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Table of Contents
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
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PART I
ITEM 1. BUSINESS
Business Overview
Robotic Assistance Devices, LLC was incorporated in the State of Nevada on July 26, 2016, as an LLC and was founded by current President Steve Reinharz. Mr. Reinharz, has 25+ years in various leadership/ownership roles in the security industry and was part of a successful exit to a global multinational security company in 2004. Mr. Reinharz started his first security integration company in 1996, which he grew to 30+ employees before closing that company in 2003. In 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc. (“RAD”), through the issuance of 10,000 common shares to its sole shareholder.
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, On the Move Systems Corp. changed its name to Artificial Intelligence Technology Solutions Inc. (“AITX”).
In 2017, AITX acquired all the ownership and equity interests in RAD (the “Acquisition”). Before the Acquisition, AITX’s business focus had been transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships. After the Acquisition, AITX shifted its business focus to align with RAD’s mission. Since that time, AITX has been engaged in pursuing the delivery of artificial intelligence (AI) and robotic solutions for operational, security, and monitoring needs. More specifically, the Company is focused on applying advanced AI-driven technologies, paired with multi-use hardware and supported by custom software and cloud services, to intelligently automate and integrate a variety of high-frequency security, concierge, and operational tasks.
Since substantially all of AITX’s operations were disposed of with the transaction’s consummation, the Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes. AITX recorded no goodwill or other intangible assets 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. Therefore, the assets, liabilities, and historical operations reflected in these financial statements are those of RAD as if RAD had always been the reporting company.
RAD’s solutions are generally offered as a recurring monthly subscription, typically with a minimum 12-month subscription contract. RAD also sells their units and the client that RAD has had longest opts to do this. RAD’s solutions are expected to earn over 75% gross margin over the life of each deployed asset when under subscription and over 50% gross margin when sold. Specifically, RAD provides workflow automation solutions delivered through a system of hardware, software and cloud services. All elements of hardware and software design offered by RAD are 100% designed, developed and owned by RAD.
Company Strategies
We apply our Artificial Intelligence (AI) technology to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of our client or prospective client organizations.
A short list of basic examples include:
| 1. | Typical security guard-related functions such as monitoring a parking lot during and after hours and responding appropriately. This scenario applies to perimeters, interior yard areas, and related similar environments. | |
| 2. | Integrated hardware/software with AI-driven responses, simulating and expanding on what legacy or manned solutions could perform. | |
| 3. | Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today. |
RAD’s first industry focus is the more than $100 billion global security services market.1 RAD’s current goal is to disrupt and capture a significant portion of both the human security guard market (over $30 billion)2 and “physical security” (video surveillance, access control, visitor management, etc.) market (over $20 billion) through its innovative RAD solution ecosystem.
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1 https://www.statista.com/statistics/323113/distribution-of-the-security-services-market-worldwide/
2 https://www.statista.com/statistics/294206/revenue-of-security-services-in-the-us/
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RAD solutions are unique because they:
| 1. | Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed. | |
| 2. | Use unique hardware purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new functionality. | |
| 3. | Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms. |
AITX Subsidiaries
AITX owns and operates three (3) wholly-owned subsidiaries.
| 1. | Robotic Assistance Devices, Inc. (RAD I) is the primary operating company of AITX. The company holds the dealer and end-user contracts, employs all US employees, operates the California and Michigan facilities, and is the primary industry-facing entity of AITX. RAD I owns all intellectual property related to RADSoC™, RAD Mobile SOC™, RADGuard™, and their core operating architecture. RAD I owns everything related to AITX’s line of stationary devices and their manufacturing. RAD I also implements and services the devices. This company’s primary website is radsecurity.com and is updated as developments occur. | |
| 2. | Robotic Assistance Devices Group, Inc. (RAD G) is RAD G is an AITX subsidiary, separate from RAD I and RAD M, created for the purposes of expected future sales through a channel that is incompatible and non-competitive with RAD I’s existing channel. RAD G is focused on the development of advanced software and electronics solutions and completed a ‘soft-launch’ of it’s ‘RADPACK’ board in December 2022. This hardware is a RAD-designed circuit board designed to power all RAD devices. The company will be working to sell it to other manufacturers that want to create security devices but need a hardware/software solution and want to leverage the investments and network that RAD Inc has built over the years. The company has started to work with a commission-only sales person to start to share this solution in the electric vehicle charger industry. Additional sales materials are under development and company is working to find it’s first adopter. It is expected that this market niche could take several years to develop and as such the company will be looking for clients in the security space and related markets. The Company anticipates no revenues from RADG this fiscal year. This company’s website is radgroup.ai and is updated as developments occur. | |
| 3. | Robotic Assistance Devices Mobile, Inc. (RAD M) is RAD M is an AITX subsidiary, separate from RAD I and RAD G, created for the purposes of future developments, partnerships, and marketing in which the company may engage in the future. RAD M is focused on the development of autonomous mobile devices, both ground-based and airborne. RAD M’s first solution, the ROAMEO™ unmanned ground vehicle, incorporates RAD M technologies related to the development of custom chassis, drive train, power management, perception, and prediction. ROAMEO features technology from RAD I and RAD G to perform its functions. The company believes that it’s developing suite of mobile devices will bring the interactive outdoor, indoor, rugged, commercial security and facility robots to the market. These mobile solutions will complement the stationary systems. The three solutions are the RADDOG™ linup of quadrupeds, ROAMEO as the outdoor long-running high visibility robot and a project that the company is naming ‘Mobile 3’ with details to be announced sometime this fiscal year. ROAMEO is manufactured, implemented, and maintained by RAD I. ROAMEO version 2.0 completed a 9 device production run in RAD’s Michigan facility in 2022 and featured some deployments that have been running ever since. However, for the ROAMEO vision to be fully realized special motors needed to be created and developed. RAD M worked with a German motor manufacturer to create a customer ROAMEO motor. Currently the focus on the RADDOG linup pushes the completion of ROAMEO 3.0 into later calendar year 2023. RAD M will continue developing additional mobility solutions that RAD I will bring to market. |
AITX’ main website is aitx.ai. Company and investor information can be found at this site and it is updated regularly.
Background - First Commercial Rugged Outdoor Security Robot
Mr. Reinharz started RAD in the summer of 2016. RAD originally partnered with SMP Robotics Systems Corp. (SMP) and commercialized the SMP S5 Robot for the security market. RAD’s commercialization of the platform focused on integrating traditional security industry manufacturers’ solutions onto the robotics platform. After two paid proofs-of-concept for large utility companies (under NDA) and over 18 months of development and testing, RAD began deployments with various Fortune 500 customers. These deployments were scheduled to start in October 2017 but were delayed until December 2017 due to various supply chain challenges.
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By March 2018 it was apparent that S5 platform was not sustainable and RAD began to pull robots out of service.
The robots were rejected by customers due to unsatisfactory reliability and some technical flaws that could not be solved, despite full efforts by SMP and RAD. RAD now considers this phase of the Company ‘Phase 1’ into robotics. The Company attempted over 40 deployments during this period.
RAD has had no contact with SMP Robotics since April 2018.
Much of RAD’s existing convertible debt was acquired in support of the RAD/SMP robotics program. This convertible debt has largely been converted to long-term debt and warrants as shown in these financial filings.
ROAMEO will deliver on AITX’s goal of bringing the first outdoor, rugged, commercial security and facility robot to market. This mobile solution will complement the stationary systems AITX already has operating in physical security applications serving customers in a wide range of environments.
Background – RAD’s 2nd Generation Ecosystem
RAD’s primary strategy has always been to use AI technology and modern systems to transform the security industry. Mobile robots, indoor and outdoor, are a part of that strategy. However, to ultimately realize the delivery of these solutions, a set of “stationary robots” required development.
These stationary robots launched in April 2018 with the Security Control and Observation Tower (SCOT), development of which began in August 2017. SCOT performs many of the same functions as a stationary human security guard, plus many tasks that human guards cannot, and does so at approximately 15% of the cost. There is no known comparable solution available today that blends technology, usability, unique features, and price. SCOT received an enthusiastic response from the security market and industry accolades. SCOT’s positive reception reinvigorated RAD, which accelerated the development of the software and cloud services that support SCOT. SCOT runs on the RAD Software Suite™. This software suite is a cloud and mobile platform at the heart of all RAD security solutions.
A beta version SCOT was first shown to potential customers at the end of February 2018 in an exposition held in Ohio that tested customer reception and elicited voice-of-the-customer input. SCOT and the preliminary RAD Software Suite received a favorable customer response. Customer feedback was incorporated into SCOT, and ideas on SCOT derivatives were added to the hardware development roadmap.
In April 2018, at the ISC West, a large annual physical security event held in the United States, SCOT won three awards: (1) The Security Industry Association’s (SIA) New Product Award for Law Enforcement/Guarding3, (2) A 2018 Secure Campus Award from Campus Security and Life Safety Magazine, and (3) A ‘Govie’ award for government security solutions from Security Today Magazine.
RAD has since won numerous awards for its solutions, including:
RAD Light My Way™, Secure Campus 2022 Awards, in the categories of ‘Security & Personal Safety Devices’ & ‘Artificial Intelligence’
AVA™ 3.0 with STAN™, Security Industry Association NPS Awards, in the category of ‘Access Control Software, Hardware, Devices and Peripherals’
ROSA™ with RAD Light My Way, CBRE Innovation Challenge 2021, in the category of ‘Best Workplace Experience Solution Award’
ROSA 180™, American Security Today 2021 ASTORS Awards, in the categories of ‘Best Robotic Perimeter Protection’ & ‘Best Motion Detection Solution’
ROADMAP & Product Development
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3 SIA’s New Product Showcase recognizes innovative products, services and solutions in electronic physical security, and SCOT™’s award comes in the Law Enforcement/Guarding Systems category. Technologies within the program are used in the protection of life and property in residential, commercial, and institutional settings, displaying SCOT™’s importance in long-range human detection and acting as a force multiplier for safety and defense against outside threats.
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RAD’s product line has continued to develop with both new solutions being added and older solutions being phased out. Specifically:
| — | SCOT has been phased out of new sales with one notable exception. This exception is an opportunity that is supposed to complete as an order in 2023. However, SCOT itself is discontinued. Although initial interest was high and several initial deployments continue to operate as intended the solution did not fulfill expected sales targets and as such it was decided not to upgrade it to the ‘3.x’ technology. It has been removed from the price list. |
| — | Wally & Tom – Wally has been replaced with TOM (‘The Office Manager’) which has many but not all Wally features yet features stronger processing and related technology. Wally’s are being removed and replaced with Toms throughout this calendar year although it is expected some Wally’s will continue to operate for a few more years. Notably, the first Wally installation continues to operate, is expected to operate for more years and is not scheduled for replacement. |
| — | ROSA is at it’s version 3.1 at the time of this filing. Version 3.2 should start being produced in August 2023 and will feature the ‘RADPack Millie Gen 2’ control board from RAD G. This board is expected to significantly reduce assembly time because it requires a significantly less sophisticated wiring harness. The board also allows for better fleet management functionality since the board is 100% designed, programmed by RAD and important features have been included by design. |
| — | ROSA has spawned two significant iterations: |
| o | RIO version. ‘RIO’ is a ROSA Independent Observatory, or in other terms, a solar powered trailer with 1 – 2 ROSA units on top. The current market leader in this space is a company called LiveView, Inc. The Company estimates this market at around 6,000 new trailer deployments per year and is looking to capture up to 10% - 20% of the market within 2 years. As of the time of this writing approximately 10 RIO have been deployed for a variety of clients. | |
| o | ROSA P version: This version has 1 – 2 ROSA attached to a pre-existing pole and powered through that poles lighting power. However, since the lights are generally only powered at night ROSA P has the ability to power the ROSA(s) and a battery pack while the lighting circuit is receiving power. During daylight, when there is no lighting power, ROSA P provides battery power to the 1 – 2 ROSA. As the time of this filing several ROSA P are deployed across three different clients. |
| — | AVA has evolved into it’s version 3.1 series. This series features more responsive and much brighter touchscreen and a significantly improved 2 way audio system. AVA deployments continue to be more ‘sticky’ than any other RAD deployment because it becomes an essential part of regular facility activity since it allows for vehicle ingress and in some cases egress. AVA will evolve into version 3.2 after the completion of the RADPack Millie Gen 2 (alongside ROSA’s upgrade to version 3.2). |
On the mobility side the Company has made significant progress. Specifically:
| — | ROAMEO – version 2 units have been deployed across a number of clients and it was found that the motors are not satisfactory for 100% reliable use. Notably one client has had a ROAMEO for many months, it’s solved their security issue and has achieved important milestones such as 16 hours of perfect autonomous patrols and months of perfect autonomous recharging. However the Company has decided to shut the 2.x program in favor of the 3.x program for these reasons: 1. The new motors built for 3.x will give much improved performance across the board and this is the type of performance the Company wants to use in a high volume product. Specifically the motors allow for minute operation as a stepper motor, allow for fast speeds, have an integrated safety brake and are suited for safety certifications (critical). 2. Production costs of ROAMEO 3.x are expected to be 50% of 2.0 which was considerably expensive and made it impossible to achieve required profit margins. 3. The sensor package and user payload on 3.0 is refined and focused for reliability. ROAMEO 3.x prototype 1 is 80% at the time of this filing although resources are primarily focused on RADDOG development. At this moment the Company has achieved sophisticated autonomous navigation for ROAMEO and other important technical milestones. A sales funnel for this product lines exists and the Company looks forward to producing ROAMEO 3.0 by the of this fiscal year. |
| — | RADDOG 2LE – This version launched June 6, 2023, and it’s ‘LE’ denotes that it is specifically designed for law enforcement applications. Additional information can be found at raddog.ai. It is expected that the Company will deliver 20-120 of these RADDOG versions in this current fiscal year. |
| — | ‘Mobile 3’ is current code name for a mobility project that has begun development but shares it’s development teams with RADDOG and is therefore being developed slowly. It is expected that the details of this autonomous robot are revealed this year. It is complementary to RADDOG and ROAMEO and continues to fill out AITX’ line of mobile devices. |
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Software Solutions
RAD has created a variety of front-end and back-end software solutions to power its ecosystem. RADGUARD is customer-facing software (on the touchscreens of RAD’s field devices), and management solutions include RADSOC (Security Operations Center) and RADPMC (Property Management Center).
RAD has developed a variety of utilities that allow automatic over-the-air updates, most of which are within a back-end application called SCOT Manager.
RAD has developed Visitor Management, Access Control, and other applications itself instead of seeking to partner with legacy manufacturers. It is RAD’s opinion that the legacy paradigm in the physical space underserves the markets in terms of cost, functionality, and integration.
RAD recently introduced its own Video Management System into RADSOC, delivering a fully integrated solution that facilitates robust security and property management capabilities.
Towards the end of the prior fiscal year the company announced ‘ROSS’ which is the company’s video management system. This allows non-RAD cameras to be managed by RADSOC alongside RAD stationary and mobile devices. It further allows for RADSOC’s analytics and communication features to be accessible and applied to these non-RAD cameras.
RAD launched it’s Fire Arm Detection (‘FAD’) analytic last fiscal year and closed it’s first ROSS/FAD/ROSA project with Rosenbaum Yeshiva in New Jersey. The company has built a modest sales funnel for similar opportunities.
The Company believes that RAD’s ability to deliver easy-to-use, easy-to-obtain, and easy-to-support software, combined with custom workflow-automation applications, is key to the company’s success.
The company believes that the R&D work it has completed makes AITX’ vision for a single all encompassing security and property technology platform complete. With the addition of the stationary and mobile solutions, plus the ability to integrate existing cameras into the system, RAD can now provide solutions in almost every situation at a cost less than most others.
Manufacturing & Assembly
RAD uses various domestic and overseas machine shops for raw material procurement and machining of the required plastic and metal pieces that build RAD devices. RAD’s sourcing has redundancy through use of multiple machine shops producing the same products for RAD. In addition, all pieces within any RAD device can be procured from a choice of suppliers.
RAD’s margins are based on current small batch production and assembly. The Company expects that economies of scale will drive greater gross margin as quantities and efficiencies increase.
Team and Culture
AITX has built a strong start-up culture based on performance, sacrifice, and rewards. Attracting employees who can thrive in this environment requires a different approach to corporate growth and development. RAD’s governing philosophy centers around the principles of “Emotional Intelligence. Self-awareness, composure, internal motivation, empathy, and social skills are prerequisites for joining the RAD team, and each candidate interview begins with a review of the foundational elements that comprise RAD culture.
Team members are open to multitasking and wearing multiple hats, as situations demand. This allows management to focus on larger goals and long-term strategies. We try to ensure that our entire staff shares the same core beliefs and values as the Company, allowing us to adapt and adjust quickly to changes that might grind other companies to a halt. Members have been no stranger to the difficulties that face a startup, including unexpected setbacks, delays in funding, or a cash crunch, but they have persevered with dedication and enthusiasm for our greater mission. They have met incredibly tight deadlines, volunteered to make financial sacrifices, and assisted wherever and however they can.
We believe that RAD’s high-EQ work culture creates productive, motivated employees that has allowed the Company to weather the difficult period of robot deployments and our transition to 2nd generation solutions.
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Subsequent to the end of fiscal year ending February 28, 2023, the Company completed two Reduction In Force events that brought headcount from 92 full time equivalent employees to 69. The Company largely cut development teams working on future solutions, reduced engineering staff and trimmed other positions for cost control efforts. Additionally, the Company instituted cost control methods revolving around tasks such as freight and purchasing processes. These efforts will take full effect in July 2023 and are expect to save the Company between $ 200,000 to $ 300,000/month between reduced labor costs in addition to other efficiencies.
The Company is focused on sequential product development while sales grow in order to get close to positive cash flow.
Market Environment
RAD believes that its experience has shown that the security market is ripe for disruption. It has captured the interest of many Fortune 500 companies. The Company believes that no other company operating in the physical security space has the solutions, distribution channel, reputation, sales or support model to rival RAD in the near term. In addition, the Company expects that the launch of RAD’s mobile solutions will significantly increase the gap between it and would-be competitors. RAD will be a one-stop-shop for proven and comprehensive mobile and stationary workflow improvement devices and systems.
RAD’s technology model includes a “new paradigm” for the security industry: Security in a Box. Every RAD solution features connection to the RAD Software Suite, a platform for AI processing, usage analytics, cloud-sided video, communications interface, audit logs, and much more.
Customer Acceptance of RAD Solutions
RAD end-users include one Fortune Top 10 company and a number of other Fortune 500 companies. RAD is currently deployed in logistics, commercial real estate, healthcare, amusement, manufacturing and retail industries. The Company believes that if RAD is ultimately deployed to only 5% of the facilities within any of these industries, the Company will be profitable.
RAD Industry Leadership Role
Mr. Reinharz has earned a prominent role as a spokesperson for AI and change in the security industry. He has lectured and participated in several panels for some of the security industry’s largest events and organizations. Mr. Reinharz chairs Security Industry Association’s Autonomous Working Group committee, which is dedicated to helping shape the industry and support progressive legislation. Most recently, Mr. Reinharz provided a lecture to NYC’s ASIS CPP group that qualified as a continuing education credit.
In March 2023 Steve Reinharz was elected to a Board seat for Security Industry Association, Inc (SIA). SIA is the foremost security group steering policy, lobbying various governments and promoting education within the security industry.
It is expected that Mr. Reinharz will continue his promotion of the new paradigm for the next few years until adoption is widespread.
Go To Market Strategy
RAD’s strategy has been to focus on the creation and support of a strong dealer channel. RAD has successfully executed this strategy and has added over 60 qualified dealers to our dealer channel. The expectations were that this approach affords multiple benefits to RAD with few downsides and almost all dealers exclusively represent RAD solutions in the area of ai-enabled autonomous devices.
However, over the past year it’s become clear that the dealer channel has exceptional benefits with a limited number of dealers. Forward-thinking dealers that invest the time and energy into RAD have the ability to be successful. Unfortunately many dealers are happy to sign up and continue their normal business operations without giving proper efforts to promote RAD solutions to their client bases. As such the company has about 20 active dealers with the rest being more opportunistic. As such the Company has been increasingly focusing on a limited number of dealers, including a strong and growing relationship with the world’s largest security company, Allied Universal Inc. (AUS). AUS and RAD are working on a large roll out to all integration offices as this report is filed. Furthermore the Company is devoting more time to direct sales, an area of effort that gives the Company more control over the sales process. It is expected that going forward the relationship with active dealers will strengthen while continuing to strengthen direct sales.
Competition
We may be subject to competition by competitors that have greater operating histories, cash and operational resources than we do.
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Employees
As of March 23, 2023, we have a headcount of 90 fully dedicated full-time equivalents, including 42 RAD Inc. employees, 18 overseas contractors, and 30 employees of a Canadian research and development company. None of our employees are represented by a union. We consider our employee relations to be excellent. AITX’ principle shareholder owns a minority interest in the Canadian research and develop company but has not received any compensation of any kind from that company to date.
Since the close of the year the Company completed two Reduction In Force events that brought the team size to 69 people and added one additional sale focused employee for a headcount of 70 full time equivalent employees as of June 12, 2023.
Accomplishments & Highlights
AITX, and its subsidiaries RAD I, RAD M, and RAD G, list of accomplishments highlights successes in adding to the strength of its executive leadership team, expanding its sales and distribution channels, launching new products, while growing its presence, visibility and profile within its existing marketplaces. Milestones and accomplishments over the past 12 months include:
Cyber and data protection and compliance
The Company continues it’s focus on delivery of safe and secure software and systems to its clients. As such, last year the Company achieved SOC 2 Report status. The SOC 2 Report has become a benchmark standard, and now an often-specified requirement, in the software procurement process. Established by the American Institute of Certified Public Accountants (AICPA), criteria and reporting principles are outlined as a means for organizations to create a documented framework of policies and procedures to prove how they manage and secure data in the cloud and ensure protection of customer privacy and ensure internal communications are suitably handled. This achievement reflects the Company’s stated goals of best-in-class data protection and internal processes.
The Company has subsequently maintained SOC 2 Type 2 status and has achieved a cyber certification from a Fortune Five company which was more difficult to obtain than either SOC certifications. Due to non-disclosure agreements with the Fortune Five company AITX can not disclose who it is from.
Implementation of ERP (enterprise resource planning) System - Update
The Company’s implementation of NetSuite ERP continued through the year with a successful transition to all accounting and human resources now fully functionality. Sales is using some of the CRM features of the ERP but still using a non-ERP platform for management of the sales funnel. Production’s use of the ERP significantly increased over the course of the year. There remain some challenges for full production implementation related to change management. Management expects full implementation of the ERP to complete this fiscal year. The will allow realization of efficiencies in purchasing, kitting and production.
Authorized Dealers Added to Dealer Network
At the end of FY 2023 RAD has more than 57 authorized dealers, up from 32 at the beginning of the fiscal year. These dealers are located across the United States, Canada, and the EU, with plans for continued expansion. Dealers include the largest security companies in the world, including Allied Universal and GardaWorld, which are respectively the largest and 3rd largest guarding companies in the world. The ongoing addition of authorized dealers introduces and delivers RAD products to new markets.
Discussion on Sales
The sales funnel has grown significantly over the course of this fiscal year although expectations and goals were not fully achieved. The sales team has matured and stabilized with a Senior Vice President of Sales with three full time direct sales reports. There was no salesperson turnover in this fiscal year. Additional sales drivers are RAD’s President as well as AITX’ CEO. Furthermore operations team members are instrumental in encouraging clients to expand existing systems.
In the fiscal year ended February 28, 2022 RAD added 311 sales opportunities to the sales funnel. An opportunity is mostly defined as an account that is exhibiting a pain that can be solved by RAD, has a budget, and has reached the point in the sales process where they have a quote they can sign. In the fiscal year that ended February 28, 2023 sales activity skyrocketed with the Company issuing approximately 840 quotes for various opportunities. Of those 840 quotes at least 120 are in the final stages of customer acceptance and sign off.
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Management has identified that conversion of accounts from opportunities to clients is low and has identified some of the reasons for the low conversion rate as well as new tactics to break through these obstacles. Advanced new technology sales often involve multiple decision-makers and require a skilled and passionate internal champion. The security industry breeds risk-averse personnel. The Company is pressing several initiatives to change the industry to create an environment where trying new things in the norm as opposed to the exception. An example of these efforts are the Security Industry Association’s (SIA) upcoming Town Hall where three Fortune 500 security practitioners that have implemented new technologies will share their tips for successful internal selling. AITX will be putting more emphasis on these efforts this year.
Subsequent to the close this fiscal year the Company’s largest dealer has accelerated RAD device sales roll out to all of it’s branches. The Company expects this relationship and roll out will drive significantly more sales than the Company has experienced to date.
Management projects that RIO’s introduction will drive higher gross sales and greater RAD adoption of unique software functions such as RAD Light My Way and Fire Arm Detection. It is further expected that the Company’s first RAD Light My Way client will be public in the summer of 2023 and will drive significant sales in healthcare. RAD’s first Fire Arm Detection client, the Rosenbaum Yeshiva in New Jersey, will complete it’s installation in the summer of 2023 and is expected to drive additional system sales.
Between a maturing hardware and software line up, an increasing number of deployments/case studies/success stories, management is excited for the next year’s sales. Management feels that ironing out technical and production challenges are well in hand and clearing the way for a greater volume of deployments.
Press Announcements
During the fiscal year, the Company issued over 100 press releases, the vast majority of them being sales announcements and new authorized dealers being signed. Public events, conferences, awards and new product announcements were also publicized via press releases. All Company press releases can be found here: AITX News - AITX - Artificial Intelligence Technology Solutions
Awards and Industry Recognition
During the period, RAD solutions were honored with six security industry awards, primarily for ROSA 3.0, AVA 3.0 and RAD Light My Way. ROSA 3.0 was also selected for a ‘Good Design’ award for its stylish design and high-performance features.
Trade Shows and Conferences
As in previous years, RAD attended several large security industry events including ISC West, GSX, plus dozens of regional conferences with the purpose of presenting the Company’s solutions to a buying audience and continually loading the sales pipeline with new opportunities. RAD often utilizes the events for speaking engagements or panel discussions to propel the Company’s ‘thought leadership’ regarding its AI-powered security and safety solutions.
Additional Points of Interest
This fiscal year was significant for stabilization of technology, better understanding of the sales process and related challenges, positioning as a true leader in the industry and the achievement of several high profile deployments. The Company continues its focus on sales, efficiencies with the goal of achieving positive cash flow within 18 months.
Technology reliability issues caused some slower sales adoption in the fiscal year. As a response the Company has concentrated on it’s next-generation system ‘brain’ called the RADPack Millie Gen 2. As of June 14 the final prototype was technically approved and is going in production. This will drive the ‘3.2’ series of devices that production is scheduled for in the August/September timeframe. This new board allows quicker production, full on and off board peripheral control, advanced fleet management and automated maintenance and reporting. This board is expected to significantly reduce and/or eliminate various ongoing technical challenges and allow the operations team to accelerate the quantity of system deployments without increasing the size of the deployment team.
Management, based on regular conversations with the Company’s largest debt holder, expects no issues regarding pushing out debt deadlines as it has done so in years past. Management confirms the support of this lender and notes the most recent non-convertible $4M loan facility. As of June 13, 2023, $3.2M of that facility has been used.
Management reiterates that the plan continues to be to grow revenues, achieve positive cash flow, reduce debt and prepare for an uplist to Nasdaq. Management estimates this timeline to be in the two to four year range. On June 14, 2023 the company extended it’s ‘No Reverse Split’ policy by 12 months, to now end January 1, 2025. It is expected the company will continue 1 year extensions until the conditions merit an uplist to Nasdaq or NYSE.
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Legal Proceedings
See Item 3 - Legal Proceedings.
ITEM 1A. RISK FACTORS
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We maintain our corporate offices at 701 North Green Valley Parkway, Suite 200, Henderson, Nevada, 89704 pursuant to a month-to-month lease. Our annual rental cost for this facility is approximately $936 per year. RAD maintains a mailing address of 31103 Ranch Viejo Road, Suite D2114, San Juan Capistrano, CA 92675, USA for a nominal fee of $264 per year. RAD entered into a 15-month lease at 18009 Sky Park Circle Suite E , Irvine, California 92614, that began on December 18, 2020 and terminated on March 31, 2022, at annual cost of $46,308. This property is used as the West Coast Sales and Service Center. The lease is not renewable.
On March 10, 2021 the Company entered into a ten-year lease of a 29,316 square foot building located at 10800 Galaxie Avenue, Ferndale, Michigan 48220. The lease began on May 1, 2021. These premises are being used for offices, manufacturing and distribution. The annual rental cost for this facility is approximately $190,000, plus a proportionate share of operating expenses of approximately $28,000 annually.
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.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There are no legal proceedings pending at this time.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
AITX’s common stock began trading on the “Over the Counter” Bulletin Board (“OTC”) under the symbol “AITX” in June 2011 and as AITX on August 24, 2018. The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter market, as reported and summarized by OTC Markets Group, Inc. On August 24, 2018, the Company undertook a 100:1 reverse stock split and on March 27, 2020 a 10,000:1 reverse split. The share capital has been retrospectively adjusted accordingly to reflect this reverse stock split, except for the conversion price of certain convertible notes as the conversion price is not subject to adjustment from forward and reverse stock splits.
These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions. There is an absence of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile, which may affect the prices listed below.
| High | Low | |||||
| Fiscal Year Ended February 28, 2023: | ||||||
| Quarter ended February 28, 2023 | $ | 0.02 | $ | 0.01 | ||
| Quarter ended November 30, 2022 | $ | 0.02 | $ | 0.01 | ||
| Quarter ended August 31, 2022 | $ | 0.02 | $ | 0.01 | ||
| Quarter ended May 31, 2022 | $ | 0.01 | $ | 0.01 | ||
| Fiscal Year Ended February 28, 2022: | ||||||
| Quarter ended February 28, 2022 | $ | 0.03 | $ | 0.02 | ||
| Quarter ended November 30, 2021 | $ | 0.05 | $ | 0.03 | ||
| Quarter ended August 31, 2021 | $ | 0.09 | $ | 0.03 | ||
| Quarter ended May 31, 2021 | $ | 0.16 | $ | 0.05 | ||
On April 3, 2022, the closing price per share of the Company’s common stock as quoted on the OTC was $0.0057.
Dividends
To date, we have not paid dividends on shares of the Company’s common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, AITX’s financial condition, and other factors deemed relevant by its Board of Directors.
Holders of Common Stock
As of April 3, 2023, there were 84 holders of AITX’s common stock of which 21 were active. The number of foregoing holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Common Stock
The Company is authorized to issue 7.225,000,000 shares of common stock, with a par value of $0.00001. The closing price of its common stock on April 3, 2023, as quoted by OTC Markets Group, Inc., was $0.0057. There were 5,919,914,956 shares of common stock issued and outstanding as of April 3, 2023. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of its assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.
Our Articles of Incorporation, Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders of our securities.
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During the years ended February 28, 2023 and February 28, 2022, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
Non-cumulative voting
Holders of shares of the Company’s common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
Securities Authorized for Issuance under Equity Compensation Plans
On April 14, 2021 the Company adopted an Incentive Stock Option Plan where full details are disclosed in Exhibit 10.1 of the Company’s 8K filing of April 20,2021. Under the plan the Company may grant options to service providers and employees to acquire up to 5,000,000 shares of the Company’s common stock. The options will be under the varying terms and conditions of an agreement but the exercise price cannot be lower than 100% to 110% of the fair value of the stock at date of grant and the term of the grant can be no longer than 5 years. 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 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. For the year ended February 28, 2023 the Company recorded $122,050 in stock-based compensation. At February 28, 2023 there remains 95,725,000 options outstanding.
The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance at February 29, 2023.
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance | |||
| Equity compensation plans approved by security holders. | 95,725.000 | $0.02 | — | |||
| Equity compensation plans not approved by security holders. | — | — | — | |||
| Total | 95,725,000 | $0.02 | — |
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 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 holders of Series E Preferred Stock have 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
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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 2,532 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 preferred stock does not have voting rights, does not have rights upon liquidation of the Company and does not receive dividends.
Transfer Agent and Registrar
The Transfer Agent for our capital stock is Transhare with an address at 15500 Roosevelt Boulevard, Suite 302, Clearwater, Florida 33760. Their telephone number is Office phone: 303-662-1112.
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Recent Sales of Unregistered Securities
The following is a summary of transactions by AITX involving sales of its securities that were not registered under the Securities Act.
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| Number of shares outstanding February 28, 2017 | 18 | |||||||||||
| March 7, 2017 | conversion | $1,840 | $— | $— | $1,840 | 1 | ||||||
| March 22, 2017 | conversion | 1,971 | — | — | 1,971 | 1 | ||||||
| March 27, 2017 | cancelation*** | — | — | — | — | (1) | ||||||
| April 3, 2017 | conversion | 1,487 | 3,397 | — | 4,884 | 1 | ||||||
| April 7, 2017 | conversion | 1,000 | — | — | 1,000 | 1 | ||||||
| April 20, 2017 | conversion | 920 | — | — | 920 | 1 | ||||||
| April 24, 2017 | conversion | 6,876 | — | — | 6,876 | 1 | ||||||
| April 26, 2017 | conversion | 1,130 | — | — | 1,130 | 1 | ||||||
| May 2, 2017 | conversion | 1,130 | — | — | 1,130 | 1 | ||||||
| May 4, 2017 | conversion | 1,240 | — | — | 1,240 | 1 | ||||||
| May 4, 2017 | conversion | 8,854 | — | — | 8,854 | 1 | ||||||
| May 8, 2017 | conversion | 9,296 | — | — | 9,296 | 1 | ||||||
| May 12, 2017 | conversion | 1,432 | — | — | 1,432 | 1 | ||||||
| May 15, 2017 | conversion | 11,661 | — | — | 11,661 | 1 | ||||||
| May 15, 2017 | conversion | 1,550 | — | — | 1,550 | 2 | ||||||
| May 18, 2017 | conversion | 13,629 | — | — | 13,629 | 2 | ||||||
| May 23, 2017 | conversion | 9,684 | 3,059 | — | 12,743 | 1 | ||||||
| May 24, 2017 | conversion | 1,730 | — | — | 1,730 | 2 | ||||||
| May 30, 2017 | conversion | 1,890 | — | — | 1,890 | 2 | ||||||
| June 7, 2017 | conversion | 1,985 | — | — | 1,985 | 2 | ||||||
| June 9, 2017 | conversion | 2,085 | — | — | 2,085 | 2 | ||||||
| June 12, 2017 | conversion | 2,185 | — | — | 2,185 | 2 | ||||||
| June 14, 2017 | conversion | 2,295 | — | — | 2,295 | 2 | ||||||
| June 19, 2017 | conversion | 2,400 | — | — | 2,400 | 2 | ||||||
| June 20, 2017 | conversion | 2,500 | — | — | 2,500 | 3 | ||||||
| June 20, 2017 | conversion | 3,000 | 358 | — | 3,358 | — | ||||||
| June 22, 2017 | warrant exercise**** | — | — | — | — | 3 | ||||||
| June 28, 2017 | conversion | 2,800 | — | — | 2,800 | 3 | ||||||
| June 28, 2017 | warrant exercise**** | — | — | — | — | 3 | ||||||
| July 5, 2017 | conversion | 3,050 | — | — | 3,050 | 3 | ||||||
| July 6, 2017 | warrant exercise**** | — | — | — | — | 3 | ||||||
| July 7, 2017 | warrant exercise**** | — | — | — | — | — | ||||||
| July 7, 2017 | conversion | 3,400 | — | — | 3,400 | 3 | ||||||
| July 26, 2017 | conversion | 3,500 | — | — | 3,500 | 4 | ||||||
| July 28, 2017 | conversion | 9,750 | — | — | 9,750 | 1 | ||||||
| July 28, 2017 | conversion | 4,000 | — | — | 4,000 | 4 | ||||||
| August 2, 2017 | conversion | 75,000 | — | — | 75,000 | 4 | ||||||
| August 2, 2017 | conversion | 75,000 | 2,483 | — | 77,483 | 4 | ||||||
| August 4, 2017 | conversion | 11,184 | — | — | 11,184 | — | ||||||
| August 14, 2017 | conversion | 4,500 | — | — | 4,500 | 5 | ||||||
| August 21, 2017 | conversion | 4,700 | — | — | 4,700 | 5 | ||||||
| August 29, 2017 | conversion | 4,900 | — | — | 4,900 | 5 | ||||||
| September 5, 2017 | conversion | 26,250 | — | — | 26,250 | 5 | ||||||
| September 18, 2017 | conversion | 27,250 | — | — | 27,250 | 5 | ||||||
| September 27, 2017 | conversion | 29,000 | — | — | 29,000 | 6 | ||||||
| October 16, 2017 | conversion | 30,500 | — | — | 30,500 | 6 | ||||||
| October 16, 2017 | conversion | 10,000 | — | — | 10,000 | — | ||||||
| Number of shares outstanding February 28, 2018 | 124 |
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| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| April 16, 2018 | conversion | 132,160 | — | — | 132,160 | 6 | ||||||
| April 26, 2018 | conversion | 14,500 | — | 500 | 15,000 | 1 | ||||||
| May 1, 2018 | conversion | 26,250 | — | — | 26,250 | 3 | ||||||
| May 3, 2018 | conversion | 5,000 | — | — | 5,000 | — | ||||||
| May 7, 2018 | conversion | 27,900 | — | — | 27,900 | 3 | ||||||
| May 10, 2018 | conversion | 32,400 | — | — | 32,400 | 4 | ||||||
| May 11, 2018 | conversion | 14,500 | — | 500 | 15,000 | 2 | ||||||
| May 15, 2018 | conversion | 7,060 | — | 500 | 7,560 | 2 | ||||||
| May 15, 2018 | conversion | 8,000 | — | — | 8,000 | 1 | ||||||
| May 21, 2018 | conversion | 20,250 | — | — | 20,250 | 3 | ||||||
| May 22, 2018 | conversion | 6,075 | — | — | 6,075 | 1 | ||||||
| May 24, 2018 | conversion | 13,056 | 3,300 | — | 16,356 | 2 | ||||||
| May 30, 2018 | conversion | 8,182 | — | — | 8,182 | 2 | ||||||
| May 30, 2018 | conversion | 15,000 | — | — | 15,000 | 3 | ||||||
| June 7, 2018 | conversion | 2,922 | — | — | 2,922 | 1 | ||||||
| June 18, 2018 | conversion | 17,000 | — | — | 17,000 | 4 | ||||||
| June 19, 2018 | conversion | 14,500 | — | 500 | 15,000 | 3 | ||||||
| June 28, 2018 | conversion | 18,000 | — | — | 18,000 | 4 | ||||||
| June 28, 2018 | cancellation | (7,060) | — | (500) | (7,560) | (2) | ||||||
| July 5, 2018 | conversion | 14,500 | — | 500 | 15,000 | 4 | ||||||
| July 5, 2018 | conversion | 8,818 | — | — | 8,818 | 3 | ||||||
| July 11, 2018 | conversion | 10,200 | — | — | 10,200 | 4 | ||||||
| July 11, 2018 | conversion | 14,500 | — | 500 | 15,000 | 5 | ||||||
| July 19, 2018 | conversion | 16,000 | — | 500 | 16,500 | 5 | ||||||
| July 19, 2018 | conversion | 11,000 | 1,366 | — | 12,366 | 4 | ||||||
| July 23, 2018 | conversion | 14,500 | — | 500 | 15,000 | 7 | ||||||
| July 25, 2018 | conversion | 5,000 | — | — | 5,000 | 2 | ||||||
| July 31, 2018 | conversion | 11,000 | 1,455 | — | 12,455 | 6 | ||||||
| August 24, 2018 | conversion | — | 15,300 | — | 15,300 | 10 | ||||||
| August 27, 2018 | conversion | 5,500 | — | 500 | 6,000 | 10 | ||||||
| August 29, 2018 | conversion | 4,280 | — | 500 | 4,780 | 11 | ||||||
| August 30, 2018 | conversion | 6,000 | — | — | 6,000 | 10 | ||||||
| August 30, 2018 | rounding shares | — | — | — | — | — | ||||||
| August 31, 2018 | conversion | 20,000 | — | — | 20,000 | 11 | ||||||
| August 31, 2018 | conversion | 7,500 | — | 500 | 8,000 | 11 | ||||||
| September 5, 2018 | conversion | 8,800 | 1,375 | — | 10,175 | 13 | ||||||
| September 5, 2018 | conversion | 7,800 | — | — | 7,800 | 13 | ||||||
| September 7, 2018 | conversion | 7,000 | — | 500 | 7,500 | 13 | ||||||
| September 12, 2018 | conversion | 5,355 | — | — | 5,355 | 15 | ||||||
| September 12, 2018 | conversion | 6,500 | — | 500 | 7,000 | 14 | ||||||
| September 13, 2018 | conversion | 5,395 | — | — | 5,395 | 13 | ||||||
| September 13, 2018 | conversion | 3,436 | — | 500 | 3,936 | 14 | ||||||
| September 18, 2018 | conversion | 5,670 | — | — | 5,670 | 19 | ||||||
| September 20, 2018 | conversion | 3,448 | — | 500 | 3,948 | 19 | ||||||
| September 21, 2018 | conversion | 6,720 | — | — | 6,720 | 19 | ||||||
| September 24, 2018 | conversion | 5,250 | — | — | 5,250 | 18 | ||||||
| September 26, 2018 | conversion | 6,132 | — | — | 6,132 | 23 | ||||||
| September 28, 2018 | conversion | 3,084 | — | 500 | 3,584 | 23 | ||||||
| October 1, 2018 | conversion | 3,100 | — | — | 3,100 | 20 | ||||||
| October 3, 2018 | conversion | 4,030 | — | — | 4,030 | 26 | ||||||
| October 3, 2018 | conversion | 2,202 | — | 500 | 2,702 | 25 | ||||||
| October 5, 2018 | conversion | 2,750 | 485 | — | 3,235 | 16 | ||||||
| October 5, 2018 | conversion | 4,449 | — | — | 4,449 | 29 | ||||||
| October 8, 2018 | conversion | 8,835 | — | — | 8,835 | 105 | ||||||
| October 9, 2018 | conversion | 4,158 | — | 500 | 4,658 | 30 |
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| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| October 10, 2018 | conversion | 4,988 | — | — | 4,988 | 29 | ||||||
| October 15, 2018 | conversion | 5,935 | — | — | 5,935 | 33 | ||||||
| October 18, 2018 | conversion | 9,000 | — | — | 9,000 | 113 | ||||||
| October 19, 2018 | conversion | 4,400 | 713 | — | 5,113 | 33 | ||||||
| October 23, 2018 | conversion | 9,840 | — | — | 9,840 | 317 | ||||||
| November 1, 2018 | conversion | 9,400 | — | — | 9,400 | 94 | ||||||
| November 5, 2018 | conversion | 6,195 | — | — | 6,195 | 52 | ||||||
| November 15, 2018 | conversion | 7,980 | — | — | 7,980 | 95 | ||||||
| November 27, 2018 | conversion | 3,850 | 724 | — | 4,574 | 123 | ||||||
| December 6, 2018 | conversion | 4,056 | 797 | — | 4,853 | 141 | ||||||
| December 7, 2018 | conversion | 2,034 | — | — | 2,034 | 66 | ||||||
| December 10, 2018 | conversion | 2,367 | — | — | 2,367 | 76 | ||||||
| December 10, 2018 | conversion | 2,333 | — | 500 | 2,833 | 91 | ||||||
| December 10, 2018 | conversion | 1,475 | — | 500 | 1,975 | 91 | ||||||
| December 10, 2018 | conversion | 3,348 | — | — | 3,348 | 90 | ||||||
| December 11, 2018 | conversion | 2,489 | — | — | 2,489 | 80 | ||||||
| December 11, 2018 | conversion | 4,340 | — | — | 4,340 | 140 | ||||||
| December 12, 2018 | conversion | 3,500 | — | — | 3,500 | 94 | ||||||
| December 12, 2018 | conversion | 6,600 | 1,306 | — | 7,906 | 213 | ||||||
| December 13, 2018 | conversion | 2,408 | — | 500 | 2,908 | 134 | ||||||
| December 13, 2018 | conversion | 3,426 | — | — | 3,426 | 111 | ||||||
| December 14, 2018 | conversion | 4,154 | — | — | 4,154 | 134 | ||||||
| December 18, 2018 | conversion | 4,368 | — | — | 4,368 | 141 | ||||||
| December 19, 2018 | conversion | 3,100 | — | 500 | 3,600 | 160 | ||||||
| December 19, 2018 | conversion | 1,000 | 3,348 | — | 4,348 | 161 | ||||||
| December 20, 2018 | conversion | — | — | — | — | 130 | ||||||
| December 20, 2018 | conversion | 2,155 | — | 500 | 2,655 | 169 | ||||||
| December 20, 2018 | conversion | 3,636 | — | — | 3,636 | 117 | ||||||
| December 20, 2018 | conversion | 7,480 | 1,520 | — | 9,000 | 333 | ||||||
| December 24, 2018 | conversion | 2,970 | — | — | 2,970 | 110 | ||||||
| December 26, 2018 | conversion | 3,213 | — | — | 3,213 | 143 | ||||||
| December 27, 2018 | conversion | 1,870 | 1,381 | — | 3,252 | 120 | ||||||
| December 28, 2018 | conversion | 3,700 | — | 500 | 4,200 | 227 | ||||||
| December 31, 2018 | conversion | 4,869 | — | — | 4,869 | 216 | ||||||
| December 31, 2018 | conversion | 5,365 | — | — | 5,365 | 290 | ||||||
| January 2, 2019 | conversion | 7,370 | 1,562 | — | 8,932 | 425 | ||||||
| January 7, 2019 | conversion | 3,360 | — | — | 3,360 | 240 | ||||||
| January 7, 2019 | conversion | 3,944 | — | — | 3,944 | 290 | ||||||
| January 8, 2019 | conversion | 4,080 | — | — | 4,080 | 300 | ||||||
| January 9, 2019 | conversion | 3,161 | — | 500 | 3,661 | 317 | ||||||
| January 10, 2019 | conversion | 3,380 | — | — | 3,380 | 325 | ||||||
| January 11, 2019 | conversion | 5,280 | 1,150 | — | 6,430 | 397 | ||||||
| January 11, 2019 | conversion | 3,625 | — | — | 3,625 | 290 | ||||||
| January 14, 2019 | conversion | 3,400 | — | — | 3,400 | 340 | ||||||
| January 15, 2019 | conversion | 4,100 | — | — | 4,100 | 410 | ||||||
| January 15, 2019 | conversion | 4,300 | — | — | 4,300 | 430 | ||||||
| January 17, 2019 | conversion | 4,800 | — | — | 4,800 | 480 | ||||||
| January 22, 2019 | conversion | 4,435 | — | — | 4,435 | 504 | ||||||
| January 22, 2019 | conversion | 4,230 | — | — | 4,230 | 470 | ||||||
| January 23, 2019 | conversion | 3,816 | — | — | 3,816 | 530 | ||||||
| January 25, 2019 | conversion | 3,781 | — | — | 3,781 | 556 | ||||||
| January 28, 2019 | conversion | 3,276 | — | — | 3,276 | 585 | ||||||
| January 29, 2019 | conversion | 3,690 | — | — | 3,690 | 615 | ||||||
| January 29, 2019 | conversion | 3,870 | — | — | 3,870 | 645 |
- 15 -
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| January 30, 2019 | conversion | 4,080 | — | — | 4,080 | 680 | ||||||
| January 31, 2019 | conversion | 4,500 | — | — | 4,500 | 750 | ||||||
| January 31, 2019 | conversion | 4,290 | — | — | 4,290 | 715 | ||||||
| February 4, 2019 | conversion | 4,740 | — | — | 4,740 | 790 | ||||||
| February 5, 2019 | cancellation | (2,658) | — | — | (2,658) | (17) | ||||||
| February 5, 2019 | conversion | 4,980 | — | — | 4,980 | 830 | ||||||
| February 12, 2019 | conversion | 5,340 | — | — | 5,340 | 890 | ||||||
| February 14, 2019 | conversion | 5,236 | — | — | 5,236 | 935 | ||||||
| February 21, 2019 | conversion | 4,956 | — | — | 4,956 | 900 | ||||||
| Number of shares outstanding February 28, 2019 | 20,026 | |||||||||||
| May 6, 2019 | conversion | 5,768 | — | — | 5,768 | 1,030 | ||||||
| May 6, 2019 | conversion | 15,000 | — | — | 15,000 | 882 | ||||||
| May 6, 2019 | conversion | 11,900 | — | — | 11,900 | 992 | ||||||
| May 7, 2019 | conversion | 6,048 | — | — | 6,048 | 1,080 | ||||||
| May 7, 2019 | conversion | 11,900 | — | — | 11,900 | 992 | ||||||
| May 8, 2019 | conversion | 6,384 | — | — | 6,384 | 1,140 | ||||||
| May 8, 2019 | conversion | 11,800 | — | — | 11,800 | 983 | ||||||
| May 8, 2019 | conversion | 7,312 | — | 500 | 7,812 | 1,240 | ||||||
| May 9, 2019 | conversion | 12,500 | — | — | 12,500 | 1,136 | ||||||
| May 10, 2019 | conversion | 7,200 | — | — | 7,200 | 655 | ||||||
| May 8, 2019 | conversion | 4,400 | — | — | 4,400 | 1,000 | ||||||
| May 13, 2019 | conversion | 7,493 | — | — | 7,493 | 1,338 | ||||||
| May 13, 2019 | conversion | 12,650 | 3,786 | — | 16,436 | 1,957 | ||||||
| May 21, 2019 | conversion | 3,281 | — | — | 3,281 | 586 | ||||||
| May 22, 2019 | conversion | 11,550 | 3,526 | — | 15,076 | 2,094 | ||||||
| July 11, 2019 | conversion | 11,000 | 3,984 | — | 14,984 | 1,921 | ||||||
| July 25, 2019 | conversion | 8,584 | — | — | 8,584 | 2,000 | ||||||
| July 30, 2019 | conversion | 16,940 | 6,350 | — | 23,290 | 3,882 | ||||||
| July 31, 2019 | conversion | 9,872 | — | — | 9,872 | 2,300 | ||||||
| August 2, 2019 | conversion | 10,301 | — | — | 10,301 | 2,400 | ||||||
| August 8, 2019 | conversion | 21,450 | 8,170 | — | 29,620 | 4,937 | ||||||
| August 11, 2019 | conversion | 10,945 | — | — | 10,945 | 2,550 | ||||||
| August 11, 2019 | conversion | 5,837 | — | — | 5,837 | 1,360 | ||||||
| August 12, 2019 | conversion | 8,800 | — | — | 8,800 | 2,750 | ||||||
| August 12, 2019 | conversion | 13,915 | 5,337 | — | 19,252 | 4,011 | ||||||
| August 13, 2019 | conversion | 3,528 | — | — | 3,528 | 1,260 | ||||||
| August 14, 2019 | conversion | 5,920 | — | — | 5,920 | 2,960 | ||||||
| August 15, 2019 | conversion | 12,650 | 4,877 | — | 17,527 | 5,842 | ||||||
| August 15, 2019 | conversion | 6,200 | — | — | 6,200 | 3,100 | ||||||
| August 16, 2019 | conversion | 8,060 | — | — | 8,060 | 4,030 | ||||||
| August 19, 2019 | conversion | 6,784 | — | — | 6,784 | 4,240 | ||||||
| August 20, 2019 | conversion | 7,136 | — | — | 7,136 | 4,460 | ||||||
| August 20, 2019 | conversion | 12,100 | 4,705 | — | 16,805 | 7,002 | ||||||
| August 21, 2019 | conversion | 4,284 | 5,628 | — | 9,912 | 4,690 | ||||||
