gross profit % of 77% for the three-month period ended August

31, 2023 was lower than the gross profit % of 87% for the prior year’s corresponding period.

Operating Expenses

August 31, 2023

August 31, 2022

Research and development

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Our operating expenses during the three-month

period ended May 31, 2023 and May 31, 2022, were $3,242,674 and $3,588,089, respectively.

period ended August 31, 2023 and August 31, 2022, were $3,342,601 and $3,411,702, respectively.

The overall decrease of $69,101 was primarily

attributable to the following changes in operating expenses of:

General and administrative expenses decreased by $279,959.

In the three months ended May 31, 2023 the Company undertook cost savings measures including a reduction in force.

In comparing the three months ended May 31, 2023 and May 31, 2022 the decrease in G& A was primarily due to decreases in wages and salaries of $50,527 due to reduction in force, stock-based compensation of $45,779, office expenses of $7,087, travel $43,876, production supplies by $85,246 and bad debts expense of $89,000 due to fewer slow payers.

These decreases were partially offset by increases in sales and marketing of $62,731and professional fees of $61,631 mostly due compliance and audit fees increase.

General and administrative expenses increased by $56,029.

In comparing the three months ended August 31, 2023 and August 31, 2022 the decrease in G&A was primarily due to decreases in wages and salaries of $130,629 due to reduction in force, stock-based compensation of $68,727, office expenses of $12,885, travel $43,876, and bad debts expense of $31,270 due to fewer slow payers.

These decreases were partially offset by an increase in professional fees of $173,170 mostly due compliance and audit fees increase and other G&A increases.

Research and development decreased by $169,238 due to a reduction in funding on development of future products.

Depreciation and amortization increased by $73,947 due to large increases in revenue earning devoices , demo devices, tooling and computer equipment.

Operating lease cost and rent decreased by $7,425 due to one less lease in three month period ended May 31, 2023.

Depreciation and amortization increased by $45,248 due to large increases in revenue earning

devices, demo devices, tooling and computer equipment.

Operating lease cost and rent decreased by $1,140.

Other Income (Expense)

Other income (expense) consisted of interest.

income (expense) during the three months ended May 31, 2023 and May 31, 2022, was ($1,606,216) and ($1,175,030), respectively.

income (expense) during the three months ended August 31, 2023 and August 31, 2022, was ($1,714,476) and ($994,433), respectively.

$720,043 increase in other expense was primarily attributable to the increase in interest and amortization of debt due to higher loans.

We had a net loss of $4,759,728 for the three months

ended May 31, 2023, compared to a net loss of $4,671,686 for the three months ended May 31, 2022.

The change is primarily the result of

the loss on settlement in the three months ended May 31, 2021.

ended August 31, 2023, compared to a net loss of $4,172,865 for the three months ended August 31, 2022.

The increase in net loss of $586,863

is primarily a result of higher other expenses consisting of interest and debt amortization costs.

This increase was partially offset

by higher gross profit and lower operating expenses.

Results of Operations for the Six Months Ended

August 31, 2023 and 2022

The following table shows our results of operations

for the six months ended August 31, 2023 and 2022.

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

that may be expected for any future period.

August 31, 2023

August 31, 2022

Operating expenses

Loss from operations

Other income (expense), net

The following table presents revenues from contracts

with customers disaggregated by product/service:

August 31, 2023

August 31, 2022

Device rental activities

Direct sales of goods and services

Total revenue for the six-month period ended August

31, 2023 was $771,571 which represented an increase of $118,930 compared to total revenue of $652,641 for the six months ended August

This increase is a result of higher rental sales as the Company deployed 81more units when comparing these periods.

Total gross profit for the six-month period ended

August 31, 2023 was $591,046 which represented an increase of $266,343, compared to gross profit of $324,703 for the six months ended

August 31, 2022.

The gross profit increased due to the higher sales and higher margin sales.

The gross profit % of 77% for the six month

period ended August 31, 2023 was higher than the gross profit % of 50% for the prior year’s corresponding period.

The direct sales

for the six months ended August 31, 2023 consisted of higher proportion of training revenue at higher gross profit vs unit sales for the

six months ended August 31, 2022.

The gross profit % of 77% for the six month period ended August 31, 2023 was higher than the gross profit

% of 50% for the prior year’s corresponding period.

Operating Expenses

August 31, 2023

August 31, 2022

Research and development

General and administrative

Depreciation and amortization

Operating lease cost and rent

Operating expenses

General and administrative expenses consisted primarily

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

Our operating expenses

during the six-month period ended August 31, 2023 and August 31, 2022, were $6,585,273 and $6,999,791, respectively.

The overall decrease

of $ 414,518 was primarily attributable to the following changes in operating expenses of:

General and administrative expenses decreased by $ 223,932 .

In comparing the six months ended August 31, 2023 and August 31, 2022 the decrease may be partially explained by the following decreases:

wages and salaries by $181,156, stock based compensation by $114,506, subcontractors by $26,541, sales and marketing by $49,346, travel by $39,971, investor relations stock agents and regulatory expenses by $35,772, bad debts expense $120,270 and office expense by $19,972.

These were partially offset by increases in the following account:

professional fees by $259,677 and other G& A increases.

Research and development decreased by $301,216 due to a reduction in funding on development of future products.

Depreciation and amortization increased by $119,195 due to the acquisition of ERP computer software, computer equipment tooling, and 81 new revenue earning devices.

Operating lease cost and rent decreased by $8,565 due to one less lease in the current period.

Other Income (Expense)

Other income (expense) during the six months ended

August 31, 2023 and August 31, 2022, was ($3,320,692) and ($2,169,463), respectively.

The $1,151,229 increase in other expense was primarily

attributable to the increase in interest and debt amortization expense which is a result of higher loans in 2023.

We had a net loss of 9,314,919 for the six months

ended August 31, 2023, compared to a net loss of $8,844,551 for the six months ended August 31, 2022.

The increase in net loss of $470,368

is primarily a result of higher other expenses consisting of interest and debt amortization costs.

This increase was partially offset

by higher gross profit and lower operating expenses

Liquidity, Capital Resources and Cash Flows

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of liabilities that may be necessary should we be unable to continue as a going concern.

For the three months ended May 31, 2023, we have

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

As of May 31, 2023, we had a cash balance of $287,202,

As of August 31, 2023, we had a cash balance of $1,512,112,

accounts receivable of $260,671, device parts inventory of $1,689,930 and $28,753,936 in current liabilities.

At the current cash

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

We are taking proactive measures to reduce operating

expenses and drive growth in revenue.

At the current cash consumption

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

We are taking proactive measures to reduce operating expenses

and drive growth in revenue.

The successful outcome of future activities cannot

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

August 31, 2023

February 28, 2023

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Working capital

As of May 31, 2023 and February 28, 2023, we had a

cash balance of $287,202 and $939,759, respectively.

As of August 31, 2023 and February 28, 2023, we had

a cash balance of $1,512,112 and $939,759, respectively.

Summary of Cash Flows

August 31, 2023

August 31, 2022

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net cash used in operating activities.

Net cash used in operating activities for the three

months ended May 31, 2023 was $2,991,003, which included a net loss of $4,555,193, non-cash activity such as the bad debts expense of

$16,000, reduction of right of use asset of $28,767, accretion of lease liability $33,775, stock based compensation of $115,721, change

in operating assets of $608,025, amortization of debt discount of $557,219, increase in related party accrued payroll and interest of

$36,740 and depreciation and amortization of $167,942 to derive the uses of cash in operations.

Net cash used in operating activities for the six

months ended August 31, 2023 was $6,335,216 which included a net loss of $9,314,919, non-cash activity such as the bad debts expense of

$24,730, reduction of right of use asset of $58,220, accretion of lease liability $66,864, stock based compensation of $228,434, gain

on settlement of debt of ($38,740) , change in operating assets and liabilities of $968,783, amortization of debt discount of $1,258,198,

increase in related party accrued payroll and interest of $54,230 and depreciation and amortization of $358,983 to derive the uses of

cash in operations.

Net cash used in investing activities.

Net cash used in investing activities for the three

months ended May 31, 2023 was $3,463, which was the purchase of fixed assets,

Net cash provided (used) in financing activities.

Net cash used in investing activities for the six

months ended August 31, 2023 was $3,463, which was the purchase of fixed assets,

Net cash provided by financing activities.

Net cash provided by financing activities was $6,911,032

for the three months ended May 31, 2023.

This consisted of share proceeds net of issuance costs of $1,318,909, and proceeds from loans

payable of $1,050,000, reduced by repayments on loans payable of $27,000.

for the six months ended August 31, 2023.

This consisted of share proceeds net of issuance costs of 6,115,032, proceeds from loans payable

of $1,050,000, reduced by repayments on loans payable of $254,000.

Off-Balance Sheet Arrangements

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Related Party Transactions

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

For both the three months ended August 31, 2023 and

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

At August 31, 2023, the loan payable-related

party was $260,746 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.

Included in the balance due to the related party at August 31, 2023 is $172,265

of deferred salary and interest, $145,500 of which bears interest at 12%.

At February 28, 2023, included in the balance due to the related

party is $108,000 of deferred salary with $108,000 bearing interest at 12%.

The accrued interest included in loan at August 31, 2023 and

February 28, 2023 was $23,515 and $15,660 respectively.

Pursuant to the amended Employment Agreement with

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 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,

its Chief Executive Officer, for the three months and six ended August 31, 2023, the Company accrued $62,000 (2022-$63,000) and $125,000

(2022-$224,500) 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 August 31, 2023 and February 28, 2023 there was $1,104,000 and $979,000 of incentive compensation payable.

During the three months ended August 31, 2023 and

2022, the Company was charged $777,260 and $957,395, respectively for fees for research and development from a company partially owned

by a principal shareholder.

During the six months ended August 31, 2023 and 2022,

the Company was charged $1,659,275 and $1,959,129, respectively for fees for research and development from a company partially owned by

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis