What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-15 compared with 2025-01-14 · 88 added, 156 removed, 83 unchanged (75% of the section changed)

1 unchanged sentence

Forward-Looking

following discussion of our financial condition and results of operations for the three and nine months ended November 30, 2024 and November

30, 2023 should be read in conjunction with our unaudited consolidated financial statements and the notes to those statements that are

included elsewhere in this report.

Our discussion includes forward-looking statements based upon current expectations that involve risks

and uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially

from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A.

Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 29, 2024, as filed on May 29, 2024 with the SEC.

We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”

“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,”

“could,” and similar expressions to identify forward-looking statements.

following discussion of our financial condition and results of operations for the three months ended May 31, 2025 and May 31, 2024 should

be read in conjunction with our unaudited consolidated financial statements and the notes to those statements that are included elsewhere

in this report.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties,

such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially from those

anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A.

appearing in our Annual Report on Form 10-K for the year ended February 28, 2025, as filed on May 29, 2025 with the SEC.

such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,”

“expect,” “believe,” “intend,” “may,” “will,” “should,” “could,”

and similar expressions to identify forward-looking statements.

expressly indicated or the context requires otherwise, the terms “AITX”, the “Company”, “we”, “us”,

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Discussion and Analysis

of Operations for the Three Months Ended November 30, 2024, and 2023

following table shows our results of operations for the three months ended November 30, 2024, and 2023.

The historical results presented

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

of Operations for the Three Months Ended May 31, 2025 and 2024

following table shows our results of operations for the three months ended May 31, 2025 and 2024.

The historical results presented below

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

Three Months Ended

November 30, 2024

Three Months Ended

November 30, 2023

Operating expenses

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

November 30, 2024

November 30, 2023

Three Months Ended

Device rental activities

Direct sales of goods and services

revenue for the three-month period ended November 30, 2024, was $1,750,968 which represented an increase of $1,153,988 compared to total

revenue of $596,980 for the three months ended November 30, 2023.

There has been a large increase in revenues as a result of higher rental

activities growing each quarter through the deployment of new revenue earning devices.

gross profit for the three-month period ended November 30, 2024, was $1,173,830, which represented an increase of $826,594 compared to

gross profit of 347,236 for the three months ended November 30, 2023.

The gross profit increased due to the higher sales and higher proportion

of rental activities at higher margins than direct sales.

The gross profit % of 67% for the three-month period ended November 30, 2023,

was higher than the gross profit % of 58% for the prior year’s corresponding period.

revenue for the three-month period ended May 31, 2025 was $1,854,837 which represented an increase of $672,037 or 57% compared to total

revenue of $1,182,800 for the three months ended May 31, 2024.

Rental activities increased by $646,750 or 66%, as the Company continues

to grow its product line and customer base.

Direct sales grew by 13% driven by higher training revenue for the three months ended May

gross profit for the three-month period ended May 31, 2025 was $1,233,501 which represented an increase of $548,167 compared to gross

profit of $685,334 for the three months ended May 31, 2024.

The increase is consistent with the increase in revenues as well as changes

in product mix.

The gross profit % of 67% for the three-month period ended May 31, 2025 compared with the gross profit % of 58% for the

three month period ended May 31, 2024.

The gross profit % was higher because of higher proportion of rental revenues.

Three Months Ended

November 30, 2024

Three Months Ended

November 30, 2023

Research and development

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Operating lease cost and rent

Operating expenses

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

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

Our operating expenses during the three-month period ended November 30, 2024, and November 30, 2023, were $3,476,728 and $2,732,187,

respectively.

Our operating expenses during the three-month period ended May 31, 2025 and May 31, 2024, were $4,412,170 and $3,518,590, respectively.

The overall increase of $893,580 was primarily attributable to the following changes in operating expenses of:

and administrative expenses increased by $681,460.

In comparing the three months ended November 30, 2024, and November 30, 2023,

this increase was primarily due to the following increases:

wages and salaries $421,996, commissions by $65,064, repairs and maintenance

by $158,813 and RMC costs by $108,919.

These were partially offset by decreases in other G& A accounts.

and development increased by $21,919 as the Company continues to develop new hardware and software solutions..

and amortization increased by $4,328 due to small increases in demo devices, and warehouse equipment.

lease cost and rent decreased by $6,206 due to one less lease in the current period.

Income (Expense)

income (expense) during the three months ended November 30, 2024, and November 30, 2023, was ($1,401,076) and ($1,581,533), respectively.

The $180,457 decrease in other expense was primarily attributable to the application of ASU-2020 06 in the current year which resulted

in lower amortization expense.

had a net loss of $3,703,974 for the three months ended November 30, 2024, compared to a net loss of $3,966,484 for the three months

ended November 30, 2023.

The decrease in net loss of $262,510 is due to a number of factors:

higher gross profit offset and lower other

expenses offset by higher general and administrative in the three months ended November 30, 2024.

of Operations for the Nine Months Ended November 30, 2024, and 2023

following table shows our results of operations for the nine months ended November 30, 2024, and 2023.

The historical results presented

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

Nine Months Ended

November 30, 2024

Nine Months Ended

November 30, 2023

Operating expenses

Loss from operations

Other income (expense), net

$ (11,828,656 )

$ (13,281,405 )

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

November 30, 2024

November 30, 2023

Device rental activities

Direct sales of goods and services

revenue for the nine-month period ended November 30, 2024, was $4,277,951 which represented an increase of $2,909,400 compared to total

revenue of $1,368,551 for the nine months ended November 30, 2023.

This 213% increase was because of higher rental activities due to

272 new deployments year to date November 30, 2023.

gross profit for the nine-month period ended November 30, 2024, was 2,860,255 which represented an increase of $2,130,512, compared to

gross profit of $729,743 for the nine months ended November 30, 2023.

The gross profit increased due to the 213% higher sales and higher

proportion of rental activities at higher margins than direct sales.

The gross profit percentage of 67% for the nine-month period ended

November 30, 2024, was higher than the gross profit percentage of 53% for the prior year’s corresponding period.

Nine Months Ended

November 30, 2024

Nine Months Ended

November 30, 2023

Research and development

General and administrative

Depreciation and amortization

Operating lease cost and rent

Operating expenses

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

expenses and consultants.

Our operating expenses during the six-month period ended November 30, 2024 and November 30, 2023, were $10,610,283

and $9,108,923, respectively.

The overall increase of $1,501,360 was primarily attributable to the following changes in operating expenses

and administrative expenses increased by $1,796,613.

In comparing the nine months ended November 30, 2024, and November 30, 2023

the increase may be partially explained by the following increases:

wages and salaries by $900,370, subcontractors by $143,935, insurance

by $82,352, freight and duty by $117,773, installation expenses by $100,768, repairs and maintenance by $90,355 RMC costs by $273,629,

dues and subscriptions by $30,146, and office expenses $38,246.

These were partially offset by decreases in the following accounts:

professional fees by $84,522, stock-based compensation by $87,927 and other G& A decreases.

and development decreased by $346,266 due to a reduction in funding on development of future products especially in the first two

quarters of the current year.

and amortization increased by $57,322 due to the acquisition of demo devices, computer equipment and warehouse equipment.

lease cost and rent decreased by $6,309 due to one less lease in the current period.

In comparing the three months ended May 31, 2025 and May 31, 2024 this increase

was primarily due to the following increases:

wages and salaries by $388,250, commissions by $43,018, production supplies by $44,308,

professional fees by $57,997, marketing by $106,977, and bad debts expenses by $42,066 offset with other net G&

A account decreases.

and development increased by $277,469 due to an increase in software development.

and amortization decreased by $61,555 due to fixed assets being fully depreciated in 2025 as well as a lower allocation of revenue

earning devices to operating expenses due to a change in estimate based on experience.

lease cost and rent decreased by $3,794 due to one less lease in 2025.

Income (Expense)

income (expense) during the nine months ended November 30, 2024, and November 30, 2023, was ($4,078,628) and (4,902,225), respectively.

The $823,597 decrease in other expense was primarily attributable to the application of ASU-2020 06 in the current year which resulted

in lower amortization expense.

had a net loss of $11,828,656 for the nine months ended November 30, 2024, compared to a net loss of $13,281,405 for the nine months

ended November 30, 2023.

The decrease in net loss of $1,452,749 is due to a number of factors:

higher gross profit offset and lower other

expenses offset by higher general and administrative in the nine months ended November 30, 2024.

income (expense) during the three months ended May 31, 2025 and May 31, 2024, was ($1,415,349) and ($1,361,103), respectively.

increase in other expense was primarily attributable to a $65,000 settlement accrued for as described in Note 13 during the three months

ended May 31, 2025.

had a net loss of $4,594,018 for the three months ended May 31, 2025, compared to a net loss of $4,194,359 for the three months ended

May 31, 2024.

The increase in net loss of $399,659 is due to a number of factors:

higher research and development and general and administrative

expenses is reduced by higher gross profit for the three months ended May 31, 2025.

Capital Resources and Cash Flows

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relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going

of November 30, 2024, we had a cash balance of $84,231, accounts receivable of $1,249,792, device parts inventory of $1,883,530 and $41,294,464

in current liabilities.

At the current cash consumption rate, we will need to consider additional funding sources going forward.

taking proactive measures to reduce operating expenses and drive growth in revenue.

of May 31, 2025, we had a cash balance of $324,847, accounts receivable (net) of $893,694, device parts inventory(net) of $1,511,783

and $7,076,967 in current liabilities.

At the current cash consumption rate, we will need to consider additional funding sources going

We are taking proactive measures to reduce operating expenses and drive growth in revenue.

successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient

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following table summarizes total current assets, liabilities and working capital (deficit) for the periods indicated:

November 30, 2024

February 28, 2025

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$ (2,548,138 )

of November 30, 2024 and February 29, 2024, we had a cash balance of $84,231 and $105,926, respectively.

of May 31, 2025 and February 28, 2025, we had a cash balance of $324,857 and $865,975, respectively.

of Cash Flows

Summary of Cash Flows

November 30, 2024

November 30, 2023

Three Months Ended

Net cash used in operating activities

2 unchanged sentences

Net cash used in investing activities

Net cash provided by financing activities

Net cash (used in) provided by financing activities

cash used in operating activities.

cash used in operating activities for the nine months ended November 30, 2024, was $8,894,284 which included a net loss of $11,828,656,

non-cash activity such as the bad debts expense of $37,995, inventory provision of $150,000, reduction of right of use asset of $91,152,

accretion of lease liability $90,165, stock based compensation of $249,868, loss on settlement of debt of $6,520, change in operating

assets and liabilities of $1,030,529, amortization of debt discount of $198,696, increase in related party accrued payroll and interest

of $39,976 and depreciation and amortization of $1,039,371 to derive the uses of cash in operations.

cash used in operating activities for the three months ended May 31, 2025 was $3,321,185 which included a net loss of $4,594,018, non-cash

activity such as bad debts expense of $48,982, reduction of right of use asset of $33,865, accretion of lease liability $27,428, stock

based compensation of $80,355, change in operating assets and liabilities of $547,338 amortization of debt discount of $47,089, increase

in related party accrued payroll and interest of $5,700 and depreciation and amortization of $482,076 to derive the uses of cash in operations.

cash used in investing activities.

cash used in investing activities for the nine months ended November 30, 2024, was $77,868 which was the purchase of fixed assets of

$23,724, $4,144 for acquisition of trademarks and $50,000 for a convertible note receivable.

cash used in investing activities for the three months ended May 31, 2025 was $9,720 which was the purchase of fixed assets of $8,422

and an acquisition of trademark of $1,298.

cash provided by financing activities.

cash provided by financing activities was $8,950,457 for the nine months ended November 30, 2024.

This consisted of share proceeds net

of issuance costs of 8,894,645, proceeds from loans payable of $350,000, reduced by repayments on loans payable of $183,000, proceeds

on the issuance of Series B redeemable convertible preferred shares of $278,000 reduced by redemption of those same Series B redeemable

convertible preferred shares of $389,188.

cash provided by financing activities for the three months ended May 31, 2025 was $2,789,777.

This consisted of share proceeds net of

issuance costs of 2,839,777 reduced by repayments on loans payable of $50,000.

Sheet Arrangements

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Party Transactions

both the three months ended November 30, 2024 and November 30, 2023 , the Company had no repayments of net advances from its loan payable-related

At November 30, 2024, the loan payable-related party was $297,414 and $257,438 at February 29, 2024.

Included in the balance due

to the related party at November 30, 2024 is $222,754 of deferred salary and interest, $183,625 of which bears interest at 12%.

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%.

The accrued interest included in loan at November 30, 2024 and February 29, 2024 was $28,267 and $32,468 respectively.

to the amended Employment Agreement with its Chief Executive Officer, for the three months and six ended November 30, 2024, the Company

accrued $0 (2023-$62,000) and $0 (2023-$187,000) of incentive compensation plan payable with a corresponding recognition of stock based

compensation due to the expectation of additional awards being met.

This will be payable in Series G Preferred Shares which are redeemable

at the Company’s option at $1,000 per share.

At November 31, 2024 and February 29, 2024 there was $2,500,000 and $2,500,000 of

incentive compensation payable.

November 30, 2024 deferred compensation for CEO was $598,635.

For the nine months ended November 30, 2024, the net change was an increase

of $59,868 comprising of net cash repayments and adjustments of $195,000 offset by accruals of $700,082.

At February 29, 2024 deferred

compensation for CEO was $538,767.

the three months ended November 30, 2024 and 2023, the Company was charged $556,175 and $526,723, respectively for fees for research

and development from a company partially owned by a principal shareholder.

the nine months ended November 30, 2024 and 2023, the Company was charged $1,846,005 and $2,185,998, respectively for fees for research

and development from a company partially owned by a principal shareholder.

both the three months ended May 31, 2025, and May 31, 2024, the Company had no repayments of net advances from its loan payable-related

At May 31, 2025, the loan payable-related party was $335,065 and $329,365 at February 28, 2025.

Included in the balance due to

the related party at May 31, 2025, is $258,533 of deferred salary and interest, $190,013 of which bears interest at 12%.

As of February

28, 2025, included in the balance due to the related party is $252,833 of deferred salary and interest, $190,013 of which bears interest

The accrued interest included in the loan at May 31, 2025, and February 28, 2025, was $57,275, and $51,575, respectively.

the three months ended May 31, 2025, the Company paid out gross payments to the CEO of $1,496,687 offset by a bonus accrual of $250,000,

which yields a net change of $1,246,687 relating to deferred compensation for CEO.

This was all in accordance with a December 2023 board

action allowing for $1 million of annual discretionary compensation as well as a February 28, 2025, board action which provided an additional

$1.5 million in compensation.

There were no payments or accruals for the three months ended May 31, 2025, relating to deferred compensation

The balance of deferred compensation for CEO was $955,913 and $2,202,600 at May 31, 2025, and February 28, 2025, respectively

the three months ended May 31, 2025, the Company accrued $0 (three months ended May 31 2024-$0) of incentive compensation plan payable

This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share.

At May 31, 2025, and February 28, 2025, there was $4,000,000 and $4,000,000 of incentive compensation payable.

the three months ended May 31, 2025, and 2024, the Company was charged $736,875 and $631,584, respectively for fees for research and

development from a company partially owned by a principal shareholder.

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 May 31, 2025, and February 28,

2025, the balance due to this company was $76,532.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis