Artificial Intelligence Technology Solutions Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of February 29, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of February 29, 2024, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Limitations on Systems of Controls Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses identified in our evaluation, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: ● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; - 36 - Table of Contents ● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and ● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. As of February 29, 2024, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matters involving internal controls and procedures that our management considered to be material weaknesses under the criteria established in Internal Control – Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) were: lack of a functioning audit committee; lack of a majority of independent members and a lack of a majority of outside directors on our board of directors; inadequate segregation of duties consistent with control objectives; management is dominated by a single individual; use of the inappropriate methodology of allocating proceeds in certain debt transactions and the expensing timing of the related debt discount; use of inappropriate fair values in certain preferred stock issuances and settlements. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of February 29, 2024. Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report. Changes in Internal Control over Financial Reporting No changes were made to our internal control over financial reporting during the year ended February 28, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. - 37 - Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this report. Our directors serve for one year and until their successors are elected and qualified. Our officers are elected by the board of directors to a term of one year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees. Name Age Position Steven Reinharz (1) 49 Chief Executive Officer, Secretary and Director (2) Anthony Brenz 63 Chief Financial Officer (1) Director as of March 2, 2021 (2) All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. Biographical information concerning our director and executive officers listed above is set forth below. Steven Reinharz . RAD was founded by Mr. Reinharz in July of 2016, and he has been continuously employed by RAD and its affiliated companies since that time. He is the holder of a majority of our capital stock. Mr. Reinharz has served as a member of the Board of Directors since March 2, 2021 and as our Chief Executive Officer, Chief Financial Officer, and Secretary of the Company since March 2, 2021 and resigned as our Chief Financial Officer as of April 26, 2021 upon Anthony Brenz’s appointment as our Chief Financial Officer. As our Chief Executive Officer and President of RAD, Mr. Reinharz leverages his extensive knowledge and interest in robotics and artificial intelligence to design and develop robotic solutions that increase business efficiency and deliver immediate and impressive cost savings. Mr. Reinharz is an active voice in both the security and artificial intelligence industries. He started and ran his own security integration company from the age of 24 to 31, becoming one of California’s leading system integrators. Mr. Reinharz later was part of a team that successfully sold an integrator to a global security firm for $42 million and has held various other security industry roles. Mr. Reinharz speaks and contributes to panels at ISC East and West, and ASIS. Mr. Reinharz is a leading member of several industry association committees, mostly through the Security Industry Association. Mr. Reinharz has called Orange County, California home since 1995, having grown up in Montreal and Toronto. He earned a dual Bachelor of Science degree in Political Science and Commercial Studies. Anthony Brenz was appointed as our Chief Financial Officer on April 26, 2021. He is an accomplished senior financial and operational executive for over 20 years of experience in finance and operations, including corporate strategy, procurement and supply chain, human resources, and customer service. From April 2018 to December 2020, Anthony Brenz was the Vice President/Director Finance of AirBoss Flexible Products Company. From September 2014 to April 2018, he was the Chief Financial Officer/Vice President of Finance of Thomson Aerospace and Defense (a Parker Meggitt Company). From August 2012 to September 2014, he was the Vice President/Director of Finance of M B Aeospace US Holdings, Inc. Anthony Brenz received a Bachelor of Accountancy from Walsh College in Troy Michigan in 1989 and has been licensed as a Certified Public Accountant in Michigan since 1989. There are no family relationships between any of the executive officers and directors. Board Committees and Director Independence Mr. Reinharz serves as director, and we do not have a separately designated audit committee, compensation committee or nominating and corporate governance committee. The functions of those committees are being undertaken by our directors. Since we do not have any independent directors and have only two directors, our directors believes that the establishment of committees of the Board would not provide any benefits to our company and could be considered more form than substance. We currently have an employee director, Mr. Reinharz, but no independent directors, as such term is defined in the listing standards of The NASDAQ Stock Market, and we do not anticipate appointing additional directors in the near future. - 38 - Table of Contents Our directors are not “audit committee financial experts” within the meaning of Item 401(e) of Regulation S-K. As with most small, early stage companies, until such time that the Company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officer’s insurance, the Company does not have any immediate prospects to attract independent directors. When the Company is able to expand our Board of Directors to include one or more independent directors, the Company intends to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent, and the Company is not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors. Procedures for Nominating Directors There have been no material changes to the procedures by which security holders may recommend nominees to the Board since the most recently completed fiscal quarter. We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our sole director established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our sole director has not considered or adopted any of these policies, as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees. Director Qualifications Mr. Steve Reinharz is our sole director and was appointed on March 2, 2021. He is the founder of our operating company, Robotoc Assistance Devices, Inc. (see bio on page 33). Code of Ethics and Business Conduct We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethics. Director Compensation We reimburse our directors for all reasonable ordinary and necessary business-related expenses, but we did not pay any other director’s fees or any other cash compensation for services rendered as a director during the years ended February 29, 2024 and February 28, 2023 to any of the individuals serving on our Board during that period. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, or written representations that no other reports were required, and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed all required Forms 3, 4, and 5. - 39 - Table of Contents ITEM 11. EXECUTIVE COMPENSATION The following table summarizes all compensation recorded by us in the past two fiscal years for Mr. Reinharz , our President and Chief Executive Officer , Anthony Brenz, our Chief Financial Officer and Garret Parsons our former President, Chief Executive Officer and Chief Financial Officer. 2024 AND 2023 SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary or Fees ($) Bonus ($) Stock Awards(2) ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Non-Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Steven Reinharz 2024 300,000 461,233 1,521,000 — — 538,767 — 2,821,000 Chief Executive Officer, Chief Financial Officer, Secretary (1) 2023 300,000 280,908 499,500 — — — — 1,080,408 Anthony Brenz 2024 188,813 1,000 — 17,975 — — 1,200 208,988 Chief Financial Officer (1) 2023 190,000 1,500 — — — — — 191,500 (1) Steven Reinharz was appointed Chief Executive Officer, Chief Financial Officer and Secretary on March 2, 2021.Mr.Reinharz ceased being Chief Financial Officer on June 24, 2021 and on that date appointed Anthony Brenz as Chief Financial Officer (2) Stock awards are payable in Series G and are included in long term liabilities as they will not be paid out in the current year. Employment Agreements On April 9, 2021 Mr. Reinharz entered into an employment agreement with the Company in connection with his service as Chief Executive Officer. The agreement began on April 9, 2021 and has a three-year term, renewable thereafter on an annual basis if neither party files a notice of termination 90 days prior to the term renewal date. The agreement provides for compensation of $240,000 base salary (to be reviewed annually by the Board of Directors) and bonuses to be granted at the discretion of the Board of Directors. In addition, the Company will grant stock options to Mr. Reinharz under the following conditions: Award #1 Mr. Reinharz shall be granted an award of 10,000,000 million shares/options/warrants if Objective #1 is achieved. Objective #1 : the price per share of the Company’s common stock has increased in value to an average of $0.30 for ten (10) days in a thirty-day trading period. For example, pursuant to a Company Stock Plan, if one is adopted, Mr. Reinharz may elect to exercise Award #1 on a cash or cashless basis at an exercise price of $0.15 per share/option/warrant. Award #2 Mr. Reinharz shall be granted an award of 30,000,000 million shares/options/warrants if Objective #2 is achieved. Objective #2 : the price per share of the Company’s common stock has increased in value to an average of $0.50 for ten (10) days in a thirty-day trading period. For example, pursuant to a Company Stock Plan, if one is adopted, Mr. Reinharz may elect to exercise Award #2 on a cash or cashless basis at an exercise price of $0.25 per share/option/warrant. On July 12, 2021 the Company and CEO amended the April 9, 2021 Employment Agreement effective July 1, 2021 whereby the following objectives and awards were added to the two existing ones: Objective #3 : Sales in any fiscal quarter exceed the total sales in fiscal year 2021 for the first time. Award #3 : Five hundred (500) shares of Series G preferred stock. Objective #4 : One hundred fifty (150) devices are deployed in the marketplace. Award #4 : Two hundred fifty (250) shares of Series G preferred stock. - 40 - Table of Contents Objective #5 : Year-to-date sales at any point in fiscal year 2022 exceed One Million Dollars ($1,000,000). Award #5 : Two hundred fifty (250) shares of Series G preferred stock. Objective #6 : The price per share of common stock has increased to and maintains a price of Ten Cents ($0.10) or more for ten (10) days in a thirty (30) day period. Award #6 : Two hundred fifty (250) shares of Series G preferred stock. Objective #7 : The price per share of common stock has increased to and maintains a price of Twenty Cents ($0.20) or more for ten (10) days in a thirty(30) day period. Award #7 : Five hundred (500) shares of Series G preferred stock. Objective #8 : The RAD 3.0 products are launched into the marketplace by November 30, 2022. Award #8 : Five hundred (500) shares of Series G preferred stock. Objective #9 : RAD receives an order for fifty (50) units from a single customer. Award #9 : Five hundred (500) shares of Series G preferred stock. On January 31, 2024 the Company added the following Objective effective March 1, 2022: Objective # 10 In any fiscal quarter, attrition , measured by loss of recurring monthly revenue does not exceed 10% Award #10 Two h undred fifty (250) shares of Series G preferred stock. The fair value of the first two awards was obtained through the use of the Monte Carlo method was $69,350 with a charge to stock- based compensation and a corresponding charge to paid in capital. The fair value of the remaining rewards was determined by calculating the vesting amounts of each reward and then determining for each reporting period the requisite service rendered and applying that against the cash redemption value of the number of shares of Series G issuable for each tier in the agreement. For the period ended February 29, 2024 that amount totaled $1,521,000 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. For the period ended February 28, 2023 that amount totaled $499,500 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. On April 20,2021 an offer letter was agreed with Anthony Brenz for a base salary of $180,000, a discretionary quarterly bonus and future participation in the Employee Stock Option Plan. Employment commenced on April 26, 2021 and Mr. Brenz was appointed the Company’s Chief Financial Officer on June 24, 2021. The base salary was amended to $190,000 on January 1, 2022. O utstanding Equity Awards at 2024 Fiscal Year-End The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for Mr. Reinharz and Mr Brenz, our sole executive officers outstanding as of February 29, 2024: OPTION AWARDS STOCK AWARDS Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) Steven Reinharz 0 10,000,000 10,000,000 $ 0.15 April 9, 2024 0 0 2,500 $ 2,500,000 Steven Reinharz 0 30,000,000 30,000,000 $ 0.25 April 9, 2024 Anthony Brenz 0 0 4,500,000 $ 0.02 Sept. 1, 2027 4,500,000 $ 12,825 Anthony Brenz 0 0 10,000,000 $ 0.02 Sept. 1, 2028 10,000,000 $ 28,500 0 0 - 41 - Table of Contents On April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved and adopted the 2021 Incentive Stock Plan (the “2021 Plan”). On August 11, 2022 the Company amended the 2021 Plan increasing the maximum number of shares applicable to the 2021 Plan from 5,000,000 to 100,000,000. On August 14.32023 the Company further amended the plan increasing the maximum shares to 200,000,000. The purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors, executives, selected Employees and Consultants, and reward participants for making major contributions to the success of the Company. The 2021 Plan authorizes the granting of stock options, restricted stock, restricted stock units, stock appreciation rights and stock awards. A total of two hundred million (200,000,000) shares of common stock may be issued under the 2021 Plan. All awards under the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback or similar policy of the Company in effect from time to time, as well as any similar provisions of applicable law, which could in certain circumstances require repayment or forfeiture of awards or any shares of stock or other cash or property received with respect to the awards, including any value received from a disposition of the shares acquired upon payment of the awards. The 2021 Plan will be administered by the Board or any Committee authorized by the Board, if applicable, which will have the sole authority to, among other things: construe and interpret the 2021 Plan; make rules and regulations relating to the administration of the 2021 Plan; select participants; and establish the terms and conditions of awards, all in accordance with the terms of the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the Board. Termination will not affect awards then outstanding. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS At May 22, 2024, we had 10,318,917,383 shares of Common Stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our Common Stock as of May 7, 2024, and reflects: ● each of our executive officers; ● each of our directors; ● all of our directors and executive officers as a group; and ● each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock. Information on beneficial ownership of securities is based upon a record list of our stockholders and we have determined beneficial ownership in accordance with the rules of the SEC. We believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws, except as otherwise provided below. Amount and Nature of Percent of Name Beneficial Ownership (1) Common Stock (2) Named Executive Officers and Directors: Steven Reinharz (3) 34,433,734,378 74.99 % Anthony Brenz 0 0 Mark Folmer 0 0 All executive officers and directors as a group (3 persons) 34,433,734,378 74.99 % 5% Shareholders: Steven Reinharz 34,433,734,378 74.99 % (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable or exercisable within 60 days of the date of this table. In determining the percent of common stock owned by a person or entity as of the date of this Report, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on as of May 22, 2024 10,318,917,383shares, and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares. (2) Based on 10,318,917,383shares of the Company’s common stock issued and outstanding as of May 22, 2024. - 42 - Table of Contents (3) Steve Reinharz is a director and the Company’s Chief Executive Officer, Chief Financial Officer and Secretary as well as the CEO of RAD and is the holder of (i) 3,350,000 shares of our Series E Preferred Stock and, (ii) 2,450 shares of our Series F Convertible Preferred Stock. If Mr. Reinharz converted the 2,450 shares of the Company’s Series F Convertible Preferred Stock, he would receive 34,433,734,378 shares of the Company’s common stock, which is included in the chart above as if such conversion has occurred. Further, the outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, the holders of Series E preferred stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions. When such transactions arise, they are referred to our board of directors for its consideration. For the years ended February 29, 2024 and February 28, 2023, the Company made net repayments of $54,179 and $0, respectively , to its loan payable-related party. At February 29, 2024, the loan payable-related party was $257,438 and $206,516 at February 28, 2023. As of February 29, 2024, included in the balance due to the related party is $140,013 of deferred salary all of which bears interest at 12%. As of February 28, 2023, included in the balance due to the related party is $108,000 of deferred salary all of which bears interest at 12%. The accrued interest included at February 29, 2024 was $32,468 (February 28, 2023- $15,660). During the year ended February 28, 2023 pursuant to the amended Employment Agreement with its Chief Executive Officer the Company accrued $1,521,000 as incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. In January 2024 the Company added an Objective 10 which required the accrual of $2,000,000. There was also a net adjustment reduction of $479,000 for objectives accrued for but not met. At February 28, 2023, the balance of incentive compensation plan payable was $979,000. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. During the year ended February 29, 2024, the Company accrued $538,767 in deferred compensation for the CEO. This was in accordance with a December 2023 board action allowing for $ 1 million of discretionary compensation. The Company had already recorded $461,233 in bonus compensation. There was no deferred compensation for the year ended February 28, 2023, the Company recorded a bonus to the CEO of $280,908. During the years ended February 29, 2024 and February 28, 2023, the Company was charged $2,810,839 and $3,578,981, respectively in consulting fees for research and development to a company partially owned by a principal shareholder included in research and development expenses. The principal shareholder received no compensation from this partially owned research and development company and the fees were spent on core development projects. As at both February 29, 2024 and February 28, 2023 the balance due to this company was $76,532. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES On October 31, 2019 the Board of Directors of the Company approved and ratified the engagement (“Engagement”) of LJ Soldinger & Associates LLC (“LJ Soldinger”) as the Company’s new independent registered public accounting firm.. The following table shows the fees that were billed for the audit and other services provided by LJ Soldinger for the fiscal years ended February 29, 2024 and February 28, 2023. 2024 Audit Fees $ 422,540 Audit-Related Fees — Tax Fees — All Other Fees — Total $ 422,540 2023 Audit Fees $ 298,000 Audit-Related Fees — Tax Fees — All Other Fees — Total $ 298,000 - 43 - Table of Contents Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements. Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category would include consultation regarding correspondence with the SEC, other accounting consulting and other audit services. Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice. All Other Fees - This category consists of fees for other miscellaneous items. As part of its responsibility for oversight of the independent registered public accountants, the Board has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board. All of the services provided by LJ Soldinger described above were approved by our Board. The Company’s principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements and Financial Statement Schedules on page F-1 and included on pages F-2 through F-36. (2) Financial Statement Schedules All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein. - 44 - Table of Contents (3) Exhibits. Exhibit No. Description of Document 2.1 Stock Purchase Agreement, dated August 28, 2017, by and among the registrant, Steve Reinharz and Robotic Assistance Devices Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Commission on August 31, 2017). 3.1 Articles of Incorporation of the registrant filed with the Nevada Secretary of State on September 8, 2014. (incorporated by reference to Exhibit 3.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018) . 3.2 Plan and Agreement of Merger of Artificial Intelligence Technology Solutions Inc. (a Florida corporation) and Artificial Intelligence Technology Solutions Inc. (a Nevada corporation). (incorporated by reference to Exhibit 3.2 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). 3.3 Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). 3.4 Certificate of Designations filed with the Nevada Secretary of State on February 8, 2017. (incorporated by reference to Exhibit 3.4 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). 3.5 Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017. (incorporated by reference to Exhibit 3.5 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). 3.6 Amendment to Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017 (incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the Commission on May 12, 2017). 10.1 Preferred Stock Purchase Agreement dated January 31, 2017 and entered into between the Company and Capital Venture Holdings LLC. (incorporated by reference to Exhibit 10.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). 14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 to the registrant’s registrant statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). 21.1 List of Subsidiaries. * 23.1 Consent of Independent Registered Public Accounting Firm. * 31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. * 31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. * 32.1 Section 1350 Certification of principal executive officer. * 32.2 Section 1350 Certification of principal financial and accounting officer. * 99.1 Insider Trading Policy. (incorporated by reference to Exhibit 99.1 to the registrant’s annual report on Form 10-K filed with the Commission on May 28, 2021). 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * * Filed or furnished herewith. - 45 - Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. Date: May 28, 2024 By: /s/ Steven Reinharz Steven Reinharz President, Chief Executive Officer Date: May 28, 2024 By: /s/ Anthony Brenz Anthony Brenz Chief Financial Officer (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Steven Reinharz President, Chief Executive Officer and Director (principal executive officer) May 28, 2024 Steven Reinharz /s/ Anthony Brenz Chief Financial Officer (principal financial and accounting officer) May 28, 2024 Anthony Brenz - 46 - Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. (FORMERLY ON THE MOVE SYSTEMS CORP.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statement of Stockholders’ Deficit F-5 Consolidated Statements of Cash Flows F-6 Notes to the Consolidated Financial Statements F-7 F- 1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Artificial Intelligence Technology Solutions, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Artificial Intelligence Technology Solutions, Inc. and its subsidiaries (the “Company”) as of February 29, 2024 and February 28, 2023, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended February 29, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2024, and February 28, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended February 29, 2024, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had a net loss of approximately $20.7 million, an accumulated deficit of approximately $133.0 million and stockholders’ deficit of approximately $40.2 million as of and for the year ended February 29, 2024, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. /s/ L J Soldinger Associates, LLC Deer Park, Illinois May 9, 2024, except for Note 17, as to which the date is May 28, 2024 We have served as the Company’s auditor since 2019. PCAOB Audit ID: 318 F- 2 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. CONSOLIDATED BALANCE SHEETS February 29, 2024 February 28, 2023 ASSETS Current assets: Cash $ 105,926 $ 939,759 Accounts receivable, net 756,084 265,024 Device parts inventory, net 2,131,599 1,637,899 Prepaid expenses and deposits 622,957 596,310 Total current assets 3,616,566 3,438,992 Operating lease asset 1,139,188 1,208,440 Revenue earning devices, net of accumulated depreciation of $ 952,844 and $ 779,839 , respectively 2,480,002 1,235,219 Fixed assets, net of accumulated depreciation of $ 349,878 and $ 182,002 , respectively 268,075 315,888 Trademarks 27,080 27,080 Investment at cost 50,000 50,000 Security deposit 15,880 21,239 Total assets $ 7,596,791 $ 6,296,858 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable and accrued expenses $ 2,032,707 $ 1,343,379 Advances payable- related party 1,594 1,594 Customer deposits 73,702 9,900 Current operating lease liability 237,653 248,670 Current portion of deferred variable payment obligation 904,377 542,177 Loan payable - related party 257,438 206,516 Deferred compensation for CEO 538,767 — Current portion of loans payable, net of discount of $ 688,598 and $ 1,651,597 13,190,882 9,918,389 Vehicle loan - current portion 38,522 38,522 Current portion of accrued interest payable 4,440,009 2,761,446 Total current liabilities 21,715,651 15,070,593 Non-current operating lease liability 889,360 950,541 Loans payable, net of discount of $ 4,118,332 and $ 4,130,291 , respectively 14,798,532 15,554,069 Deferred variable payment obligation 2,525,000 2,525,000 Incentive compensation plan payable 2,500,000 979,000 Accrued interest payable 5,367,805 3,060,656 Total liabilities 47,796,348 38,139,859 Commitments and Contingencies - - Stockholders’ deficit: Preferred Stock, undesignated; 15,535,000 shares authorized; no shares issued and outstanding at February 29, 2024 and February 28, 2023, respectively — — Series B Convertible, Redeemable Preferred Stock. $ 0.001 par value; 8 % cumulative dividend payable quarterly,$ 1,200 stated value, 5,000 shares authorized, no shares issued and outstanding at February 29, 2024 and February 28, 2023, respectively Series G Redeemable Preferred Stock. $ 0.001 par value; 100,000 shares authorized, no shares issued and outstanding at February 29, 2024 and February 28, 2023, respectively — — Series E Preferred Stock, $ 0.001 par value; 4,350,000 shares authorized; 3,350,000 and 3,350,000 shares issued and outstanding, respectively 3,350 3,350 Series F Convertible Preferred Stock, $ 1.00 par value; 10,000 shares authorized; 2,533 and 2,533 shares issued and outstanding, respectively 2,533 2,533 Preferred Stock value Common Stock, $ 0.00001 par value; 15,000,000,000 shares authorized 9,238,750,958 and 5,848,741,599 shares issued, issuable and outstanding, respectively 92,388 58,489 Additional paid-in capital 92,565,513 80,247,252 Preferred stock to be issued 99,086 99,086 Accumulated deficit ( 132,962,427 ) ( 112,253,711 ) Total stockholders’ deficit ( 40,199,557 ) ( 31,843,001 ) Total liabilities and stockholders’ deficit $ 7,596,791 $ 6,296,858 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended February 29, 2024 Year Ended February 28, 2023 Revenues $ 2,227,559 $ 1,331,956 Cost of Goods Sold 1,131,102 678,073 Gross Profit 1,096,457 653,883 Operating expenses: Research and development (note 9) 2,878,134 3,625,468 General and administrative 10,525,531 8,980,709 Depreciation and amortization 854,047 478,115 Impairment on revenue earning devices 584,177 — Operating lease cost and rent 260,406 260,271 (Gain) loss on disposal of fixed assets ( 16,426 ) — Total operating expenses 15,085,869 13,344,563 Loss from operations ( 13,989,412 ) ( 12,690,680 ) Other income (expense), net: Change in fair value of derivative liabilities — 3,595 Interest expense ( 6,758,044 ) ( 5,426,364 ) Gain (loss) on settlement of debt 38,740 3,992 Total other income (expense), net ( 6,719,304 ) ( 5,418,777 ) Net Loss $ ( 20,708,716 ) $ ( 18,109,457 ) Net loss per share - basic $ ( 0.00 ) $ ( 0.00 ) Net loss per share - diluted $ ( 0.00 ) $ ( 0.00 ) Weighted average common share outstanding – basic and diluted 7,080,914,317 5,091,857,082 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023 Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Series E Series F Series G Additional Total Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-In Accumulated Shareholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance at February 28, 2022 3,350,000 3,350 2,532 101,618 — $ — 4,735,210,360 $ 47,353 $ 73,015,576 $ ( 94,144,254 ) $ ( 20,976,357 ) Issuance of shares net of $ 447,858 issuance costs — — — — — — 1,057,841,576 10,579 7,760,590 — 7,771,169 Cashless exercise of 108,378,210 warrants — — — — — — 45,306,557 453 ( 453 ) — — Cashless exercise of warrants — — — — — — 45,306,557 453 ( 453 ) — — Penalty shares issued pursuant to a share purchase agreement — — — — — — 17,500,000 175 ( 175 ) — — Relative fair value of Series F warrants issued with debt — — 1 1 — — — — 1,201,127 — 1,201,128 Relative fair value of warrants issued with debt — — — — — — — — 990,467 — 990,467 Fair value of 955,000,000 warrants cancelled for debt issuance — — — — — — — — ( 2,960,500 ) — ( 2,960,500 ) Shares issued for services — — — — — — 10,000,000 100 118,400 — 118,500 Cancelled shares — — — — — — ( 17,116,894 ) ( 171 ) 171 — — Stock based compensation - employee stock option plan — — — — — — — — 122,050 — 122,050 Rounding — — — — — — — — ( 1 ) — ( 1 ) Net income — — — — — — — — — ( 18,109,457 ) ( 18,109,457 ) Balance at February 28, 2023 3,350,000 $ 3,350 2,533 $ 101,619 — $ — 5,848,741,599 $ 58,489 $ 80,247,252 $ ( 112,253,711 ) $ ( 31,843,001 ) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Series E Series F Series G Additional Total Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-In Accumulated Shareholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance at February 28, 2023 3,350,000 3,350 2,533 101,619 — $ — 5,848,741,599 $ 58,489 $ 80,247,252 $ ( 112,253,711 ) $ ( 31,843,001 ) Balance 3,350,000 3,350 2,533 101,619 — $ — 5,848,741,599 $ 58,489 $ 80,247,252 $ ( 112,253,711 ) $ ( 31,843,001 ) Issuance of shares net of $ 457,060 issuance costs — — — — — — 3,383,509,359 33,834 10,792,061 — 10,825,895 Issuance of shares, net of issuance costs — — — — — — 3,383,509,359 33,834 10,792,061 — 10,825,895 Relative fair value of Series F warrants issued with debt — — — — — — — — 1,209,206 — 1,209,206 Shares issued for services — — — — — — 6,500,000 65 44,395 — 44,460 Stock based compensation - employee stock option plan — — — — — — — — 272,599 — 272,599 Net income — — — — — — — — — ( 20,708,716 ) ( 20,708,716 ) Balance at February 29, 2024 3,350,000 $ 3,350 2,533 $ 101,619 — $ — 9,238,750,958 $ 92,388 $ 92,565,513 $ ( 132,962,427 ) $ ( 40,199,557 ) Balance 3,350,000 $ 3,350 2,533 $ 101,619 — $ — 9,238,750,958 $ 92,388 $ 92,565,513 $ ( 132,962,427 ) $ ( 40,199,557 ) F- 5 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended February 29, 2024 Year Ended February 28, 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 20,708,716 ) $ ( 18,109,457 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 854,047 478,115 Impairment on revenue earning devices 584,177 — Inventory provision 437,820 130,000 (Gain) loss on disposal of fixed assets ( 16,426 ) — Bad debts expense 42,892 45,110 Reduction of right of use asset 120,131 112,396 Accretion of lease liability 130,020 141,631 Stock based compensation 1,793,599 740,050 Change in fair value of derivative liabilities — ( 3,595 ) Amortization of debt discounts 2,384,163 1,980,033 (Gain) loss on settlement of debt ( 38,740 ) ( 3,992 ) Increase (decrease) in related party accrued payroll and interest 105,101 12,960 Changes in operating assets and liabilities: Accounts receivable ( 533,952 ) 119,335 Prepaid expenses ( 29,591 ) ( 141,734 ) Device parts inventory ( 3,549,121 ) ( 1,161,047 ) Accounts payable and accrued expenses 1,294,286 374,529 Accrued expense, related party — — Customer deposits 63,802 ( 100 ) Operating lease liability payments ( 233,147 ) ( 254,028 ) Current portion of deferred variable payment obligations for Payments 362,200 216,577 Accrued interest payable 3,985,712 2,745,822 Net cash used in operating activities ( 12,951,743 ) ( 12,577,395 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets ( 22,165 ) ( 258,402 ) Purchase of investment — ( 50,000 ) Reimbursement of security deposit 5,359 — Proceeds on disposal of fixed assets 21,000 — Net cash used in investing activities 4,194 ( 308,402 ) CASH FLOWS FROM FINANCING ACTIVITIES: Share proceeds net of issuance costs 10,825,895 7,771,169 Proceeds from convertible notes payable — 619,250 Repayment of convertible debt — ( 750,000 ) Net borrowings loan payable-related party ( 54,179 ) — Proceeds from loans payable 1,750,000 3,300,000 Repayment of loans payable ( 408,000 ) ( 1,763,009 ) Net cash provided by financing activities 12,113,716 9,177,410 Net change in cash ( 833,833 ) ( 3,708,387 ) Cash, beginning of period 939,759 4,648,146 Cash, end of period $ 105,926 $ 939,759 Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $ 17,726 $ 451,192 Cash paid for income taxes $ — $ — Noncash investing and financing activities: Right of use asset for lease liability $ 47,934 $ — Transfer from device parts inventory to fixed assets $ 2,291,421 $ 932,805 Proceeds of fixed asset disposition to loan payable , related party $ 21,000 $ — Shares issued for services $ 44,460 $ — Deferred compensation $ 538,767 $ — Discount applied to face value of loans $ 200,000 $ 1,797,645 Series F warrants issued along with debt $ 1,209,206 $ — Exchange of common share warrants for debt $ — $ 3,000,000 Refund on abandoned trademarks $ — $ 1,643 Penalty shares pursuant to a share purchase agreement $ — $ 171 Exercise of warrants $ — $ 453 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION AND GOING CONCERN Artificial Intelligence Technology Solutions Inc. (formerly known as On the Move Systems Corp.) (“AITX” or the “Company”) was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”). Robotic Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a 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 of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock. AITX’s prior business focus was transportation 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, in which AITX purchased all of the outstanding shares of capital stock 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 effected by a share exchange for financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill or other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer. As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company. 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 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. 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 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. 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. F- 7 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. ACCOUNTING POLICIES Basis of Presentation and Consolidation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-K of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). The audited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile , Inc. , On the Move Experience, LLC and OMV Transports, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. 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 equity instruments used in debt settlements, amendments and extensions. Reclassifications Certain amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Concentrations Loans payable At February 29, 2024 there were $ 32,796,345 of loans payable, $ 28,540,506 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 one individual. Cash The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances. Accounts Receivable Accounts receivable are comprised of balances due from customers, net of estimated allowances for credit losses. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There was an allowance of $ 68,000 and $ 39,000 provided as of February 29, 2024 and February 28, 2023, respectively. For the year ended February 29, 2024 , three customers account for 72 % of total accounts receivable . For the year ended February 28, 2023 , three customers account for 48 % of total accounts receivable. Device Parts Inventory Device parts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a valuation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company uses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending on use, the Company will transfer the parts to the corresponding asset or expense if used in research and development. A charge to income is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted. At February 29, 2024 and at February 28, 2023 there was a valuation reserve of $ 959,000 and $ 195,000 , respectively. F- 8 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Revenue Earning Devices Revenue earning devices are stated at cost. Depreciation 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 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 currently. SCHEDULE OF FIXED ASSETS STATED AT COST Computer equipment 3 years Furniture and fixtures 3 years Office equipment 4 years Warehouse equipment 5 years Demo Devices 4 years Vehicles 3 years Leasehold improvements 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 29, 2024 and February 28, 2023, the Company had no deferred development costs. Contingencies Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. F- 9 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Sales of Future Revenues The Company has entered into transactions, as more fully described in footnote 10, 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: ● 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.. For the year ended February 29, 2024 , three customers accounted for 56 % of total revenue and for the year ended February 28, 2023 , two customers accounted for 45 % of total revenue. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21% . A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending February 29, 2024, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements. Leases Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset. F- 10 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and if none of the four criteria are met, the lease is classified by the Company as an operating lease. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities. 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. The Company 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. 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 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 inputs). F- 11 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. 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; 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 fell: SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE Amount at Fair Value Measurement Using Fair Value Level 1 Level 2 Level 3 February 29, 2024 Liabilities Incentive compensation plan payable – revaluation of equity awards payable in Series G shares $ 2,500,000 $ — $ — $ 2,500,000 February 28, 2023 Liabilities Incentive compensation plan payable – revaluation of equity awards payable in Series G shares $ 979,000 $ — $ — $ 979,000 The Company recorded stock based compensation of $ 1,521,000 and $ 499,500 for the years ended February 29, 2024 and February 28, 2023 with corresponding adjustments to incentive compensation plan 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. Diluted 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. F- 12 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Recently Issued Accounting Pronouncements Recently Issued Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) : Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. The amendments in ASU 2020-06 are effective for public entities, excluding smaller reporting companies as defined, for fiscal years beginning after December 15, 2021. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. A reporting entity is not permitted to adopt the guidance in an interim period, other than the first interim period of its fiscal year. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Management is currently evaluating the effect of these provisions on the Company’s financial position and results of operations 3. REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue is earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services are accounted for under Topic 606, and short-term rentals are accounted for under Topic 842 which was adopted. On March 1, 2019. As disclosed in the revenue recognition section of Note 2 – Accounting Polices, the Company adopted Topic 606 in accordance with the effective date on March 1, 2018. Note 2 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s financial statements. Revenue is recognized on direct sales of goods or services 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. F- 13 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Upon adoption of Topic 842, also referred to above in Note 2, the Company accounts for revenue earned from rental activities where an identified asset is transferred to the customer and the customer has the ability to control that asset for periods greater than one year. To date none of the lease agreements entered into have been for periods longer than one year or greater, and the Company has availed itself of the practical expedient to exclude such leases from ASC 842 accounting and instead has accounted for these leases under ASC 606. The following table presents revenues from contracts with customers disaggregated by product/service: SCHEDULE OF REVENUES FROM CONTRACTS WITH CUSTOMERS Year Ended February 29, 2024 Year Ended February 28, 2023 Device rental activities $ 1,626,207 $ 754,126 Direct sales of goods and services 601,352 577,830 Revenue $ 2,227,559 $ 1,331,956 4. LEASES We lease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components. There is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Below is a summary of our lease assets and liabilities at February 29, 2024 and February 28, 2023. SCHEDULE OF LEASE ASSETS AND LIABILITIES Leases Classification February 29, 2024 February 28, 2023 Assets Operating Operating Lease Assets $ 1,139,188 $ 1,208,440 Liabilities Current Operating Current Operating Lease Liability $ 237,653 $ 248,670 Noncurrent Operating Noncurrent Operating Lease Liabilities 889,360 950,541 Total lease liabilities $ 1,127,013 $ 1,199,211 Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above was based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred. Operating lease cost and rent was $ 260,406 and $ 260,271 for both the twelve months ended February 29, 2024 and February 28, 2023, respectively. F- 14 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. INVESTMENT 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 discount. 6. REVENUE EARNING DEVICES Revenue earning devices consisted of the following: REVENUE EARNING DEVICES CONSISTED OF THE FOLLOWING February 29, 2024 February 28, 2023 Revenue earning devices $ 3,432,846 $ 2,015,058 Less: Accumulated depreciation ( 952,844 ) ( 779,839 ) Total $ 2,480,002 $ 1,235,219 During the year ended February 29, 2024, the Company made total additions to revenue earning devices of $ 2,166,081 which were transferred from inventory. The Company wrote- off assets with a value 748,243 and related accumulated depreciation $ 490,295 with a net book value of $ 257,948 as a permanent impairment on revenue devices along with finished goods inventory on assets not yet deployed of $ 326,180 for a total permanent impairment on revenue earning devices of $ 584,177 . During the year ended February 28, 2023, the Company made total additions to revenue earning devices of $ 871,334 which were transferred from inventory. There was no permanent impairment on revenue earning services for the year ended February 28, 2023. Depreciation expense for these devices was $ 681,042 and $ 345,178 for the years ended February 29, 2024 and February 28, 2023, respectively. 7. FIXED ASSETS Fixed assets consisted of the following: SCHEDULE OF FIXED ASSETS February 29, 2024 February 28, 2023 Automobile $ 74,237 $ 101,680 Demo devices 194,352 69,010 Tooling 107,020 101,322 Machinery and equipment 8,825 8,825 Computer equipment 150,387 150,387 Office equipment 15,312 15,312 Furniture and fixtures 21,225 21,225 Warehouse equipment 19,639 14,561 Leasehold improvements 26,956 15,568 Fixed assets gross 617,953 497,890 Less: Accumulated depreciation ( 349,878 ) ( 182,002 ) Fixed assets, net of accumulated depreciation $ 268,075 $ 315,888 During the year ended February 29, 2024, the Company made additions to fixed assets of $ 22,165 and also additions through inventory transfers of $ 125,340 and the Company sold a vehicle having a net book value of $ 4,574 for fair value proceeds of $ 21,000 and recorded a gain on disposal of fixed assets of $ 16,426 . The $ 21,000 proceeds were applied to loan payable -related party. During the year ended February 28, 2023, the Company made additions to fixed assets of $ 258,402 and also additions through inventory transfers of $ 52,471 . Depreciation expense was $ 190,747 and $ 132,937 for the years ended February 29, 2024 and February 28, 2023, respectively. F- 15 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. DEFERRED VARIABLE PAYMENT OBLIGATION On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $ 900,000 in exchange for a perpetual 9 % rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues). At February 29, 2020 the investor has advanced the full $ 900,000 . On May 9, 2019 the Company entered into two similar arrangements with two investors: (1) The investor would pay up to $ 400,000 in exchange for a perpetual 4 % rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $ 400,000 has been paid to the Company. (2) The investor would pay up to $ 50,000 in exchange for a perpetual 1.11 % rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $ 50,000 has been paid to the Company. These variable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount . In the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of the share disposition price defined as the total price the third 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 2.25 % rate Payment on the Company’s quarterly Revenues (commencing on quarter ending May 31, 2020). At February 29, 2020 the investor 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. 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. If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the first payment due July 2020 and the final payment no later than February 28, 2021. As at August 31, 2020 the investor had fully funded the $800,000 commitment On August 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for $ 900,000 , November 18, 2019 for $ 225,000 and July 1, 2020 for $ 800,000 into a new agreement for a total of $ 1,925,000 . This new agreement is for similar terms as the above agreements save for the following: 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. F- 16 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In summary of all agreements mentioned above if in the event that at least 10 % of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted below. This aggregate asset disposition % was reduced from 43.77 % to 33.77% 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 29, 2024, the Company has accrued approximately $ 904,377 in Payments, of which $ 542,176 is in arrears. As of February 28, 2023, the Company has accrued approximately $ 542,177 in Payments, of which $ 325,600 is in arrears. No notices have been received by the Company. On March 1, 2021 the first investor referred to above whose aggregate investment is $ 1,925,000 revised his agreements as follows: 1) The rate payment was reduced from 14.25 % to 9.65 % 2) The asset disposition % (see below) was reduced from 31 % to 21 % In consideration for the above changes, the investor received 40 Series F Convertible Preferred Stock and a warrant to purchase 367 shares of its Series F Convertible Preferred Stock with 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. The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements. As of February 29, 2024, and February 28, 2023, 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 29, 2024 and February 28, 2023, 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. F- 17 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. RELATED PARTY TRANSACTIONS For the years ended February 29, 2024 and February 28, 2023, the Company made net repayments of $ 54,179 and $ 0 , respectively , to its loan payable-related party. At February 29, 2024, the loan payable-related party was $ 257,438 and $ 206,516 at February 28, 2023. As of February 29, 2024, included in the balance due to the related party is $ 140,013 of deferred salary all of which bears interest at 12 %. As of February 28, 2023, included in the balance due to the related party is $ 108,000 of deferred salary all of which bears interest at 12 %. The accrued interest included at February 29, 2024 was $ 32,468 (February 28, 2023- $ 15,660 ). During the year ended February 28, 2023 pursuant to the amended Employment Agreement with its Chief Executive Officer the Company accrued $ 1,521,000 as incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. In January 2024 the Company added an Objective 10 which required the accrual of $ 2,000,000 . There was also a net adjustment reduction of $ 479,000 for objectives accrued for but not met. At February 28, 2023, the balance of incentive compensation plan payable was $ 979,000 . This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $ 1,000 per share. During the year ended February 29, 2024, the Company accrued $ 538,767 in deferred compensation for the CEO. This was in accordance with a December 2023 board action allowing for $ 1 million of discretionary compensation. The Company had already recorded $ 461,233 in bonus compensation. There was no deferred compensation for the year ended February 28, 2023, the Company recorded a bonus to the CEO of $ 280,908 . During the years ended February 29, 2024 and February 28, 2023, the Company was charged $ 2,810,839 and $ 3,578,981 , respectively in consulting fees for research and development to a company partially owned by a principal shareholder included in research and development expenses. The principal shareholder received no compensation from this partially owned research and development company and the fees were spent on core development projects. As at both February 29, 2024 and February 28, 2023 the balance due to this company was $ 76,532 . 10. OTHER DEBT – VEHICLE LOANS In December 2016, RAD entered into a vehicle loan for $ 47,704 secured by the vehicle. The loan is repayable over 5 years maturing November 9, 2021, and repayable $ 1,019 per month including interest and principal. In November 2017, RAD entered into another vehicle loan secured by the vehicle for $ 47,661 . The loan is repayable over 5 years, maturing October 24, 2022 and repayable at $ 923 per month including interest and principal. The principal repayments made were $ 0 for both the year ended February 28, 2022 and February 28, 2021. Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was subsequently sold by the lender for proceeds of $ 21,907 which went to reduce the outstanding balance of the loan. A loss of $ 3,257 was recorded as well. A balance of $ 21,578 remains on this vehicle loan at both February 28, 2023 and February 29, 2022. For the first vehicle loan, the vehicle was retired in 2020, the proceeds of the disposal of $ 18,766 was applied against the balance of the loan with a $ 5,515 gain on the remaining asset value of $ 13,251 . A balance of $ 16,944 remains on this vehicle loan at both February 28, 2023 and February 28, 2022. The remaining total balances of the amounts owed on the vehicle loans were $ 38,522 and $ 38,522 as of February 29, 2024 and February 28, 2023, respectively, of which all were classified as current. F- 18 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. LOANS PAYABLE Loans payable at February 29, 2024 consisted of the following: SCHEDULE OF LOANS PAYABLE Annual Date Maturity Description Principal Interest Rate July 18, 2016 July 18, 2017 Promissory note (1)* $ 3,500 22 % December 10, 2020 March 1, 2025 Promissory note (2) 3,921,168 12 % December 10, 2020 March 1, 2025 Promissory note (3) 2,754,338 12 % December 10, 2020 December 10, 2024 Promissory note (4) 165,605 12 % December 14, 2020 December 14, 2023 Promissory note (5)* 310,375 12 % December 30, 2020 March 1, 2025 Promissory note (6) 350,000 12 % January 1, 2021 March 1, 2025 Promissory note (7) 25,000 12 % January 1, 2021 March 1, 2025 Promissory note (8) 145,000 12 % January 14, 2021 March 1, 2025 Promissory note (9) 550,000 12 % February 22, 2021 March 1, 2025 Promissory note (10) 1,650,000 12 % March 1, 2021 March 1, 2024 Promissory note (11) 6,000,000 12 % June 8, 2021 June 8, 2024 Promissory note (12) 2,750,000 12 % July 12, 2021 July 26, 2026 Promissory note (13) 3,776,360 7 % September 14, 2021 September 14, 2024 Promissory note (14) 1,650,000 12 % July 28, 2022 March 1, 2025 Promissory note (15) 170,000 15 % August 30, 2022 August 30,2024 Promissory note (16) 3,000,000 15 % September 7, 2022 March 1, 2025 Promissory note (17) 400,000 15 % September 8, 2022 March 1, 2025 Promissory note (18) 475,000 15 % October 13, 2022 March 1, 2025 Promissory note (19) 350,000 15 % October 28, 2022 October 31, 2026 Promissory note (20) 400,000 15 % November 9, 2022 October 31, 2026 Promissory note (20) 400,000 15 % November 10, 2022 October 31, 2026 Promissory note (20) 400,000 15 % November 15, 2022 October 31, 2026 Promissory note (20) 400,000 15 % January 11, 2023 October 31, 2026 Promissory note (20) 400,000 15 % February 6, 2023 October 31, 2026 Promissory note (20) 400,000 15 % April 5. 2023 October 31, 2026 Promissory note (20) 400,000 15 % April 20, 23 October 31, 2026 Promissory note (20) 400,000 15 % May 11, 2023 October 31, 2026 Promissory note (20) 400,000 15 % October 27, 2023 October 31, 2026 Promissory note (20) 400,000 15 % November 30, 2023 October 31, 2025 Purchase Agreement (21) 350,000 35 % $ 32,796,346 Less: current portion of loans payable ( 13,879,479 ) Less: discount on non-current loans payable ( 4,118,334 ) Non-current loans payable, net of discount $ 14,798,532 Current portion of loans payable $ 13,879,479 Less: discount on current portion of loans payable ( 688,597 ) Current portion of loans payable, net of discount $ 13,190,882 * In default F- 19 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) This note was transferred from convertible notes payable because in August 2022 it was no longer convertible due to restrictions placed on the lender. (2) 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. On November 28, 2023, the parties extended the maturity date from December 10, 2023 to March 1, 2025 with all other terms and conditions remaining the same . (3) 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. $ 100,000 and $ 300,000 has been repaid the three and nine months ended November 30, 2023. The balance at November 30,2023 is now $ 2,754,338 . On November 28, 2023, the parties extended the maturity date from December 10, 2023 to March 1, 2025 with all other terms and conditions remaining the same . (4) 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 . (5) 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 loan is presently in default and the Company is working on a extension with the lender. (6) The note, with an original principal amount of $ 350,000 , may be pre-payable at any time. The note balance includes an original issue discount of $ 35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3 -year term and having a relative fair value of $ 271,250 . 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 $ 271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the year ended February 29, 2024, the Company recorded amortization expense of $ 120,023 , with an unamortized discount of $ 73,491 at February 29, 2024. On November 28, 2023, the parties extended the maturity date from December 10, 2023 to March 1, 2025 with all other terms and conditions remaining the same. (7) 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 . This note is secured by a general security charging all of the Company’s present and after-acquired property. On November 28, 2023, the parties extended the maturity date from January 1, 2024 to March 1, 2025 with all other terms and conditions remaining the same. (8) This promissory note was issued as part of a debt settlement whereby $ 79,500 in convertible notes and associated accrued interest of $ 28,925 totaling $ 108,425 was exchanged for this promissory note of $ 145,000 . This note is secured by a general security charging all of the Company’s present and after-acquired property. On November 28, 2023, the parties extended the maturity date from January 1, 2024 to March 1, 2025 with all other terms and conditions remaining the same. (9) The note, with an original principal amount of $ 550,000 , may be pre-payable at any time. The note balance includes an original issue discount of $ 250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $ 0.025 per share with a 3 -year term and having a relative fair value of $ 380,174 . 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 $ 380,174 with a corresponding adjustment to paid in capital. For the year ended February 29, 2024, the Company recorded amortization expense of $ 148,493 , with an unamortized discount of $ 90,443 at February 29, 2024. On November 28, 2023, the parties extended the maturity date from January 14, 2024 to March 1, 2025 with all other terms and conditions remaining the same. F- 20 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (10) 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 100,000,000 shares at an exercise price of $ 0.135 per share with a 3 -year term and having a relative fair value of $ 1,342,857 . The discount and warrant 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 $ 1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 559,061 , with an unamortized discount of $ 553,199 at February 29, 2024. On November 28, 2023, the parties extended the maturity date from February 22, 2024 to March 1, 2025 with all other terms and conditions remaining the same. (11) 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.. 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. This note has been fully amortized. (12) The note, with an original principal balance of $ 2,750,000 , may be pre-payable at any time. The note balance includes an original issue discount of $ 50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $ 0.064 per share with a 3 -year term and having a relative fair value of $ 2,035,033 . 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 $ 2,035,033 with a corresponding adjustment to paid in capital. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 756,550 , with an unamortized discount of $ 37,668 at February 29, 2024. (13) This loan, with an original principal balance of $ 4,000,160 , was in exchange for 184 Series F preferred shares from a former director. The interest and principal are payable at maturity. The loan is unsecured. For the year ended February 29, 2024 there were repayments of $ 108,000 on the note. (14) 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 year ended February 29, 2024, the Company recorded amortization expense of $ 575,036 , with an unamortized discount of $ 639,395 at February 29, 2024. (15) Original $ 170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $ 20,000 . Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended February 29, 2024, the Company recorded amortization expense of $ 9,026 , with an unamortized discount of $ 0 at February 29, 2024. On November 29, 2023, the parties extended the maturity date from July 28, 2023 to March 1, 2025 with all other terms and conditions remaining the same. F- 21 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (16) 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 year ended February 29, 2024, the Company recorded amortization expense of $ 19,333 , with an unamortized discount of $ 11,535 at February 29, 2024. (17) Original $ 400,000 note may be pre-payable at any time. The note balance includes an original issue discount of $ 50,000 . Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended February 29, 2024, the Company recorded amortization expense of $ 27,821 , with an unamortized discount of $ 0 at February 29, 2024. On November 29, 2023, the parties extended the maturity date from September 7, 2023 to March 1, 2025 with all other terms and conditions remaining the same. (18) Original $ 475,000 note may be pre-payable at any time. The note balance includes an original issue discount of $ 75,000 . Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended February 29, 2024, the Company recorded amortization expense of $ 36,739 , with an unamortized discount of $ 0 at February 29, 2024. On November 29, 2023, the parties extended the maturity date from September 8, 2023 to March 1, 2025 with all other terms and conditions remaining the same. (19) Original $ 350,000 note may be pre-payable at any time. The note balance includes an original issue discount of $ 50,000 . Principal and interest due at maturity. Secured by a general security charging all of the Company’s s present and after-acquired property. For the year ended February 29, 2024, the Company recorded amortization expense of $ 32,910 , with an unamortized discount of $ 0 at February 29, 2024. On November 29, 2023, the parties extended the maturity date from October 13, 2023 to March 1, 2025 with all other terms and conditions remaining the same. (20) On October 28, 2022 the Company entered into an loan facility with a lender for up to $ 4,000,000 including an original issue discount of $ 500,000 . In exchange the Company will issue one series F Preferred Share, extended 329 series F warrants with a March 1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10 tranches with each 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. Secured by a general security charging all of the Company’s present and after-acquired property. At February 29, 2024 the Company has issued all 10 tranches totaling $ 4,000,000 as follows: October 28, 2022, $ 400,000 loan, original issue discount of $ 50,000 , 61 Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $ 299,399 . For the year ended February 29, 2024, the Company recorded amortization expense of $ 11,950 , with an unamortized discount of $ 336,074 at February 29, 2024. November 9, 2022, $ 400,000 loan, original issue discount of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $ 299,750 . For the year ended February 29, 2024, the Company recorded amortization expense of $ 11,799 , with an unamortized discount of $ 336,639 at February 29, 2024. November 10, 2022, $ 400,000 loan, original issue discount of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $ 302,020 . For the year ended February 29, 2024, the Company recorded amortization expense of $ 10,897 , with an unamortized discount of $ 339,984 at February 29, 2024. November 15, 2022, $ 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 year ended February 29, 2024, the Company recorded amortization expense of $ 12,025 , with an unamortized discount of $ 335,790 at February 29, 2024. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 12,252 , with an unamortized discount of $ 334,937 at February 29, 2024. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 11,790 , with an unamortized discount of $ 336,636 at February 29, 2024. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 11,015 , with an unamortized discount of $ 335,230 at February 29, 2024. F- 22 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 year ended February 29, 2024, the Company recorded amortization expense of $ 8,618 , with an unamortized discount of $ 343,601 at February 29, 2024. 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 year ended February 29, 2024, the Company recorded amortization expense of $ 174 , with an unamortized discount of $ 398,809 at February 29, 2024. October 27 2023, $ 400,000 loan, original issue discount of $ 50,000 , 61 Series F Preferred Share warrants having a relative fair value of $ 261,759 . For the year ended February 29, 2024, the Company recorded amortization expense of $ 8,661 , with an unamortized discount of $ 303,098 at February 29, 2024. (21) On November 30, 2023, the Company entered into an agreement where the lender will buy pay the Company $ 350,000 in exchange for thirteen future monthly payments of $36,750 commencing on April 30,2024 through to April 30, 2025 totaling $ 477,750 . The effective interest rate is 35 % per annum. As the proceeds were received on December 1, 2023 , this loan was recorded on December 1, 2023. Secured by a general security charging all of RAD’s present and after-acquired property. Default rate of 15 % per annum calculated daily on any missed monthly payment. 12. STOCKHOLDERS’ DEFICIT Preferred Stock: The Company is authorized to issue up to 20,000,000 shares of $ 0.001 par value preferred stock. The board of directors is authorized to designate any series of preferred stock up to the total authorized number of shares. Series B Convertible, Redeemable Preferred Stock The board of directors has designated 5,000 shares of Series B Convertible, Redeemable Preferred Stock with a par value of $ 0.001 per share. As of the date of this report, there are no shares of Series B Preferred Stock outstanding. The Series B Convertible Preferred Stock are redeemable at $ 1,200 per share, rank in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights on a converted basis and receives quarterly dividends of 8 %. Each holder may, at any time and from time to time convert all, but not less than all, of their shares of Series B Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares of common stock determined by dividing the redemption value by the Conversion Price. The Conversion price is equal to the lower of (1) a fixed price equaling the closing bid price of the Common Stock on the trading day immediately preceding the date of the acquisition of the shares and (2) the lowest traded price of the Common Stock during the ten (10) calendar days immediately preceding, but not including, the Conversion Date. Following an event of default,” as defined in the Purchase Agreement, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty five percent (85%) of the lowest traded price for the Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion Date. Each share of Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of eight percent (8%) per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any dividends that are not paid a shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the dividend payment date through and including the date of actual payment in full. On the thirtieth day following the issue date of this Preferred Stock the Company shall have the obligation to redeem one-third of the Preferred Stock outstanding for a redemption price equal to the redemption value of each such share of Preferred Stock, plus any accrued but unpaid dividends, plus all other amounts due to the Holder including, but not limited to Late Fees, liquidated damages and the legal fees and expenses of the Holder’s counsel. On the sixtieth (60 th ) calendar day following the date Preferred Stock is issued, the Corporation shall have the obligation to redeem one-half of the Preferred Stock then outstanding for the redemption price. On the ninetieth (90 th ) calendar day following the date Preferred Stock is issued, the Corporation shall have the obligation to redeem all of the Preferred Stock then outstanding for the redemption price. From the date of issuance until the date no shares of Series B Preferred Stock are issued and outstanding, unless Holders of at least 75% in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend its charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction Documents: (e) pay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or(g) enter into any agreement with respect to any of the foregoing. F- 23 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Series E Preferred Stock The board of directors has designated 4,350,000 shares of Series E Preferred Stock. As of the date of this report, there are 3,350,000 shares of Series E Preferred Stock outstanding. The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation. The Series E preferred stock is non-redeemable, does not have rights upon liquidation of the Company and does not receive dividends. The outstanding shares of Series E Preferred Stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of equity instruments with voting rights. As a result, the holder of Series E Preferred Stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. Series F Convertible Preferred Stock The board of directors has designated 4,350 shares of Series F Convertible Preferred Stock with a par value of $ 1.00 per share. As of the date of this report, there are 2,533 shares of Series F Convertible Preferred Stock outstanding. The Series F Convertible Preferred Stock is non-redeemable, does not have rights upon liquidation of the Company, does not have voting rights and does not receive dividends. Each holder may, at any time and from time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock 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. So long as any shares of Series F Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders: (a) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible preferred stock; (b) create any Senior Securities; (c) create any pari passu Securities; (d) do any act or thing not authorized or contemplated by the Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time to time amended, (or otherwise suffer to exist any such taxation as a result thereof). Series G Preferred Stock The board of directors has designated 100,000 shares of Series G Preferred Stock. As of the date of this report, there are no shares of Series G Preferred Stock outstanding. The series G shares are redeemable at $ 1,000 per share The Series G preferred stock does not have voting rights, does not have rights upon liquidation of the Company and does not receive dividends. Summary of Preferred Stock Activity F- 24 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Series B Convertible, Redeemable Preferred Stock On April 27, 2024, in connection with a Share Purchase Agreement the Company created a new class Of Series B Convertible Redeemable with 5,000 authorized shares. Series F Convertible Preferred Stock Each holder of Series F 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. On April 30, 2024 the Company increased authorized to 10,000 Series F Preferred Shares. Summary or Preferred Stock Activity During the year ended February 29, 2024 Series F shareholders had the following activity: — A total of 244 Series F Preferred Stock Warrants issued along with debt to a lender. During the year ended February 28, 2023 Series F shareholders had the following activity: — 1 Series F Preferred Share and a total of 366 Series F Preferred Stock Warrants issued along with debt to a lender. Unissued Series F Preferred Stock At both February 29, 2024 and February 28, 2023 there remains 46 issuable Series F preferred stock at a value of $ 99,086 . On October 28, 2022 as part of a $ 4,000,000 loan facility (described in Note 11) the Company extended the maturity date of the 329 existing Series F Preferred Warrants currently held by the lender to October 31, 2033 from October 31, 2026. Summary of Preferred Stock Warrant Activity SUMMARY OF PREFERRED STOCK WARRANT ACTIVITY Number of Series F Preferred Warrants Weighted Average Exercise Price Weighted Average Remaining Years Outstanding at March 1, 2023 695 $ 1.00 10.00 Issued 244 $ 1.00 10.00 Exercised — — — Forfeited and cancelled — — — Outstanding at February 29, 2024 939 $ 1.00 9.5 F- 25 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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, from 6,000,000,000 to 7,225,000,000 on March 19, 2023 from 7,225,000,000 to 10,000,000,000 on August 30, 2023, and from 10,000,000,000 to 12,500,000,000 on March 22, 2024. Summary of Common Stock Activity During the year ended, February 29, 2024, common shareholders had the following activity: — the Company issued 3,383,509,359 common shares with gross proceeds of $ 8,21,027 and net proceeds of $ 11,282,955 after issuance costs of $ 457,060 . — the Company issued 6,500,000 common shares for services with a fair value of $ 44,460 . During the year ended, February 28, 2023, common shareholders had the following activity: — the Company issued 1,057,841,576 common shares with gross proceeds of $ 8,21,027 and net proceeds of $ 7,771,169 after issuance costs of $ 447,858 . — the Company issued 17,500,000 common shares as penalty to an investor pursuant to a share purchase agreement. — the Company issued 45,306,557 shares through the cashless exercise of 108,378,210 warrants. — the Company cancelled 17,116,894 shares as a result of an SEC enforcement action against a lender and issued 10,000,000 shares for $ 118,500 as payment for services. The table below represent the common shares issued, issuable and outstanding at February 29, 2024 and February 28, 2023: SUMMARY OF COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING Common shares February 29, 2024 February 28, 2023 Issued 9,238,750,958 5,836,641,599 Issuable — 12,100,000 Issued, issuable and outstanding 9,238,750,958 5,848,741,599 F- 26 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Summary of Warrant and Stock Option Activity SUMMARY OF WARRANT AND STOCK OPTION ACTIVITY Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Years Outstanding at February 29, 2022 1,216,845,661 $ 0.06 2.38 Adjusted (1) 66,750,000 0.011 1.41 Issued 94,000,000 0.01 4.69 Exercised ( 108,378,210 ) ( 0.011 ) 2.44 Forfeited and cancelled ( 955,000,000 ) ( 0.008 ) 1.33 Outstanding at February 28, 2023 314,217,451 $ 0.114 1.95 Issued — — — Exercised — — — Forfeited and cancelled ( 13,621,790 ) ( 0.01 ) — Outstanding at February 29, 2024 300,595,661 $ 0.003 1.00 (1) Required dilution adjustment per warrant agreement For the years ended February 29, 2024 and February 28, 2023, the Company recorded a total of $ 0 and $ 0 , respectively on stock-based payments for warrants with a corresponding adjustment to additional paid-in capital. For the years ended February 29, 2024 and February 28, 2022 the Company recorded a total of $ 272,559 and $ 240,550 respectively, to stock-based compensation for options and shares with a corresponding adjustment to additional paid-in capital. In addition the Company recorded other stock based compensation of ($ 479,000 ) and $ 499,500 , respectively with a corresponding adjustment to incentive compensation plan payable, payable in Series G Preferred shares which have not yet been issued. During the year ended February 29, 2024 warrant holders had the following activity: — On January 27, 2024 warrants to acquire 13,621,790 shares expired. During the year ended February 28, 2023 warrant holders had the following activity: — 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 of the loan. — On August 9, 2022 as part of a debt issuance the Company issued two 47,000,000 warrants at an exercise price of $ 0.01 and $ 0.008 per share, respectively both with a 5-year term and with a total relative fair value of $ 393,949 all using a Monte Carlo simulation to include reset events, exercise at maturity, and cashless exercise features with assumptions described below: SCHEDULE OF FAIR VALUE ASSUMPTIONS OF WARRANTS Strike price $ 0.008 - $ 0.01 Fair value of Company’s common stock $ 0.012 Dividend yield 0.00 % Expected volatility 88.2 % - 90.00 % Risk free interest rate 2.98 % Expected term (years) 5.00 — Cashless exercise of 108,378,210 warrants for 45,306,557 common shares F- 27 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Summary of Common Stock Option Activity Summary of CEO Compensation Grant On April 9, 2021 the Company entered into an Employment Agreement with Chief Executive Officer, Steven Reinharz with a three- year term under the following terms whereby stock option awards will be granted if certain conditions are met: — A stock option award (option 1) will be granted to the employee to purchase 10,000,000 shares at an exercise price of $ $ 0.15 per share if the trading share price of the Company reaches an average of $ 0.30 per share for ten days over a 30 day trading period. — A stock option award (option 2) will be granted to the employee to purchase 30,000,000 shares at an exercise price of $ $ 0.25 per share if the trading share price of the Company reaches an average of $ 0.50 per share for ten days over a 30 day trading period. Objective #3 : Sales in any fiscal quarter exceed the total sales in fiscal year 2021 for the first time. Award #3 : Five hundred (500) shares of Series G preferred stock. Objective #4 : One hundred fifty (150) devices are deployed in the marketplace. Award #4 : Two hundred fifty (250) shares of Series G preferred stock. Objective #5 : Year-to-date sales at any point in fiscal year 2022 exceed One Million Dollars ($1,000,000). Award #5 : Two hundred fifty (250) shares of Series G preferred stock. Objective #6 : The price per share of common stock has increased to and maintains a price of Ten Cents ($0.10) or more for ten (10) days in a thirty (30) day period. Award #6 : Two hundred fifty (250) shares of Series G preferred stock. Objective #7 : The price per share of common stock has increased to and maintains a price of Twenty Cents ($0.20) or more for ten (10) days in a thirty (30) day period. Award #7 : Five hundred (500) shares of Series G preferred stock. Objective #8 : The RAD 3.0 products are launched into the marketplace by November 30, 2021. Award #8 : Five hundred (500) shares of Series G preferred stock. Objective #9 : RAD receives an order for fifty (50) units from a single customer. Award #9 : Five hundred (500) shares of Series G preferred stock. On January 31, 2024 the Company added the following Objective effective Martch 1, 2022: Objective # 10 In any fiscal quarter, attrition , measured by loss of recurring monthly revenue does not exceed 10% Award #10 Two h undred fifty (250) shares of Series G preferred stock. The fair value of the first two awards was obtained through the use of the Monte Carlo method was $ 69,350 with a charge to stock- based compensation and a corresponding charge to paid in capital. The fair value of the remaining rewards was determined by calculating the vesting amounts of each reward and then determining for each reporting period the requisite service rendered and applying that against the cash redemption value of the number of shares of Series G issuable for each tier in the agreement. For the period ended February 29, 2024 that amount totaled $ 1,521,000 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. For the period ended February 28, 2023 that amount totaled $ 499,500 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. F- 28 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS On April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved and adopted the 2021 Incentive Stock Plan (the “2021 Plan”). On August 11, 2022 the Company amended the 2021 Plan increasing the maximum number of shares applicable to the 2021 Plan from 5,000,000 to 100,000,000. On August 14, 2023 the Company further amended the plan increasing the maximum shares to 200,000,000. The purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors, executives, selected Employees and Consultants, and reward participants for making major contributions to the success of the Company. The 2021 Plan authorizes the granting of stock options, restricted stock, restricted stock units, stock appreciation rights and stock awards. A total of two hundred million ( 200,000,000 ) shares of common stock may be issued under the 2021 Plan. All awards under the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback or similar policy of the Company in effect from time to time, as well as any similar provisions of applicable law, which could in certain circumstances require repayment or forfeiture of awards or any shares of stock or other cash or property received with respect to the awards, including any value received from a disposition of the shares acquired upon payment of the awards. The 2021 Plan will be administered by the Board or any Committee authorized by the Board, if applicable, which will have the sole authority to, among other things: construe and interpret the 2021 Plan; make rules and regulations relating to the administration of the 2021 Plan; select participants; and establish the terms and conditions of awards, all in accordance with the terms of the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the Board. Termination will not affect awards then outstanding. During the year ended February 29, 2024 the Company had the following common stock option activity: — On September 1, 2023, the Company as an addition to the afore-mentioned Incentive Stock Option Plan issued 114,217,035 shares to 48 employees. The shares were issued with an exercise price of $ 0.02 , vest after 4 years with a 5 year term having a fair value of $ 593,929 using the Black-Scholes model with assumptions described below: SCHEDULE OF COMMON STOCK OPTION ACTIVITY ASSUMPTIONS Strike price $ 0.02 Fair value of Company’s common stock $ 0.0052 Dividend yield 0.00 % Expected volatility 320.5 Risk free interest rate 4.29 % Expected term (years) 4.50 The Company recorded $ 74,241 in stock-based compensation on the 2023 plan which represents the current expense over the vesting period. In addition the company recorded $ 198,357 stock based compensation on the 2022 options , so for the year ended February 29, 2024 the Company recorded a total of $ 272,599 in stock based compensation with a corresponding increase in paid up capital. — On the original 2021 plan, options to purchase 21,275,000 shares were forfeited due to employee terminations During the year ended February 28, 2023 the Company had the following common stock option activity: — On September 1, 2022, the Company as part of the afore-mentioned Incentive Stock Option Plan issued 100,000,000 shares to 64 employees. The shares were issued with an exercise price of $ 0.02 , vest after 4 years with a 5 year term having a fair value of $ 1,020,000 using the Black-Scholes model with assumptions described below: SCHEDULE OF COMMON STOCK OPTION ACTIVITY ASSUMPTIONS Strike price $ 0.02 Fair value of Company’s common stock $ 0.01 Dividend yield 0.00 % Expected volatility 340.9 Risk free interest rate 3.39 % Expected term (years) 4.50 The Company recorded $ 122,050 in stock-based compensation which represents the current expense over the vesting period. — Options to purchase 4,275,000 shares were forfeited due to employee terminations F- 29 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Summary of Common Stock Option Activity SUMMARY OF COMMON STOCK OPTION ACTIVITY Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Years Outstanding at March 1, 2022 — $ — — Issued 100,000,000 $ 0.02 4.75 Exercised — — — Forfeited, extinguished and cancelled ( 4,275,000 ) $ 0.02 ( 4.75 ) Outstanding at February 28, 2023 95,725,000 $ 0.02 4.75 Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Years Outstanding at March 1, 2023 95,725,000 $ 0.02 4.75 Issued 114,217,035 $ 0.02 4.75 Exercised — — — Forfeited, extinguished and cancelled ( 21,275,000 ) $ 0.02 ( 4.00 ) Outstanding at February 29, 2024 188,667,035 $ 0.02 4.10 13. COMMITMENTS AND CONTINGENCIES Litigation Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. The related legal costs are expensed as incurred. Operating Lease On March 10, 2021, the Company entered into a 10 year lease agreement for q manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent of $ 15,880 per month. The base rent increase by 3% per annum commencing May 1, 2024. The Company paid a security deposit of $ 15,880 . On September 30, 2021, the Company entered into a 3-year lease agreement for a vehicle commencing September 30, 2021 through to September 30, 2024 with a minimum base rent of $ 1,538 per month. The Company paid a down payment of $ 18,462 . On January 28, 2022, the Company entered into a 2-year lease agreement for office space at 1516 E Edinger, Santa Ana, California, 92705, commencing on February 1, 2022 through to January 31, 2024 with a minimum base rent of $ 1,500 per month. The Company paid a security deposit of $ 1,500 . This lease expired on January 31, 2024 and was not renewed. On February 5, 2024, the Company entered into a 3-year lease agreement for a vehicle commencing February 5, 2024 through to February 5, 2027 with a minimum base rent of $ 1,223 per month. The Company paid a down payment of $ 9,357 . The Company’s leases are accounted for as operating leases. Rent expense and operating lease cost are recorded over the lease terms on a straight-line basis. Rent expense and operating lease cost was $ 260,406 and $ 260,271 for the years ended February 29, 2024 and February 28, 2023, respectively. F- 30 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES Maturity of Lease Liabilities Operating Leases February 28, 2025 $ 237,653 2025 $ 237,653 February 28, 2026 225,348 2026 225,348 February 28, 2027 223,866 2027 223,866 February 29, 2028 207,558 2028 207,558 February 28, 2029 207,558 2029 207,558 February 28, 2030 and after 449,709 2030 and after 449,709 Total lease payments 1,551,692 Less: Interest ( 424,679 ) Present value of lease liabilities $ 1,127,013 14. EARNINGS (LOSS) PER SHARE The net income (loss) per common share amounts were determined as follows: SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE For the Year Ended February 29, February 28, 2024 2023 Numerator: Net income (loss) available to common shareholders $ ( 20,708,716 ) $ ( 18,109,457 ) Effect of common stock equivalents Add: interest expense on convertible debt — 47,075 Add (less) loss (gain) on change of derivative liabilities — ( 3,595 ) Net income (loss) adjusted for common stock equivalents ( 20,708,716 ) ( 18,065,977 ) Denominator: Weighted average shares - basic 7,080,914,317 5,091,857,082 Net income (loss) per share – basic $ ( 0.00 ) $ ( 0.00 ) Denominator: Weighted average shares – diluted 7,080,914,317 5,091,857,082 Net income (loss) per share – diluted $ ( 0.00 ) $ ( 0.00 ) The anti-dilutive shares of common stock equivalents for the years ended February 29, 2024 and February 28, 2023 were as follows: SCHEDULE OF ANTI-DILUTIVE SHARES OF COMMON STOCK EQUIVALENTS For the Year Ended February 29, February 28, 2024 2023 Convertible Class F Preferred Shares * 31,873,690,805 — Stock options and warrants 489,262,696 496,942,251 Total 32,362,953,501 496,942,251 * 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 February 29, 2024 and February 28, 2023 the dilutive effects would be as follows: For the Year Ended February 29 and February 28 2024 2023 Convertible Series F Preferred Shares — 20,178,158,517 Anti-dilutive shares of common stock — 20,178,158,517 F- 31 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. INCOME TAXES The Company has adopted ASC 740-10, “ Income Taxes” , which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax expense (benefit) consisted of the following for the fiscal years ended February 29, 2024 and February 28, 2023: SCHEDULE OF INCOME TAX EXPENSES (BENEFIT) February 29, 2024 February 28, 2023 Total current $ — $ — Total deferred — — Total $ — $ — Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal years ended February 29, 2024 and February 28, 2023: SCHEDULE OF EXPECTED STATUTORY FEDERAL INCOME TAX PROVISION February 29, 2024 Federal statutory rate $ ( 4,349,000 ) State income tax benefit, net of federal benefit ( 994,000 ) Non deductible interest 501,000 Non deductible stock based compensation 377,000 Change in valuation allowance 4,465,000 Total $ — February 28, 2023 Federal statutory rate $ ( 3,803,000 ) State income tax benefit, net of federal benefit ( 859,400 ) Non deductible interest 415,800 Non deductible stock based compensation 155,400 Change in valuation allowance 4,091,200 Total $ — For the years ended February 29, 2024 and February 28, 2023, the expected tax benefit, temporary timing differences and long-term timing differences are calculated at the 21 % statutory rate. F- 32 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Significant components of the Company’s deferred tax assets and liabilities were as follows for the fiscal years February 29, 2024 and February 28, 2023: SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES February 29, 2024 February 28, 2023 Deferred tax assets: Net operating loss carryforwards $ 17,116,115 $ 12,651,115 Deferred tax liabilities: Depreciation — — Deferred revenue — — Total deferred tax liabilities — — Net deferred tax assets: Less valuation allowance ( 17,116,115 ) ( 12,651,115 ) Net deferred tax assets (liabilities) $ — $ — The Company has incurred losses since inception, therefore, the Company has no federal tax liability. Additionally there are limitations imposed by certain transactions which are deemed to be ownership changes which occurred in the Company on August 28, 2017. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward was approximately $ 61,973,800 at February 29, 2024 and $ 44,448,800 at February 28, 2023, that is available for carryforward for federal income tax purposes and begin to expire in 2030 . Although the Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration. Accordingly, the future income tax asset amounts have been fully reserved by a valuation allowance. The Company has maintained a full valuation allowance against its deferred tax assets at February 29, 2024 and February 28, 2023. A valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided. The Company does not have any uncertain tax positions at February 29, 2024 and February 28, 2023 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense. The Company’s tax returns for the years ended February 28, 2023, and February 28, 2022, and February 29, 2021 are open for examination under Federal statute of limitations. F- 33 Table of Contents ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. SUBSEQUENT EVENTS Subsequent to February 29, 2024 through to May 9, 2024, — the Company issued 705,166,425 common shares pursuant to a share purchase agreement for gross proceeds of $ 1,298,639 , issuance costs of $ 55,021 and cash proceeds of $ 1,243,618 . — on March 12 ,2024 the shareholders approved an increase to its authorized common stock by 2,500,000,000 shares for 10,000,000 shares to 12,500,000 shares. — On March 8, 2024, the Company entered into an agreement where the lender will buy pay the Company $ 350,000 in exchange for thirteen future monthly payments of $ 36,750 commencing on August 8,2024 through to August 8,2025 totaling $ 477,750 . The effective interest rate is 35 % per annum. This agreement is secured by a general security charging all of RAD’s present and after-acquired property. Default rate of 15 % per annum calculated daily on any missed monthly payment. — On April 29, 2024 , the Company entered into a Securities Purchase Agreement for 300 Series B Convertible , Redeemable Preferred Shares. The Company will receive $ 300,000 less $ 10,000 in legal fees. In addition as a commitment fee the Company issued an additional 20 Series B Convertible, Redeemable Preferred Shares. The shares have a redemption value of $ 1,200 per share. The Company must redeem one third of these shares or 106 2/3 for $108,000 in 30, days and each 30 days thereafter until all the shares are redeemed at 90 days. The Company must pay an 8 % dividend from issue date to redemption date. 17. OTHER SUBSEQUENT EVENTS Subsequent to May 9, 2024 through to May 23, 2024, — On May 15, 2024 the Company increased authorized common shares from 12,500,000,000 to 15,000,000,000 . — the Company issued 375,000,000 common shares pursuant to a share purchase agreement for gross proceeds of $ 1,500,000 , issuance costs of $ 61,025 and cash proceeds of $ 1,438,975 . F- 34