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Item 7. Management’s Discussion and Analysis

2024-05-28 compared with 2023-06-14 · 288 added, 311 removed, 43 unchanged (93% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition

and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial 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

the Risk Factors, Forward-Looking Statements and Business sections in this report.

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.

AITX was incorporated in Florida on March 25, 2010.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial

statements and the notes to those financial 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 the Risk Factors, Forward-Looking Statements and Business sections in this report.

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.

was incorporated in Florida on March 25, 2010.

AITX reincorporated into Nevada on February 17, 2015.

AITX’ fiscal year end is February 28 (February 29 during leap year).

is located at 10800 Galaxie Ave ,Ferndale Michigan , 48220, and our telephone number is 877-767-6268.

Results of Operations

The following table shows our results of operations

for the years ended February 28, 2022 and February 28, 2021.

The historical results presented below are not necessarily indicative of

the results that may be expected for any future period.

AITX’ fiscal year end is February

28 (February 29 during leap year).

AITX is located at 10800 Galaxie Ave ,Ferndale Michigan , 48220, and our telephone number is 877-767-6268.

of Operations

following table shows our results of operations for the years ended February 29, 2024 and February 28, 2023.

The historical results presented

below are not necessarily indicative of the results that may be expected for any future period.

February 29, 2024

2 unchanged sentences

Loss from operations

(13,989,412 )

(12,690,680 )

Other income (expense), net

The following table presents revenues from contracts

with customers disaggregated by product/service:

$ (20,708,716 )

$ (18,109,457 )

$ (2,599,259 )

following table presents revenues from contracts with customers disaggregated by product/service:

February 29, 2024

2 unchanged sentences

Direct sales of goods and services

Total revenue for the year ended February 28, 2023

was $1,331,956, which represented a decrease of $115,153 compared to total revenue of $1,447,109 for the year ended February 28, 2022.

This decrease was a result of higher unit sales in fiscal 2022 which were $688,180 as compared to unit sales of $376,546, this $311,634

increase was partially offset by increases in training revenue in 2023 so as to yield an overall decrease in direct sales of goods and

services of $ 276,878.

Rental activities increased by $161,725 or 27%, as the Company continues to grow its product line and customer

Total gross profit for the year ended February 28,

2023 was $ 653,883 , which represented a decrease of $ 320,300, compared

to total gross profit of $974,183 for the year ended February 28, 2022.

The decrease is a result of the decrease in revenues above, higher

amount of overhead allocated to cost of sales in fiscal 2023 by approximately $ 257,000 due to full year’s allocation in 2023 partially

as compared to only a partial year’s allocation ion 2022.

Although the factory lease started in May 2021 it took many months to

ramp up factory capacity and personnel.

Cost of sales also increased due to more staff being allocated to production work overt R&D

work and a higher inventory provision in 2023.

Operating expenses

Operating expenses for the years ended February 28,

2023 and February 28, 2022 comprised of the following:

revenue for the year ended February 29, 2024 was $2,227,559, which represented an increase of $895,603 compared to total revenue of $1,331,956

for the year ended February 28, 2023.

Rental activities increased by $872,071 or 116%, as the Company continues to grow its product line

and customer base.

Direct sales grew by 4% driven by higher training revenue for the year ended February 29, 2024.

gross profit for the year ended February 29, 2024 was $1,096,457, which represented an increase of $442,574, compared to total gross

profit of $653,883 for the year ended February 28, 2023.

The increase is a result of the increase in revenues above, and gross profit

% which was 49% for the year ended February 29, 2024 was also 49% for the prior year.

The Gross profit % was stable as the increase in

higher margin rental activities in the product mix, and overhead being allocated over a higher sales base was offset by a higher inventory

provision for the permanent impairment in value of two products that the Company will not be continuing.in their current form

expenses for the years ended February 29, 2024 and February 28, 2023 comprised of the following:

February 29, 2024

3 unchanged sentences

Depreciation and amortization

Impairment on revenue earning devices

Operating lease cost and rent

1 unchanged sentence

Operating expenses

Our operating expenses were comprised of general and

administrative expenses, research and development, depreciation and amortization, operating lease and rent and a (gain) loss on disposal of

fixed assets.

General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries

and wages, travel expenses and rent.

Our operating expenses during the years ended February 28, 2023 and February 28, 2022 were $13,344,563

and 14,346,069, respectively.

The overall $ 1,001,506 de crease in operating expenses was primarily

attributable to the following changes in operating expenses:

Research and development expenses increased by $664,074 which was due funding development of new products,(such as the ROAMEO, RIO, RADDOG,and new RAD software solutions ) as well as upgrades of existing products.

General and administrative expenses decreased by $ 1,924,420 primarily due to the following changes:

For the year ended February 28, 2023 stock based compensation to CEO in equity awards was $499,500 with $118,500 fees paid to consultants, and a charge of $ 122,050 all totaling $740,050 compare with stock based compensation to CEO in equity awards was $2,048,850 with $109,200 fees paid to consultants all totaling $2,158,050 for the year ended February 28, 2022.

This represents a decrease of $1,418,000 in stock based compensation.

Professional fees decreased by $401,687 due to decreases in financial reporting of $167,321, decrease in legal of $143,044, decrease in professional fees from former director of $282,946 with the remaining offsetting increase due to changes in regulatory, investor relations and consulting costs.

Wages, salaries and payroll levies decreased by $499,661 with a reduction in CEO compensation of $1,093,758 offset by the increase in staff .

Office expense increased by $113,610.

Freight, duty and brokerage increased by $84,725 due to higher purchases in 2023.

Insurance cost increase by $210,985 due to health plan and liability insurance increases.

Advertising and marketing costs increased by $385,919 as the Company increased efforts to promote its products.

Bad debts expense increased by $173,859 due to write off of uncollectible accounts.

Supplies decreased by $224,703 as a higher amount was used in manufacturing and part of capital cost of revenue earning devices in 2023.

Trade shows and travel increased by $133,098 as a result of promotional and business travel in fiscal 2023.

The remaining offsetting increases were distributed amongst other general and administrative accounts such as website design warehouse expense, repairs and maintenance, and utilities amongst others.

In general, these increases in general and administrative expenses may be explained due to a ramp up in personnel and production and the full year of the manufacturing facility in 2023.

Operating lease cost and rent decreased by $15,514 due to the expiration of a lease in the current period.

Depreciation and amortization increased by $245,229 due to the increase in revenue earning devices and new computer equipment, tooling ,furniture and fixtures and manufacturing equipment in fixed assets.

(Gain) loss on disposal of fixed assets decreased by $29,125 due to a vehicle disposal in 2022 that yielded a gain.

Other income (expense)

Other income (expense) consisted of the change of

fair value of derivative instruments interest expense and gain on settlement of debt.

Other income (expense) during the years ended February

28, 2023 and February 28, 2022, was ($5,418,777) and ($48,825,598), respectively.

The change in other income (expense) was due to the

Change in fair value of derivative liabilities decreased by $368,621 due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock and the reduction in convertible notes payable through debt conversions to common stock and settlements.

At February 28, 203 there was no longer any convertible debt.

Interest expense decreased by $10,703,135 due to lower amortization of debt discounts for the year ended February 28, 2023 of 1,980,033 (2022-$7,597,242).

Interest expense in 2022 was higher due to interest expense related to the issuance of warrants for debt extensions of $5,415,000 for which there was no charge in 2023.

Loans payable increased by approximately $5 million in 2023, with most of that increase occurring in the latter part of the year and related interest increased by approximately $570,000.

Gain on settlement of debt increased by $33,072,305 due to the fiscal 2022 valuation of Series F shares and warrants given in exchange for an amendment to a deferred variable payment obligation that resulted in a loss of $33,015,215.

There was no corresponding charge for the year ended February 29, 2023.

The difference can be attributed to smaller gains and losses on other debt settlements.

In 2023 the $3,992 gain is resultant from the settlement of convertible notes.

The Company’s loss from operations for the year

ended February 28, 2023 was $12,690,680, which represented a decrease in loss of $ 681,206 compared

to a loss of $13 ,371,886 for the year ended February 28, 2022.

The lower revenues and gross profit

in 2023 were offset by significantly lower operating expenses for the reasons set out above.

Note that the Company had a net loss of $18,109,457

for the year ended February 28, 2023, as compared to net loss of $62,197,484 for the year ended February 28, 2022.

This change is mostly

attributable to the loss on settlement of debt, decrease in interest expense and a decrease in general and administrative costs.

operating expenses were comprised of general and administrative expenses, research and development, depreciation and amortization,

operating lease and rent and a (gain) loss on disposal of fixed assets.

General and administrative expenses consisted primarily of

professional services, automobile expenses, advertising, salaries and wages, travel expenses and rent.

Our operating expenses during

the years ended February 29, 2024 and February 28, 2023 were $15,085,869 and $13,344,563, respectively.

The overall $1,741,206

increase in operating expenses was primarily attributable to the following changes in operating expenses:

and development expenses decreased by $747,334 as the Company focused on current product development and spent less money on longer

term projects.

and administrative expenses increased by $1,544,822 primarily due to the following changes:

the year ended February 29, 2024 stock based compensation to CEO in equity awards was $1,521,000 with a charge of $272,599 for the

Employee Stock Option Plan (ESOP) all totaling $1,793,599 compare with stock based compensation to CEO in equity awards was $499,500

with $118,500 fees paid to consultants and a charge of $ 122,050 for the ESOP all totaling $740,050 for the year ended February 28,

This represents an increase of $1,053,549 in stock based compensation.

The stock based compensation for the CEO is payable

in Series G and has been deferred until after a year.

salaries and payroll levies for the CEO increased by $731,447 in discretionary bonus charged, $537,747 of which is deferred compensation

and will not be paid out this year.

salaries and payroll levies for the staff decreased by $218,382 due to staff reductions early in the fiscal year.

fees decreased by $117,726 due to decreases in financial reporting and consulting costs.

expense increased by $74,476.

duty and brokerage increased by $154,172 due to higher purchases in 2024.

and marketing costs decreased by $179,742 as the Company reduced its promotion efforts.

debts expense decreased by $139,989 due to write off of uncollectible accounts in the prior year.

increased slightly by $11,102.

shows and travel decreased by $111,752 as a result of less promotional and business travel in fiscal 2024.

remaining increases were distributed amongst other general and administrative accounts such as website design warehouse expense,

repairs and maintenance, and utilities amongst others.

lease cost and rent increased by $135.There was a new vehicle lease and a lease for premises that expired during the current fiscal

and amortization increased by $375,932 due to the increase in revenue earning devices and demo devices, computer equipment, tooling

,leasehold improvements and manufacturing equipment in fixed assets.

loss on disposal of fixed assets increased by $16,426 due to a vehicle disposal in 2024 that yielded a gain.

on revenue earning devices was $584,177 for the year ending February 29,2024 due to the discontinuance of two products in their present

There was no such impairment in the prior year’s period

income (expense)

income (expense) consisted of the change of fair value of derivative instruments interest expense and gain on settlement of debt.

income (expense) during the years ended February 29, 2024 and February 28, 2023, was ($6,719,304) and ($5,418,777), respectively.

change in other income (expense) was due to the following:

in fair value of derivative liabilities decreased by $3,595 due to the re-valuation of derivative liability on convertible notes

that were converted or settled during the prior year ended February 28, 2023.

At both February29, 2024 and February 28, 2023 there

was no longer any convertible debt.

expense increased by $1,331,580.

Amortization of debt discounts for the year ended February 29, 2024 of $2,384,163 compared with

$1,980,033 for the year ended February 28, 2023.

Interest expense was $4,011,681 for the year ended February 29, 2024 compared with

$ $3,196,882 for the year ended February 28, 2023.

Deferred variable payment obligation (DVPO) expense was $362,200 for the year

ended February 29,2024 compared with $216,577 for the year ended February 28, 2023.

Interest and debt amortization were both higher

during the current year due to approximately $2 million in new debt.

on settlement of debt increased by $34,788 due to a settlement in accounts payable during the current fiscal year.

Company’s loss from operations for the year ended February 29, 2024 was $13,989,412 which represented an increase in loss of $1,298,732

compared to a loss of $12,690,680 for the year ended February 28, 2023.

The higher revenues and gross profit in 2024 were offset by higher

operating expenses for the reasons set out above.

Note that the Company had a net loss of $20,708,716 for the year ended February 29,

2024, as compared to net loss of $18,109,457 for the year ended February 28, 2023.

This change is mostly attributable to an increase

in other expense and an increase in general and administrative costs.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

The accompanying

financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of

assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a

going concern.

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

The accompanying financial statements do not include any

adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications

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

For the year ended February 28, 2023, the Company

had negative cash flow from operating activities of $12,577,395.

As of February 28, 2023 the Company has an accumulated deficit of $112,253,711

and negative working capital of $12,610,601.

Management does not anticipate having positive cash flow from operations in the near future.

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

the issuance of these financial statements.

The Company does not have the resources at this time

to repay all its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business

the year ended February 29, 2024, the Company had negative cash flow from operating activities of $12,951,743.

As of February 29, 2024

the Company has an accumulated deficit of $132,962,427 and negative working capital of $18,099,085.

Management does not anticipate having

positive cash flow from operations in the near future.

These factors raise substantial doubt about the Company’s ability to continue

as a going concern for the twelve months following the issuance of these financial statements.

Company does not have the resources at this time to repay all its credit and debt obligations, make any payments in the form of dividends

to its shareholders or fully implement its business plan.

Without additional capital, the Company will not be able to remain in business.

At the same time management points to its successful

history with maintaining Company operations and reminds all with reasonable confidence this will continue.

Management has plans

to address the Company’s financial situation as follows:

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

Combined 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.

Management 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.

Capital Resources

The following table summarizes total current assets,

liabilities and working capital for the period indicated:

At the same time management points to its successful history with maintaining Company operations and reminds all with reasonable confidence

this will continue.

Management has plans to address the Company’s financial situation as follows:

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.

There remains approximately $21 million left to issue under this arrangement.

Management believes that it has the

necessary support to continue operations by continuing its funding methods in the following ways:

growing revenues ,through equity proceeds,

and issuing 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.

Management 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.

following table summarizes total current assets, liabilities and working capital for the period indicated:

February 29, 2024

3 unchanged sentences

Working capital

As February 28, 2023 and February 28, 2022, current liabilities included approximately $0 and $7,587, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms.

As of February 28, 2023 and February 28, 2022, we

had a cash balance of $939,759 and $4,648,146, respectively.

Summary of Cash Flows

$ (18,099,085 )

$ (11,631,601 )

of February 29, 2024 and February 28, 2023, we had a cash balance of $105,926 and $939,759, respectively.

of Cash Flows

February 29, 2024

1 unchanged sentence

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash used in operating activities for the year

ended February 28, 2023 was $12,577,395, which included a net loss of $18,109,457, non-cash activity such as the change in fair value

of derivative liabilities of ($3,595), gain on settlement of debt of ($3,992), amortization of debt discount of $1,980,033, stock based

compensation of $740,050, reduction in right of use asset $112,396, accretion of lease liability $141,631, increase in related party accrued

payroll and interest $12,960, inventory provision of $130,000, bad debts expense $45,110, depreciation and amortization of $478,115 and

change in operating assets and liabilities of $1,899,354.

Net cash used in investing activities.

Net cash used in investing activities for the year

ended February 28, 2023 was $308,402.

This consisted of the purchase of fixed assets and investment of $258,402 and $50,000, respectively..

$ (12,951,743 )

$ (12,577,395 )

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net cash provided by financing activities was $9,177,410

for the year ended February 28, 2023.

This consisted of share proceeds net of issuance costs of $7,771,169 ,and proceeds from loans payable

$3,300,000 and convertible notes payable of $619,250 offset by repayments of convertible notes payable and loans payable of $750,000 and

$1,763,009, respectively.

Off-Balance Sheet Arrangements

We do not have any outstanding off-balance sheet guarantees,

interest rate swap transactions or foreign currency forward contracts.

Furthermore, we do not have any retained or contingent interest

in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

We do not have

any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages

in leasing, hedging or research and development services with us.

Significant Accounting Policies

Use of Estimates

In order to prepare financial statements in conformity

with accounting principals generally accepted in the United States, management must make estimates , judgements and assumptions that affect

the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any , are disclosed in the

financial statements.

The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution

currently anticipated by management and on which the financial statements are based.

The most significant estimates included in these

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

Revenue Earning Devices

Revenue earning devices are stated at cost.

is provided on a straight-line basis over the estimated useful life of 48 months.

The Company continually evaluates revenue earning devices

to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether

the devices should be evaluated for possible impairment.

The Company uses a combination of the undiscounted cash flows and market approaches

in assessing whether an asset has been impaired.

The Company measures impairment losses based upon the amount by which the carrying amount

of the asset exceeds the fair value.

Fixed assets are stated at cost.

Depreciation is provided

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

Major repairs

or improvements are capitalized.

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

cash used in operating activities for the year ended February 29, 2024 was $12,951,753, which included a net loss of $20,708,716,

non-cash activity such as the gain on settlement of debt of ($16,426), amortization of debt discount of $2,384,163, stock based

compensation of $1,793,599, reduction in right of use asset $120,131, accretion of lease liability $130,020, increase in related

party accrued payroll and interest $105,101, inventory provision of $437,820, impairment on revenue earning devices for $584,177,

bad debts expense $42,892, depreciation and amortization of $854,047 and change in operating assets and liabilities of

cash provided by (used in) investing activities.

cash provided by investing activities for the year ended February 29, 2024 was $4,194.

This consisted of the purchase of fixed assets

of ($22,165), proceeds of disposal of fixed asset of $21,000 and reimbursement of security deposit of $5,359.

cash provided by (used in) financing activities.

cash provided by financing activities was $12,113,716 for the year ended February 29, 2024.

This consisted of share proceeds net of issuance

costs of $10,825,895 and proceeds from loans payable $1,750,000 offset by repayments of loans payable of $408,000 and net repayments

on loan payable-related party of $54,179, respectively.

Sheet Arrangements

do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts.

we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity

or market risk support to such entity.

We do not have any variable interest in an unconsolidated entity that provides financing, liquidity,

market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

Accounting Policies

order to prepare financial statements in conformity with accounting principals generally accepted in the United States, management must

make estimates , judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent

assets and liabilities, if any , are disclosed in the financial statements.

The ultimate resolution of issues requiring these estimates

and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements

The most significant estimates included in these consolidated financial statements are those associated with the assumptions

used to value derivative liabilities.

Earning Devices

earning devices are stated at cost.

Depreciation is provided on a straight-line basis over the estimated useful life of 48 months.

Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may

warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment.

The Company uses a

combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired.

The Company measures

impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.

assets are stated at cost.

Depreciation is provided on the straight-line method based on the estimated useful lives of the respective

assets which range from three to five years.

Major repairs or improvements are capitalized.

Minor replacements and maintenance and repairs

which do not improve or extend asset lives are expensed currently.

Computer equipment

4 unchanged sentences

5 years, the life of the lease

The Company periodically evaluates the fair value

of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable.

Upon retirement

or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain

or loss, if any, is recognized in income.

Research and Development

Research and development costs are expensed in the

period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related

to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly

defined future market for the product, and the availability of adequate resources to complete the project.

If all criteria are met, the

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

At February 28, 2022 and February

28, 2021, the Company had no deferred development costs.

Sales of Future Revenues

The Company has entered into transactions, as more

fully described in footnote 11, in which it has received funding from investors in exchange for which it will make payments to those investors

based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues.

determines whether these agreements constitute sales of future revenues or are in substance debt based on the facts and circumstances

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

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

Does the Company have continuing involvement in the generation of cash flows due the investor

Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets

Is the investors rate of return implicitly limited by the terms of the agreement

Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return

Does the investor have recourse relating to payments due

In the event a transaction is determined to be a sale

of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue method.

In the event a transaction is

determined to be debt, it is recorded as debt and amortized using the effective interest method.

As of the date of these financial statements,

the Company has determined that all such agreements are debt.

Revenue Recognition

ASU 2014-09, “Revenue from Contracts

with Customers (Topic 606)” , supersedes the revenue recognition requirements and industry specific guidance under Revenue

Recognition (Topic 605) .

Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers

in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

Topic 606 defines

a five-step process that must be evaluated and, in doing so, it is possible more judgment and estimates may be required within the revenue

recognition process than required under existing accounting principles generally accepted in the United States of America (“U.S.

GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration to include

in the transaction price and allocating the transaction price to each separate performance obligation.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC

Topic 480, Distinguishing Liabilities from Equity , to classify certain redeemable and/or convertible instruments.

first determines whether a financial instrument should be classified as a liability.

The Company will determine the liability classification

if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional

obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument

should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability

section and the equity section of the balance sheet (“temporary equity”).

The Company will determine temporary equity classification

if the redemption of the financial instrument is outside the control of the Company (i.e.

Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying

amounts may not be recoverable.

Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are

removed from the accounts and the resulting gain or loss, if any, is recognized in income.

and Development

and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless

they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited

to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.

If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned.

At February 29, 2024 and February 28, 2023, the Company had no deferred development costs.

of Future Revenues

Company has entered into transactions, as more fully described in footnote 11, in which it has received funding from investors in exchange

for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage

of sales for those certain revenues.

The Company determines whether these agreements constitute sales of future revenues or are in substance

debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement

constitutes a sale of future revenues or debt:

the agreement purport, in substance, to be a sale

the Company have continuing involvement in the generation of cash flows due the investor

the transaction cancellable by either party through payment of a lump sum or other transfer of assets

the investors rate of return implicitly limited by the terms of the agreement

the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate

the investor have recourse relating to payments due

the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue

In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method.

As of the date of these financial statements, the Company has determined that all such agreements are debt.

2014-09, “Revenue from Contracts with Customers (Topic 606)” , supersedes the revenue recognition requirements and

industry specific guidance under Revenue Recognition (Topic 605) .

Topic 606 requires an entity to recognize revenue when it transfers

promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange

for those goods or services.

Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment

and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted

in the United States of America (“U.S.

GAAP”) including identifying performance obligations in the contract, estimating the

amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance

Distinguishing

Liabilities from Equity

Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity , to classify certain redeemable

and/or convertible instruments.

The Company first determines whether a financial instrument should be classified as a liability.

Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument,

other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of

its equity shares.

the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial

instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”).

The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the

Company (i.e.

at the option of the holder).

Otherwise, the

Company accounts for the financial instrument as permanent equity.

Our CEO and Chairman holds sufficient shares of the

Company’s voting 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

The Company records its financial instruments classified

as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.

Subsequent Measurement – Financial Instruments

Classified as Liabilities

The Company records the fair value of its financial

instruments classified as liabilities at each subsequent measurement date.

The changes in fair value of its financial instruments classified

as liabilities are recorded as other income (expenses).

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and

Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted

accounting principles.

ASC Topic 820 defines fair value as the price that

would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on

market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions

developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels,

which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest

priority to unobservable inputs (Level 3).

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

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

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Otherwise, the Company accounts for the financial instrument as permanent equity.

CEO and Chairman holds sufficient shares of the Company’s voting 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

Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value,

or cash received.

Measurement – Financial Instruments Classified as Liabilities

Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date.

in fair value of its financial instruments classified as liabilities are recorded as other income (expenses).

Value of Financial Instruments

Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value

in accordance with generally accepted accounting principles.

Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1)

market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s

own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable

fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for

identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value

hierarchy under ASC Topic 820 are described as follows:

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

2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

or indirectly.

Level 2 inputs include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability;

quoted prices for identical

or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset

or liability;

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

Measured on a Recurring Basis

The following table presents information about our

liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements

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

on a Recurring Basis

following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the

fair value hierarchy within which those measurements fell:

Fair Value Measurement Using

3 unchanged sentences

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

assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances, accounts payable and accrued expenses, approximate

their fair values because of the short maturity of these instruments.

Earnings (Loss) per Share

Basic earnings (loss) per share (“EPS”)

is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding

(denominator) during the period.

Diluted EPS give effect to all dilutive potential common shares outstanding during the period using the

treasury stock method and convertible preferred stock using the if-converted method.

In computing diluted EPS, the average stock price

for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options and/or warrants.

EPS excluded all dilutive potential shares if their effect is anti-dilutive.

Basic loss per common share is computed based on the

weighted average number of shares outstanding during the period.

Diluted loss per share is computed in a manner similar to the basic loss

per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the

potential to be issued by virtue of convertible debt and other such convertible instruments.

Diluted loss per share contemplates a complete

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

Recently Issued Accounting Pronouncements

In September 2016, the FASB issued ASU 2016-13, Financial

Instruments-Credit Losses .

ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on

financial instruments and changes the loss impairment methodology.

ASU 2016-13 is effective for reporting periods beginning after December

15, 2019 using a modified retrospective adoption method.

A prospective transition approach is required for debt securities for which an

other-than-temporary impairment had been recognized before the effective date.

The standard did not materially impact our consolidated

net loss, accumulated deficit, and had no impact on cash flows.

The Company has adopted this on March 1, 2020.

carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances,

accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.

(Loss) per Share

earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator)

by the weighted average number of shares outstanding (denominator) during the period.

Diluted EPS give effect to all dilutive potential

common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.

In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from

the exercise of stock options and/or warrants.

Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.

loss per common share is computed based on the weighted average number of shares outstanding during the period.

Diluted loss per share

is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to

include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments.

Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in

nature with regards to earnings per share.

Issued Accounting Pronouncements

September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses .

ASU 2016-13 was issued to provide more decision-useful

information about the expected credit losses on financial instruments and changes the loss impairment methodology.

ASU 2016-13 is effective

for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method.

A prospective transition approach

is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date.

did not materially impact our consolidated net loss, accumulated deficit, and had no impact on cash flows.

The Company has adopted this

on March 1, 2020.

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-K

Item 7. Management’s Discussion and Analysis