| August 22, 2019 | conversion | — | 6,348 | — | 6,348 | 5,290 | ||||||
| August 23, 2019 | conversion | — | 4,400 | — | 4,400 | 5,500 | ||||||
| August 26, 2019 | conversion | 7,810 | 3,068 | — | 10,878 | 9,065 | ||||||
| August 26, 2019 | conversion | — | 3,416 | — | 3,416 | 4,270 | ||||||
| August 27, 2019 | conversion | — | 2,240 | — | 2,240 | 2,800 | ||||||
| August 29, 2019 | conversion | — | 5,344 | — | 5,344 | 6,680 | ||||||
| September 3, 2019 | conversion | — | 5,616 | — | 5,616 | 7,020 | ||||||
| September 3, 2019 | conversion | 6,149 | 2,449 | — | 8,598 | 14,329 |
- 16 -
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| September 4, 2019 | conversion | — | 2,956 | — | 2,956 | 7,390 | ||||||
| September 5, 2019 | conversion | — | 3,240 | — | 3,240 | 8,100 | ||||||
| September 6, 2019 | conversion | — | 3,560 | — | 3,560 | 8,900 | ||||||
| September 9, 2019 | conversion | — | 3,752 | — | 3,752 | 9,380 | ||||||
| September 10, 2019 | conversion | — | 3,944 | — | 3,944 | 9,860 | ||||||
| September 10, 2019 | conversion | 6,826 | 2,750 | — | 9,575 | 15,959 | ||||||
| September 11, 2019 | conversion | — | 4,129 | — | 4,129 | 10,300 | ||||||
| September 12, 2019 | conversion | 2,447 | 2,233 | — | 4,680 | 11,700 | ||||||
| September 13, 2019 | conversion | 4,920 | — | — | 4,920 | 12,300 | ||||||
| September 16, 2019 | conversion | 2,818 | 2,342 | — | 5,160 | 12,900 | ||||||
| September 17, 2019 | conversion | — | 2,960 | — | 2,960 | 7,400 | ||||||
| September 18, 2019 | conversion | — | 4,760 | — | 4,760 | 11,900 | ||||||
| September 19, 2019 | conversion | — | 2,920 | — | 2,920 | 7,300 | ||||||
| September 20, 2019 | conversion | 202 | 1,998 | — | 2,200 | 5,500 | ||||||
| September 25, 2019 | conversion | 4,506 | 234 | — | 4,740 | 12,600 | ||||||
| October 3, 2019 | conversion | 5,651 | 349 | — | 6,000 | 15,000 | ||||||
| October 10, 2019 | conversion | 3,760 | 280 | — | 4,040 | 10,100 | ||||||
| October 25, 2019 | conversion | 2,584 | 556 | — | 3,140 | 15,700 | ||||||
| November 4, 2019 | conversion | 2,926 | 354 | — | 3,280 | 16,400 | ||||||
| November 27, 2019 | conversion | 2,970 | 770 | — | 3,740 | 18,700 | ||||||
| January 3, 2020 | conversion | — | 2,640 | — | 2,640 | 13,200 | ||||||
| January 27, 2020 | conversion | 3,360 | — | — | 3,360 | 16,800 | ||||||
| February 1, 2020 | cancellation | (3,360) | — | — | (3,360) | (16,800) | ||||||
| February 5, 2020 | cancellation | — | (640) | — | (640) | (3,200) | ||||||
| February 5, 2020 | conversion | — | 4,060 | — | 4,060 | 20,300 | ||||||
| February 29, 2020 | rounding shares issuable | — | — | — | — | 2,946 | ||||||
| Number of shares outstanding February 29, 2020 | 418,415 | |||||||||||
| March 29, 2020 | Conversion | — | 2,568 | — | 2,568 | 21,400 | ||||||
| March 30, 2020 | Conversion | 742 | — | 500 | 1,242 | 20,700 | ||||||
| March 31, 2020 | Conversion | — | 1,013 | — | 1,013 | 21,100 | ||||||
| April 3, 2020 | Conversion | — | 936 | — | 936 | 19,500 | ||||||
| April 6, 2020 | Conversion | 868 | — | 500 | 1,368 | 22,800 | ||||||
| April 7, 2020 | Conversion | — | 1,186 | — | 1,186 | 24,700 | ||||||
| April 7, 2020 | Conversion | 1,500 | — | 500 | 2,000 | 25,000 | ||||||
| April 8, 2020 | Conversion | — | 1,104 | — | 1,104 | 23,000 | ||||||
| April 13, 2020 | Conversion | — | 1,474 | — | 1,474 | 30,700 | ||||||
| April 14, 2020 | Conversion | — | 1,272 | — | 1,272 | 26,500 | ||||||
| April 16, 2020 | Conversion | 1,456 | — | 500 | 1,956 | 32,600 | ||||||
| April 17, 2020 | Conversion | — | 1,613 | — | 1,613 | 33,600 | ||||||
| April 20, 2020 | Conversion | — | 1,776 | — | 1,776 | 37,000 | ||||||
| April 20, 2020 | Conversion | 1,200 | — | 500 | 1,700 | 23,611 | ||||||
| April 21, 2020 | Conversion | — | 1,448 | — | 1,448 | 31,000 | ||||||
| April 23, 2020 | Conversion | — | 1,773 | — | 1,773 | 38,500 | ||||||
| April 24, 2020 | Conversion | — | 1,392 | — | 1,392 | 43,500 | ||||||
| April 24, 2020 | Conversion | 1,941 | — | 500 | 2,441 | 42,420 | ||||||
| April 27, 2020 | Conversion | — | 1,469 | — | 1,469 | 45,900 | ||||||
| April 28, 2020 | Conversion | — | 781 | — | 781 | 24,400 | ||||||
| April 28, 2020 | Conversion | — | 1,376 | — | 1,376 | 43,000 | ||||||
| April 29, 2020 | Conversion | 2,400 | — | 500 | 2,900 | 48,333 | ||||||
| April 30, 2020 | Conversion | — | 1,408 | — | 1,408 | 44,000 | ||||||
| April 30, 2020 | Conversion | 2,225 | — | 500 | 2,725 | 54,500 | ||||||
| May 1, 2020 | Conversion | — | 1,792 | — | 1,792 | 56,009 | ||||||
| May 4, 2020 | Conversion | — | 1,728 | — | 1,728 | 54,000 | ||||||
| May 4, 2020 | Conversion | 5,060 | 2,719 | — | 7,779 | 129,643 |
- 17 -
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| May 4, 2020 | Conversion | 2,724 | — | 500 | 3,224 | 71,640 | ||||||
| May 5, 2020 | Conversion | — | 2,365 | — | 2,365 | 73,900 | ||||||
| May 6, 2020 | Conversion | 3,750 | — | 500 | 4,250 | 78,703 | ||||||
| May 7, 2020 | Conversion | — | 2,170 | — | 2,170 | 67,800 | ||||||
| May 7, 2020 | Conversion | 2,640 | — | 500 | 3,140 | 78,500 | ||||||
| May 8, 2020 | Conversion | — | 1,592 | — | 1,592 | 59,400 | ||||||
| May 11, 2020 | Conversion | 1,843 | — | 500 | 2,343 | 90,100 | ||||||
| May 12, 2020 | Conversion | — | 2,095 | — | 2,095 | 100,700 | ||||||
| May 12, 2020 | Conversion | 1,910 | — | 500 | 2,410 | 95,000 | ||||||
| May 12, 2020 | Conversion | 4,070 | 2,208 | — | 6,278 | 201,231 | ||||||
| May 13, 2020 | Conversion | — | 2,413 | — | 2,413 | 116,000 | ||||||
| May 14, 2020 | Conversion | — | 1,936 | — | 1,936 | 94,000 | ||||||
| May 14, 2020 | Conversion | 2,698 | — | 500 | 3,198 | 123,000 | ||||||
| May 14, 2020 | Conversion | 3,300 | — | 500 | 3,800 | 121,794 | ||||||
| May 15, 2020 | Conversion | — | 1,764 | — | 1,764 | 98,000 | ||||||
| May 15, 2020 | Conversion | 4,510 | 2,416 | — | 6,926 | 232,206 | ||||||
| May 18, 2020 | Conversion | — | 2,728 | — | 2,728 | 155,000 | ||||||
| May 19, 2020 | Conversion | — | 2,546 | — | 2,546 | 148,000 | ||||||
| May 19, 2020 | Conversion | 3,108 | — | 500 | 3,608 | 164,000 | ||||||
| May 19, 2020 | Conversion | 3,108 | — | 500 | 3,608 | 164,000 | ||||||
| May 19, 2020 | Conversion | 2,450 | — | 500 | 2,950 | 121,399 | ||||||
| May 20, 2020 | Conversion | — | 2,477 | — | 2,477 | 144,000 | ||||||
| May 21, 2020 | Conversion | — | 3,560 | — | 3,560 | 207,000 | ||||||
| May 22, 2020 | Conversion | 3,600 | — | 500 | 4,100 | 210,000 | ||||||
| May 22, 2020 | Conversion | 5,665 | 3,112 | — | 8,777 | 416,744 | ||||||
| May 25, 2020 | Conversion | 3,238 | — | 500 | 3,738 | 230,000 | ||||||
| May 26, 2020 | Conversion | — | 3,120 | — | 3,120 | 240,000 | ||||||
| May 27, 2020 | Conversion | — | 2,280 | — | 2,280 | 190,000 | ||||||
| May 28, 2020 | Conversion | — | 2,148 | — | 2,148 | 179,000 | ||||||
| May 28, 2020 | Conversion | 6,050 | 3,347 | — | 9,397 | 522,072 | ||||||
| May 28, 2020 | Rounding shares | — | — | — | — | 9 | ||||||
| May 29, 2020 | Conversion | 4,000 | — | 500 | 4,500 | 257,731 | ||||||
| June 1, 2020 | Conversion | — | 2,367 | — | 2,367 | 202,000 | ||||||
| June 1, 2020 | Conversion | 4,380 | — | — | 4,380 | 300,000 | ||||||
| June 1, 2020 | Conversion | 8,680 | — | — | 8,680 | 620,000 | ||||||
| June 3, 2020 | Conversion | — | 3,427 | — | 3,427 | 357,000 | ||||||
| June 4, 2020 | Conversion | 4,372 | — | 500 | 4,872 | 435,000 | ||||||
| June 4, 2020 | Conversion | — | 2,554 | — | 2,554 | 285,000 | ||||||
| June 3, 2020 | Conversion | 7,095 | 3,954 | — | 11,049 | 754,703 | ||||||
| June 4, 2020 | Conversion | 9,744 | — | — | 9,744 | 870,000 | ||||||
| June 5, 2020 | Conversion | — | 3,916 | — | 3,916 | 445,000 | ||||||
| June 8, 2020 | Conversion | 4,770 | — | — | 4,770 | 530,000 | ||||||
| June 8, 2020 | Conversion | — | 2,980 | — | 2,980 | 487,000 | ||||||
| June 8, 2020 | Conversion | 6,600 | 3,700 | — | 10,300 | 1,122,004 | ||||||
| June 9, 2020 | Conversion | 3,593 | — | 500 | 4,093 | 535,000 | ||||||
| June 10, 2020 | Conversion | 4,396 | — | 500 | 4,896 | 640,000 | ||||||
| June 10, 2020 | Conversion | — | 2,472 | — | 2,472 | 404,000 | ||||||
| June 11, 2020 | Conversion | — | 2,935 | — | 2,935 | 587,000 | ||||||
| June 11, 2020 | Conversion | 4,320 | — | — | 4,320 | 720,000 | ||||||
| June 12, 2020 | Conversion | 6,600 | 3,718 | — | 10,318 | 1,433,000 | ||||||
| June 15, 2020 | Conversion | — | 3,126 | — | 3,126 | 704,000 | ||||||
| June 15, 2020 | Conversion | 9,435 | — | — | 9,435 | 1,700,000 | ||||||
| June 15, 2020 | Conversion | 4,218 | — | 500 | 4,718 | 850,000 | ||||||
| June 17, 2020 | Conversion | — | 3,135 | — | 3,135 | 825,000 |
- 18 -
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| June 17, 2020 | Conversion | 4,750 | — | — | 4,750 | 1,000,000 | ||||||
| June 17, 2020 | Conversion | 5,830 | 3,303 | — | 9,133 | 1,902,773 | ||||||
| June 18, 2020 | Conversion | — | 2,608 | — | 2,608 | 815,000 | ||||||
| June 18, 2020 | Conversion | 4,300 | — | 500 | 4,800 | 1,200,000 | ||||||
| June 19, 2020 | Conversion | 3,500 | — | 500 | 4,000 | 1,000,000 | ||||||
| June 19, 2020 | Conversion | — | 2,797 | — | 2,797 | 874,000 | ||||||
| June 19, 2020 | Conversion | 6,490 | 3,686 | — | 10,176 | 2,119,985 | ||||||
| June 22, 2020 | Conversion | — | 4,627 | — | 4,627 | 1,446,000 | ||||||
| June 22, 2020 | Conversion | 6,930 | 3,950 | — | 10,880 | 2,266,600 | ||||||
| June 23, 2020 | Conversion | — | 5,120 | — | 5,120 | 1,600,000 | ||||||
| June 22, 2020 | Conversion | 10,000 | — | — | 10,000 | 2,500,000 | ||||||
| June 23, 2020 | Conversion | 6,100 | — | 500 | 6,600 | 1,650,000 | ||||||
| June 23, 2020 | Conversion | 10,120 | 5,775 | — | 15,895 | 3,311,362 | ||||||
| June 23, 2020 | Conversion | 2,488 | — | 500 | 2,988 | 747,000 | ||||||
| June 24, 2020 | Conversion | 8,400 | — | — | 8,400 | 2,100,000 | ||||||
| June 24, 2020 | Conversion | 17,200 | — | — | 17,200 | 4,300,000 | ||||||
| June 24, 2020 | Conversion | 10,120 | 5,781 | — | 15,901 | 3,312,766 | ||||||
| June 24, 2020 | Conversion | 1,150 | — | 500 | 1,650 | 343,750 | ||||||
| June 25, 2020 | Conversion | — | 7,040 | — | 7,040 | 2,200,000 | ||||||
| June 25, 2020 | Conversion | 10,300 | — | 500 | 10,800 | 2,700,000 | ||||||
| June 25, 2020 | Conversion | 11,275 | 6,448 | — | 17,723 | 3,692,421 | ||||||
| June 26, 2020 | Conversion | — | 6,400 | — | 6,400 | 2,000,000 | ||||||
| June 29, 1930 | Conversion | 12,800 | — | — | 12,800 | 3,200,000 | ||||||
| June 29, 2020 | Conversion | 3,355 | 485 | — | 3,840 | 1,200,000 | ||||||
| June 30, 2020 | Conversion | 4,841 | 119 | — | 4,960 | 1,550,000 | ||||||
| June 29, 2020 | Conversion | 13,000 | 861 | — | 13,861 | 2,887,685 | ||||||
| July 1, 2020 | Conversion | 12,980 | — | 500 | 13,480 | 3,370,000 | ||||||
| July 1, 2020 | Conversion | 22,800 | — | — | 22,800 | 5,700,000 | ||||||
| July 1, 2020 | Conversion | 12,485 | 7,191 | — | 19,676 | 4,099,085 | ||||||
| July 1, 2020 | Conversion | 5,222 | 116 | — | 5,338 | 1,668,000 | ||||||
| July 2, 2020 | Conversion | 7,248 | 112 | — | 7,360 | 2,300,000 | ||||||
| July 6, 2020 | Conversion | 16,088 | — | — | 16,088 | 4,021,875 | ||||||
| July 1, 2020 | Conversion | 13,250 | 861 | — | 14,111 | 2,945,058 | ||||||
| July 6, 2020 | Conversion | 17,600 | 10,195 | — | 27,795 | 5,790,666 | ||||||
| July 7, 2020 | Conversion | 7,462 | 538 | — | 8,000 | 2,500,000 | ||||||
| July 8, 2020 | Conversion | 6,297 | 103 | — | 6,400 | 2,000,000 | ||||||
| July 9, 2020 | Conversion | 18,150 | 10,550 | — | 28,700 | 5,979,187 | ||||||
| July 9, 2020 | Conversion | 20,000 | — | — | 20,000 | 5,000,000 | ||||||
| July 10, 2020 | Conversion | 9,403 | 197 | — | 9,600 | 3,000,000 | ||||||
| July 14, 2020 | Conversion | — | 10,240 | — | 10,240 | 3,200,000 | ||||||
| July 14, 2020 | Conversion | 12,000 | — | — | 12,000 | 3,000,000 | ||||||
| July 14, 2020 | Conversion | 9,230 | 370 | — | 9,600 | 3,000,000 | ||||||
| July 14, 2020 | Conversion | 12,114 | 7,082 | — | 19,196 | 3,999,234 | ||||||
| July 14, 2020 | Conversion | 24,000 | — | — | 24,000 | 6,000,000 | ||||||
| July 14, 2020 | Conversion | — | 12,800 | — | 12,800 | 4,000,000 | ||||||
| July 16, 2020 | Conversion | 22,611 | 13,782 | — | 36,392 | 7,581,749 | ||||||
| July 17, 2020 | Conversion | 33,000 | 18,736 | — | 51,736 | 10,645,130 | ||||||
| July 20, 2020 | Conversion | — | 1,600 | — | 1,600 | 500,000 | ||||||
| July 20, 2020 | Conversion | 32,000 | — | — | 32,000 | 8,000,000 | ||||||
| July 20, 2020 | Conversion | 28,600 | 16,249 | — | 44,849 | 9,237,550 | ||||||
| July 20, 2020 | Conversion | — | 10,560 | — | 10,560 | 3,300,000 | ||||||
| July 21, 2020 | Conversion | — | 6,400 | — | 6,400 | 2,000,000 | ||||||
| July 22, 2020 | Conversion | — | 6,400 | — | 6,400 | 2,000,000 | ||||||
| July 22, 2020 | Conversion | — | 24,000 | — | 24,000 | 7,500,000 |
- 19 -
| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| July 23, 2020 | Conversion | — | 6,400 | — | 6,400 | 2,000,000 | ||||||
| July 24, 2020 | Conversion | — | 6,400 | — | 6,400 | 2,000,000 | ||||||
| July 24, 2020 | Conversion | 9,000 | — | — | 9,000 | 2,000,000 | ||||||
| July 24, 2020 | Conversion | 27,500 | 15,741 | — | 43,241 | 6,863,668 | ||||||
| July 27, 2020 | Conversion | 16,018 | 182 | — | 16,200 | 5,000,000 | ||||||
| July 27, 2020 | Conversion | — | 22,680 | — | 22,680 | 7,000,000 | ||||||
| July 28, 2020 | Conversion | 9,150 | 50 | — | 9,200 | 2,500,000 | ||||||
| July 29, 2020 | Conversion | 50,032 | 7,700 | — | 57,732 | 9,785,085 | ||||||
| July 29, 2020 | Conversion | 10,456 | 44 | — | 10,500 | 2,500,000 | ||||||
| July 29, 2020 | Conversion | — | 29,400 | — | 29,400 | 7,000,000 | ||||||
| July 29, 2020 | Conversion | 27,500 | 15,833 | — | 43,333 | 6,878,219 | ||||||
| July 30, 2020 | Conversion | 10,463 | 37 | — | 10,500 | 2,500,000 | ||||||
| July 30, 2020 | Conversion | — | 29,400 | — | 29,400 | 7,000,000 | ||||||
| July 30, 2020 | Conversion | 57,750 | — | — | 57,750 | 11,000,000 | ||||||
| July 30, 2020 | Conversion | 12,570 | 30 | — | 12,600 | 3,000,000 | ||||||
| July 31, 2020 | Conversion | — | 29,400 | — | 29,400 | 7,000,000 | ||||||
| July 31, 2020 | Conversion | 23,100 | 13,330 | — | 36,430 | 7,019,333 | ||||||
| July 31, 2020 | Conversion | 6,734 | 66 | — | 6,800 | 2,000,000 | ||||||
| August 3, 2020 | Conversion | 43,500 | — | — | 43,500 | 10,000,000 | ||||||
| August 3, 2020 | Conversion | — | 29,400 | — | 29,400 | 7,000,000 | ||||||
| August 3, 2020 | Conversion | — | 8,500 | — | 8,500 | 2,500,000 | ||||||
| August 4, 2020 | Conversion | 17,985 | 10,427 | — | 28,412 | 5,474,293 | ||||||
| August 4, 2020 | Conversion | 5,800 | — | 5,800 | 2,500,000 | |||||||
| August 5, 2020 | Conversion | 27,500 | 13,979 | — | 41,479 | 8,837,286 | ||||||
| August 6, 2020 | Conversion | 33,741 | 18,759 | — | 52,500 | 12,500,000 | ||||||
| August 6, 2020 | Conversion | — | 17,000 | — | 17,000 | 5,000,000 | ||||||
| August 10, 2020 | Conversion | 43,294 | 953 | — | 44,247 | 15,000,000 | ||||||
| August 11, 2020 | Conversion | 25,850 | 15,107 | — | 40,957 | 17,065,350 | ||||||
| August 11, 2020 | Conversion | 12,533 | 10,000 | — | 22,533 | 11,268,750 | ||||||
| August 12, 2020 | Conversion | 8,965 | 5,245 | — | 14,210 | 5,920,900 | ||||||
| August 14, 2020 | Conversion | 27,500 | 15,510 | — | 43,010 | 17,920,835 | ||||||
| August 14, 2020 | Conversion | 16,000 | — | — | 16,000 | 8,000,000 | ||||||
| August 17, 2020 | Conversion | — | 12,000 | — | 12,000 | 6,000,000 | ||||||
| August 19, 2020 | Conversion | — | 12,000 | — | 12,000 | 6,000,000 | ||||||
| August 19, 2020 | Conversion | 26,510 | 15,040 | — | 41,550 | 17,312,501 | ||||||
| August 27, 2020 | Conversion | 25,441 | 10,000 | 500 | 35,941 | 17,970,625 | ||||||
| August 28, 2020 | Conversion | 41,000 | — | — | 41,000 | 20,000,000 | ||||||
| August 28, 2020 | Conversion | 38,500 | 21,894 | — | 60,394 | 25,164,027 | ||||||
| August 31, 2020 | Conversion | 39,500 | — | 500 | 40,000 | 20,000,000 | ||||||
| September 3, 2020 | Conversion | 44,990 | 25,974 | — | 70,964 | 29,568,429 | ||||||
| September 4, 2020 | Conversion | 48,100 | — | 500 | 48,600 | 27,000,000 | ||||||
| September 10, 2020 | Conversion | 44,000 | 19,046 | — | 63,046 | 29,188,067 | ||||||
| September 14, 2020 | Conversion | 36,000 | — | — | 36,000 | 20,000,000 | ||||||
| September 16, 2020 | Conversion | 36,300 | 15,858 | — | 52,158 | 28,976,854 | ||||||
| September 17, 2020 | Conversion | 30,000 | — | — | 30,000 | 20,000,000 | ||||||
| September 21, 2020 | Conversion | 29,700 | 13,074 | — | 42,774 | 35,645,000 | ||||||
| September 22, 2020 | Conversion | 33,500 | — | 500 | 34,000 | 34,000,000 | ||||||
| September 22, 2020 | Conversion | 20,000 | — | — | 20,000 | 20,000,000 | ||||||
| September 25, 2020 | Conversion | 27,500 | 12,179 | — | 39,679 | 38,900,867 | ||||||
| September 28, 2020 | Conversion | 21,000 | — | — | 21,000 | 30,000,000 | ||||||
| September 28, 2020 | Conversion | 6,850 | — | 500 | 7,350 | 15,000,000 | ||||||
| September 29, 2020 | Conversion | 23,300 | — | 500 | 23,800 | 34,000,000 | ||||||
| September 30, 2020 | Conversion | 27,500 | 12,410 | — | 39,910 | 47,511,901 | ||||||
| October 5, 2020 | Conversion | 27,500 | 11,991 | — | 39,491 | 50,630,340 |
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| Date | Transaction (*) | Principal Converted | Interest Converted | Fees Converted | Total Amount Converted | Shares Issued** | ||||||
| October 5, 2020 | Conversion | 17,500 | — | — | 17,500 | 25,925,926 | ||||||
| October 6, 2020 | Conversion | 5,881 | 9,360 | 500 | 15,741 | 24,217,169 | ||||||
| October 6, 2020 | Conversion | 6,780 | — | 500 | 7,280 | 16,000,000 | ||||||
| October 8, 2020 | Conversion | 33,000 | 14,762 | — | 47,762 | 61,233,329 | ||||||
| October 12, 2020 | Conversion | 27,500 | 12,375 | — | 39,875 | 66,458,333 | ||||||
| October 15, 2020 | Conversion | 41,800 | 26,711 | — | 68,511 | 114,185,778 | ||||||
| October 15, 2020 | Conversion | 6,500 | — | 500 | 7,000 | 20,000,000 | ||||||
| October 21, 2020 | Conversion | 22,000 | 10,032 | — | 32,032 | 53,386,667 | ||||||
| October 26, 2020 | Conversion | 10,000 | 5,000 | — | 15,000 | 25,000,000 | ||||||
| October 29, 2020 | Conversion | 44,000 | 20,298 | — | 64,298 | 107,164,443 | ||||||
| October 29, 2020 | Conversion | 27,500 | 14,000 | — | 41,500 | 69,166,666 | ||||||
| November 2, 2020 | Conversion | 2,500 | 142 | — | 2,642 | 4,403,700 | ||||||
| November 9, 2020 | Conversion | 38,500 | 18,044 | — | 56,544 | 94,239,448 | ||||||
| November 17, 2020 | Conversion | 38,500 | 25,450 | — | 63,950 | 106,582,783 | ||||||
| November 24, 2020 | Conversion | 40,040 | 26,655 | — | 66,695 | 111,157,519 | ||||||
| December 1, 2020 | Conversion | 44,660 | 29,938 | — | 74,598 | 124,330,726 | ||||||
| December 3, 2020 | Conversion | 38,170 | 22,938 | — | 61,108 | 101,847,067 | ||||||
| December 10, 2020 | Conversion | 78,650 | 47,584 | — | 126,234 | 210,390,074 | ||||||
| December 28, 2020 | Warrants | — | — | — | 1,190 | 119,000,000 | ||||||
| January 1, 2021 | Warrants | — | — | — | 1,250 | 125,000,000 | ||||||
| January 21, 2021 | Warrants | — | — | — | 736 | 73,650,793 | ||||||
| January 14, 2021 | Warrants | — | — | — | 1,300 | 130,000,000 | ||||||
| January 20, 2021 | Warrants | — | — | — | 323 | 32,338,030 | ||||||
| January 20, 2021 | Warrants | — | — | — | 1,280 | 127,992,278 | ||||||
| February 3, 2021 | Fees | — | — | — | — | 5,000,000 | ||||||
| February 10, 2021 | Warrants | — | — | — | — | 75,000,000 | ||||||
| February 16, 2021 | Warrants | — | — | — | — | 14,268,324 | ||||||
| February 16, 2021 | Warrants | — | — | — | — | 130,000,000 | ||||||
| February 19, 2021 | Conversion | 82,500 | 27,530 | — | 110,030 | 4,075,191 | ||||||
| February 23, 2021 | Warrants | — | — | — | — | 42,189,696 | ||||||
| February 26, 2021 | Warrants | — | — | — | — | 24,771,271 | ||||||
| Number of shares outstanding February 28, 2021 | 3,229,426,884 |
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| Date | Transaction | Consideration | Shares Issued | |||
| March 3, 2021 | Conversion of Series F Preferred Shares | 40 Series F shares converted | 156,978,130 | |||
| March 23, 2021 | Conversion of Series F Preferred Shares | 18 Series F shares converted | 74,652,380 | |||
| April 8, 2021 | Conversion of Series F Preferred Shares | 20 Series F shares converted | 84,715,488 | |||
| June 3, 2021 | Exercise of warrants | Cashless exercise of 188,000,000 warrants | 182,000,000 | |||
| June 15, 2021 | Exercise of warrants | Cashless exercise of 11,000,000 warrants | 9,975,508 | |||
| June 15, 2021 | Debt exchange | $2,545,900 in debt exchanged for common shares | 39,167,693 | |||
| June 15, 2021 | Debt Exchange | $5,000,875 in debt exchanged for common shares | 76,936,539 | |||
| July 21, 2021 | Exercise of warrants | Cashless exercise of 112,000,000 warrants | 108,276,053 | |||
| July 26, 2021 | Common stock issued at previous day bid price per note conversion agreement | Convert a note payable including $275,000 of principal, $16,955 of interest, and $1,750 of fees | 10,859,436 | |||
| August 5, 2021 | Common stock issued at previous day bid price per note conversion agreement | Convert a note payable including $550,000 of principal, and $55,000 of interest | 20,183,000 | |||
| September 16, 2021 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period | $0.03 per share for gross proceeds of $601,499 and net proceeds (after issuance costs) of $563,849 | 19,943,616 | |||
| September 24, 2021 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period | $0.03 per share for gross proceeds of $770,141 and net proceeds (after issuance costs) of $691,336 | 24,289,716 | |||
| October 7, 2021 | Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period | $0.02 per share for gross proceeds of $1,182,004 and net proceeds (after issuance costs) of $1,170,788 | 49,000,000 | |||
| October 14, 2021 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period | $0.02 per share for gross proceeds of $1,155,997 and net proceeds (after issuance costs) of $1,090,557 | 55,166,929 | |||
| October 19, 2021 | Exercise of warrants | Cashless exercise of 52,985,075 warrants | 50,000,000 | |||
| October 25, 2021 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period | $0.03 per share for gross proceeds of $2,708,457 and net proceeds (after issuance costs) of $2,600,119 | 95,368,212 | |||
| October 27, 2021 | Exercise of warrants | Cashless exercise of 47,014,925 warrants | 44,770,776 | |||
| November 11, 2021 | Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period | $0.03 per share for gross proceeds of $1,358,600 and net proceeds (after issuance costs) of $1,345,014 | 50,000,000 | |||
| November 24, 2021 | Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period | $0.03 per share for gross proceeds of $1,016,515 and net proceeds (after issuance costs) of $1,006,349 | 51,400,000 | |||
| January 3, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $1,275,000 and net proceeds (after issuance costs) of $1,183,725 | 100,000,000 | |||
| January 19, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.02 per share for gross proceeds of $1,697,110 and net proceeds (after issuance costs) of $1,577,312 | 100,000,000 | |||
| February 8, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $1,412,700 and net proceeds (after issuance costs) of $1,312,811 | 100,000,000 | |||
| Number of shares outstanding February 28, 2022***** | 4,733,110,360 |
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| Date | Transaction | Consideration | Shares Issued | |||
| April 6, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $1,350,6500 and net proceeds (after issuance costs) of $1,255,104 | 100,000,000 | |||
| May 25, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $411,729 and net proceeds (after issuance costs) of $390,4761 | 33,881,576 | |||
| June 6, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $292,268 and net proceeds (after issuance costs) of $276,630 | 23,723,044 | |||
| June 15, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $317,845 and net proceeds (after issuance costs) of $300,927 | 28,378,983 | |||
| June 27, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $292,386 and net proceeds (after issuance costs) of $276,742 | 26,873,732 | |||
| July 8, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $221,755 and net proceeds (after issuance costs) of $209,643 | 22,175,543 | |||
| July 11, 2022 | Exercise of warrants | Cashless exercise of 8,250,000 warrants | 1,688,178 | |||
| July 19, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.01 per share for gross proceeds of $163,167 and net proceeds (after issuance costs) of $153,983 | 16,059,723 | |||
| July 21, 2022 | Exercise of warrants | Cashless exercise of 53,128,210 warrants | 8,000,001 | |||
| August 12, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.009 per share for gross proceeds of $225,065 and net proceeds (after issuance costs) of $212,787 | 23,841,632 | |||
| August 22, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.009 per share for gross proceeds of $225,065 and net proceeds (after issuance costs) of $212,787 | 20,638,478 | |||
| August 30, 2022 | Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period | $0.009 per share for gross proceeds of $284,290 and net proceeds (after issuance costs) of $281,280 | 30,000,000 | |||
| August 31, 2022 | Cancellation of common stock | Pursuant to an SEC enforcement action against a lender | (17,116,894) | |||
| September 7, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.008 per share for gross proceeds of $167,289 and net proceeds (after issuance costs) of $157,900 | 20,348,167 | |||
| September 19, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.008 per share for gross proceeds of $147,542 and net proceeds (after issuance costs) of $139,140 | 18,260,143 | |||
| September 30, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 5 day period | $0.007 per share for gross proceeds of $103,152 and net proceeds (after issuance costs) of $96,969 | 14,820,143 | |||
| October 12, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.006 per share for gross proceeds of $80,278 and net proceeds (after issuance costs) of $75,240 | 12,543,515 | |||
| October 20, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.006 per share for gross proceeds of $94,361 and net proceeds (after issuance costs) of $88,618 | 17,094,439 | |||
| October 31, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $89,237 and net proceeds (after issuance costs) of $83,750 | 17,705,725 | |||
| November 9, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $72,964 and net proceeds (after issuance costs) of $68,291 | 14,710,472 |
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| Date | Transaction | Consideration | Shares Issued | |||
| November 17, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $80,548 and net proceeds (after issuance costs) of $75,496 | 15,490,043 | |||
| November 22, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.006 per share for gross proceeds of $354,770 and net proceeds (after issuance costs) of $336,007 | 66,188,441 | |||
| December 7, 2022 | Common stock issued pursuant to share purchase agreement at 92% VWAP over previous 3 day period | $0.008 per share for gross proceeds of $231,840 and net proceeds (after issuance costs) of $228,840 | 30,000,000 | |||
| December 9, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.006 per share for gross proceeds of $207,058 and net proceeds (after issuance costs) of $195,680 | 32,762,396 | |||
| December 20, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $139,080 and net proceeds (after issuance costs) of $131,102 | 25,947,874 | |||
| December 29, 2022 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $135,832 and net proceeds (after issuance costs) of $128,016 | 28,778,009 | |||
| January 9, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.004 per share for gross proceeds of $123,603 and net proceeds (after issuance costs) of $116,397 | 27,589,862 | |||
| January 17, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $118,338 and net proceeds (after issuance costs) of $111,397 | 23,858,593 | |||
| January 20, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $214,971 and net proceeds (after issuance costs) of $203,197 | 40,174,120 | |||
| January 27, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $303,216 and net proceeds (after issuance costs) of $287,030 | 46,792,519 | |||
| February 6, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.007 per share for gross proceeds of $387,943 and net proceeds (after issuance costs) of $367,521 | 60,616,138 | |||
| February 10, 2023 | Exercise of warrants | Cashless exercise of 47,000,000 warrants | 35,618,378 | |||
| February 13, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.007 per share for gross proceeds of $652,837 and net proceeds (after issuance costs) of $619,170 | 90,071,304 | |||
| February 22, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.006 per share for gross proceeds of $511,317 and net proceeds (after issuance costs) of 484,726 | 81,316,289 | |||
| February 28, 2023 | Common stock issued as penalty pursuant to share purchase agreement | Corresponding adjustment to paid in capital | 17,500,000 | |||
| February 28, 2023 | Common stock issued pursuant to share purchase agreement at 85% VWAP over previous 10 day period | $0.005 per share for gross proceeds of $253,832 and net proceeds (after issuance costs) of $240,115 | 46,660,225 | |||
| Number of shares outstanding February 28, 2023***** | 5,836,641,599 |
__________
* Conversions occur at discounts ranging from 40-50% of average market price
** Shares adjusted for reverse stock splits: 100: 1 on August 24, 2018 and 10,000:1 on March 27, 2020
*** Total proceeds $600
**** Total proceeds $8,922
***** At February 28, 2022 there were 2,100,000 issuable shares
****** At February 28, 2023 there were 12,100,000 issuable shares
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In connection with the foregoing, the Registrant relied upon the exemption from registration under the Securities Act of 1933, as amended and the rules and regulations of the Securities and Exchange Commission thereunder, in reliance upon Section 4(a)(2) thereof and Regulation D thereunder.
Penny Stock Regulations
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock falls within the definition of penny stock and therefore is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. In addition, the broker-dealer must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy and sell our stock.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers
We have not repurchased any shares of our common stock during the fiscal years ended February 28, 2023 or 2022.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Forward-Looking Statements and Business sections in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’ fiscal year end is February 28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave ,Ferndale Michigan , 48220, and our telephone number is 877-767-6268.
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Results of Operations
The following table shows our results of operations for the years ended February 28, 2022 and February 28, 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| Period | ||||||||||||
| Year Ended | Year Ended | Change | ||||||||||
| February 28, 2023 | February 28, 2022 | Dollars | Percentage | |||||||||
| Revenues | $ | 1,331,956 | $ | 1,447,109 | $ | (115,153 | ) | (8% | ) | |||
| Gross profit | 653,883 | 974,183 | (320,300 | ) | (33% | ) | ||||||
| Operating expenses | 13,344,563 | 14,346,069 | (1,001,506 | ) | (7% | ) | ||||||
| Loss from operations | (12,690,680 | ) | (13,371,886 | ) | 681,206 | (5% | ) | |||||
| Other income (expense), net | (5,418,777 | ) | (48,825,598 | ) | 43,406,821 | 89% | ||||||
| Net loss | $ | (18,109,457 | ) | $ | (62,197,484 | ) | $ | 44,088,027 | 71% | |||
The following table presents revenues from contracts with customers disaggregated by product/service:
| Year Ended | Year Ended | Change | ||||||||||
| February 28, 2023 | February 28, 2022 | Dollars | Percentage | |||||||||
| Device rental activities | $ | 754,126 | $ | 592,401 | $ | 161,725 | 27% | |||||
| Direct sales of goods and services | 577,830 | 854,708 | (276,878 | ) | (32% | ) | ||||||
| $ | 1,331,956 | $ | 1,447,109 | $ | (115,153 | ) | (8% | ) | ||||
Revenue
Total revenue for the year ended February 28, 2023 was $1,331,956, which represented a decrease of $115,153 compared to total revenue of $1,447,109 for the year ended February 28, 2022. This decrease was a result of higher unit sales in fiscal 2022 which were $688,180 as compared to unit sales of $376,546, this $311,634 increase was partially offset by increases in training revenue in 2023 so as to yield an overall decrease in direct sales of goods and services of $ 276,878. Rental activities increased by $161,725 or 27%, as the Company continues to grow its product line and customer base.
Gross profit
Total gross profit for the year ended February 28, 2023 was $653,883, which represented a decrease of $320,300,compared to total gross profit of $974,183 for the year ended February 28, 2022. The decrease is a result of the decrease in revenues above, higher amount of overhead allocated to cost of sales in fiscal 2023 by approximately $ 257,000 due to full year’s allocation in 2023 partially as compared to only a partial year’s allocation ion 2022. Although the factory lease started in May 2021 it took many months to ramp up factory capacity and personnel. Cost of sales also increased due to more staff being allocated to production work overt R&D work and a higher inventory provision in 2023.
Operating expenses
Operating expenses for the years ended February 28, 2023 and February 28, 2022 comprised of the following:
| Period | ||||||||||||
| Year Ended | Year Ended | Change | ||||||||||
| February 28, 2023 | February 28, 2022 | Dollars | Percentage | |||||||||
| Research and development | $ | 3,625,468 | $ | 2,961,394 | $ | 664,074 | (22% | ) | ||||
| General and administrative | 8,980,709 | 10,905,129 | (1,924,420 | ) | (18% | ) | ||||||
| Depreciation and amortization | 478,115 | 232,886 | 245,229 | 105% | ||||||||
| Operating lease cost and rent | 260,271 | 275,785 | (15,514 | ) | (6% | ) | ||||||
| (Gain) loss on disposal of fixed assets | — | (29,125 | ) | 29,125 | 100% | |||||||
| Operating expenses | $ | 13,344,563 | $ | 14,346,069 | $ | (1,001,506 | ) | (7% | ) | |||
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Our operating expenses were comprised of general and administrative expenses, research and development, depreciation and amortization, operating lease and rent and a (gain) loss on disposal of fixed assets. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and rent. Our operating expenses during the years ended February 28, 2023 and February 28, 2022 were $13,344,563 and 14,346,069, respectively. The overall $1,001,506 decrease in operating expenses was primarily attributable to the following changes in operating expenses:
| ● | Research and development expenses increased by $664,074 which was due funding development of new products,(such as the ROAMEO, RIO, RADDOG,and new RAD software solutions ) as well as upgrades of existing products. |
| ● | General and administrative expenses decreased by $1,924,420 primarily due to the following changes: |
| — | For the year ended February 28, 2023 stock based compensation to CEO in equity awards was $499,500 with $118,500 fees paid to consultants, and a charge of $ 122,050 all totaling $740,050 compare with stock based compensation to CEO in equity awards was $2,048,850 with $109,200 fees paid to consultants all totaling $2,158,050 for the year ended February 28, 2022. This represents a decrease of $1,418,000 in stock based compensation. | |
| — | Professional fees decreased by $401,687 due to decreases in financial reporting of $167,321, decrease in legal of $143,044, decrease in professional fees from former director of $282,946 with the remaining offsetting increase due to changes in regulatory, investor relations and consulting costs. | |
| — | Wages, salaries and payroll levies decreased by $499,661 with a reduction in CEO compensation of $1,093,758 offset by the increase in staff . | |
| — | Office expense increased by $113,610. | |
| — | Freight, duty and brokerage increased by $84,725 due to higher purchases in 2023. | |
| — | Insurance cost increase by $210,985 due to health plan and liability insurance increases. | |
| — | Advertising and marketing costs increased by $385,919 as the Company increased efforts to promote its products. | |
| — | Bad debts expense increased by $173,859 due to write off of uncollectible accounts. | |
| — | Supplies decreased by $224,703 as a higher amount was used in manufacturing and part of capital cost of revenue earning devices in 2023. | |
| — | Trade shows and travel increased by $133,098 as a result of promotional and business travel in fiscal 2023. | |
| — | The remaining offsetting increases were distributed amongst other general and administrative accounts such as website design warehouse expense, repairs and maintenance, and utilities amongst others. In general, these increases in general and administrative expenses may be explained due to a ramp up in personnel and production and the full year of the manufacturing facility in 2023. |
| ● | Operating lease cost and rent decreased by $15,514 due to the expiration of a lease in the current period. |
| ● | Depreciation and amortization increased by $245,229 due to the increase in revenue earning devices and new computer equipment, tooling ,furniture and fixtures and manufacturing equipment in fixed assets. |
| ● | (Gain) loss on disposal of fixed assets decreased by $29,125 due to a vehicle disposal in 2022 that yielded a gain. |
Other income (expense)
Other income (expense) consisted of the change of fair value of derivative instruments interest expense and gain on settlement of debt. Other income (expense) during the years ended February 28, 2023 and February 28, 2022, was ($5,418,777) and ($48,825,598), respectively.
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The change in other income (expense) was due to the following:
| ● | Change in fair value of derivative liabilities decreased by $368,621 due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock and the reduction in convertible notes payable through debt conversions to common stock and settlements. At February 28, 203 there was no longer any convertible debt. |
| ● | Interest expense decreased by $10,703,135 due to lower amortization of debt discounts for the year ended February 28, 2023 of 1,980,033 (2022-$7,597,242). Interest expense in 2022 was higher due to interest expense related to the issuance of warrants for debt extensions of $5,415,000 for which there was no charge in 2023. Loans payable increased by approximately $5 million in 2023, with most of that increase occurring in the latter part of the year and related interest increased by approximately $570,000. |
| ● | Gain on settlement of debt increased by $33,072,305 due to the fiscal 2022 valuation of Series F shares and warrants given in exchange for an amendment to a deferred variable payment obligation that resulted in a loss of $33,015,215. There was no corresponding charge for the year ended February 29, 2023. The difference can be attributed to smaller gains and losses on other debt settlements. In 2023 the $3,992 gain is resultant from the settlement of convertible notes. |
The Company’s loss from operations for the year ended February 28, 2023 was $12,690,680, which represented a decrease in loss of $681,206 compared to a loss of $13,371,886 for the year ended February 28, 2022. The lower revenues and gross profit in 2023 were offset by significantly lower operating expenses for the reasons set out above. Note that the Company had a net loss of $18,109,457 for the year ended February 28, 2023, as compared to net loss of $62,197,484 for the year ended February 28, 2022. This change is mostly attributable to the loss on settlement of debt, decrease in interest expense and a decrease in general and administrative costs.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
For the year ended February 28, 2023, the Company had negative cash flow from operating activities of $12,577,395. As of February 28, 2023 the Company has an accumulated deficit of $112,253,711 and negative working capital of $12,610,601. Management does not anticipate having positive cash flow from operations in the near future. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.
The Company does not have the resources at this time to repay all its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business 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. In March and April the Company reduced personnel that were working on far-future solutions as well as other department reductions. Combined with other cost cutting measures management estimates it reduced the monthly expense burn by $ 200,000 - $ 300,000 with little impact on short and medium term operations. Management believes that it has the necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,equity proceeds and non-convertible debt. Management has had many recent conversations with the Company’s primary debt holder and believes that the non-convertible debt on the balance sheet will be extended. Management notes that non-convertible debt on the books has been extended by this debt holder twice in the past and notes that this debt holder has been a strong supporter of the Company.
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Capital Resources
The following table summarizes total current assets, liabilities and working capital for the period indicated:
| February 28, 2023 | February 28, 2022 | ||||||
| Current assets | $ | 3,438,992 | $ | 7,050,436 | |||
| Current liabilities(1) | 16,049,593 | 4,547,718 | |||||
| Working capital | $ | (12,610,601 | ) | $ | 2,502,718 | ||
__________
| (1) | As February 28, 2023 and February 28, 2022, current liabilities included approximately $0 and $7,587, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms. |
As of February 28, 2023 and February 28, 2022, we had a cash balance of $939,759 and $4,648,146, respectively.
Summary of Cash Flows
| Year Ended February 28, 2023 |
Year Ended February 28, 2022 |
||||||
| Net cash used in operating activities | $ | (12,577,395 | ) | $ | (14,825,442 | ) | |
| Net cash used in investing activities | $ | (308,402 | ) | $ | (129,200 | ) | |
| Net cash provided by financing activities | $ | 9,177,410 | $ | 18,558,370 | |||
Net cash used in operating activities for the year ended February 28, 2023 was $12,577,395, which included a net loss of $18,109,457, non-cash activity such as the change in fair value of derivative liabilities of ($3,595), gain on settlement of debt of ($3,992), amortization of debt discount of $1,980,033, stock based compensation of $740,050, reduction in right of use asset $112,396, accretion of lease liability $141,631, increase in related party accrued payroll and interest $12,960, inventory provision of $130,000, bad debts expense $45,110, depreciation and amortization of $478,115 and change in operating assets and liabilities of $1,899,354.
Net cash used in investing activities.
Net cash used in investing activities for the year ended February 28, 2023 was $308,402. This consisted of the purchase of fixed assets and investment of $258,402 and $50,000, respectively..
Net cash provided by financing activities.
Net cash provided by financing activities was $9,177,410 for the year ended February 28, 2023. This consisted of share proceeds net of issuance costs of $7,771,169 ,and proceeds from loans payable $3,300,000 and convertible notes payable of $619,250 offset by repayments of convertible notes payable and loans payable of $750,000 and $1,763,009, respectively.
Off-Balance Sheet Arrangements
We do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
Significant Accounting Policies
Use of Estimates
In order to prepare financial statements in conformity with accounting principals generally accepted in the United States, management must make estimates , judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any , are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value derivative liabilities.
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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.
| 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 28, 2022 and February 28, 2021, the Company had no deferred development costs.
Sales of Future Revenues
The Company has entered into transactions, as more fully described in footnote 11, in which it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues. 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.
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Revenue Recognition
ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and industry specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. 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).
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:
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| ● | 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:
| Fair Value Measurement Using | |||||||||||||
| Amount at Fair Value |
Level 1 | Level 2 | Level 3 | ||||||||||
| February 28, 2023 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | 979,000 | $ | — | $ | — | $ | 979,000 | |||||
| February 28, 2022 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | 479,500 | $ | — | $ | — | $ | 479,500 | |||||
| Derivative liability – conversion features pursuant to convertible notes payable | $ | 7,587 | $ | — | $ | — | $ | 7,587 | |||||
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.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The standard did not materially impact our consolidated net loss, accumulated deficit, and had no impact on cash flows. The Company has adopted this on March 1, 2020.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have any financial instruments that are exposed to significant market risk. We maintain our cash and cash equivalents in bank deposits and short-term, highly liquid money market investments. A hypothetical 100-basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents securities, or our earnings on such cash equivalents.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-36 of this annual report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
From October 31, 2019 through April 28, 2023, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and LJ Soldinger & Associates LLC (“LJ Soldinger”) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of February 28, 2023, 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 28, 2021, 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:
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| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● | 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 28, 2023, 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 28, 2023.
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.
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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) | 48 | Chief Executive Officer, Secretary and Director (2) |
| Anthony Brenz | 62 | 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.
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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
Apart from a settlement paid upon Mr. Parsons resignation on June 22, 2021 totaling $265,700 no other compensation was paid for his services as a director. We reimburse our directors for all reasonable ordinary and necessary business-related expenses, but we did not pay any other director’s fees or any other cash compensation for services rendered as a director during the years ended February 28, 2023 and February 28, 2022 to any of the individuals serving on our Board during that period.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, or written representations that no other reports were required, and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed all required Forms 3, 4, and 5.
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ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation recorded by us in the past two fiscal years for Mr. Reinharz , our President and Chief Executive Officer , Anthony Brenz, our Chief Financial Officer and Garret Parsons our former President, Chief Executive Officer and Chief Financial Officer.
2023 AND 2022 SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary or Fees ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Non-Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) | |||||||||
| Steven Reinharz | 2023 | 300,000 | 280,908 | 499,500 | — | — | — | — | 1,080,408 | |||||||||
| Chief Executive Officer, Chief Financial Officer, Secretary (1) | 2022 | 240,000 | 1,429,328 | 1,979,500 | 69,350 | — | — | — | 3,718,178 | |||||||||
| Anthony Brenz | 2023 | 190,000 | 1,500 | — | — | — | — | — | 191,500 | |||||||||
| Chief Financial Officer (1) | 2022 | 155,928 | 6,000 | — | — | — | — | — | 161,928 |
__________
| (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 |
Employment Agreements
On March 1, 2021, Mr. Parsons entered into a consulting agreement with us whereby he would provide services for a three-year term. The consulting agreement sets his annual compensation as $96,000 for the first year, $108,000 for the second year, and $120,000 for the third year. On June 22, 2021, Mr. Garett Parsons submitted his resignation as our director effective as of June 22, 2021 as a result of personal reasons. In connection with the resignation of Mr. Parsons, we and Mr. Parsons entered into a resignation letter agreement which cancels the previous consulting agreement. Pursuant to the terms of this letter, Mr. Parsons will receive, among other things, a lump sum payment equal to $265,700 which was paid in June 2021.This payment was a settlement as director of the company and not included as executive compensation above.
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. |
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| 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. |
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 28, 2023 that amount totaled $499,500 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. For the period ended February 28, 2022 that amount totaled $1,979,500 with a charge to stock-based compensation and a corresponding charge to incentive compensation plan payable. With the achievement of objectives 3,4,5 and 8 of the equity awards described above the CEO was granted 1,500 Series G Preferred shares which were redeemed in the reporting period for $1,500,000 in cash. As part of the grant, the Company is responsible for grossing up the award value and has accrued additional compensation for the estimated taxes to be paid by the executive.
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 $190,000 on January 1, 2022.
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for Mr. Reinharz and Mr Brenz, our sole executive officers outstanding as of February 28, 2023:
| OPTION AWARDS | STOCK AWARDS | ||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
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 | 770.5 | $770,500 | ||||||||||
| 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 | $26,550 | 0 | 0 | ||||||||||
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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.
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 one hundred million (100,000,000) 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 31, 2023, we had 6,117,570,789 shares of Common Stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our Common Stock as of May 3, 2023, 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) | 20,414,041,490 | 74.99 | % | |||||
| Anthony Brenz | 0 | 0 | ||||||
| Mark Folmer | 0 | 0 | ||||||
| All executive officers and directors as a group (3 persons) | 20,414,041,490 | 74.99 | % | |||||
| 5% Shareholders: | ||||||||
| Steven Reinharz | 20,414,041,490 | 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 31, 2023 6,117,570,789 shares, 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 6,117,570,789 shares of the Company’s common stock issued and outstanding as of May 31, 2023. |
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| (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 20,414,041,490 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 28, 2023 and February 28, 2021, the Company made net repayments of $0 and $803,394, respectively, to its loan payable-related party. At February 28, 2023, the loan payable-related party was $206,516 and $193,556 at February 28, 2022. 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%. At February 28, 2023 there was $108,000 of deferred salary with $90,000 bearing interest at 12%. The accrued interest included at February 28, 2023 was $15,660 (2022- $2,700).
During the year ended February 28, 2023 pursuant to the amended Employment Agreement with its Chief Executive Officer the Company accrued $499,500 as incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. At February 28, 2023, the balance of incentive compensation plan payable was $979,000 (2022-$479,500). 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 28, 2022, pursuant to the amended Employment Agreement with its Chief Executive Officer, the Company issued 1,500 shares of Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share and recorded $1,500,000 of stock based compensation. The Company redeemed these shares for $1,500,000 and accrued $479,500 as incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met.
During the years ended February 28, 2023 and February 28, 2022, the Company was charged $3,578,981 and $2,258,819, respectively in consulting fees for research and development to 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.
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 28, 2023 and 2022.
| 2022 | ||||
| Audit Fees | $ | 298,698 | ||
| Audit-Related Fees | — | |||
| Tax Fees | — | |||
| All Other Fees | — | |||
| Total | $ | 298,698 | ||
| 2021 | ||||
| Audit Fees | $ | 275,000 | ||
| Audit-Related Fees | 15,000 | |||
| Tax Fees | — | |||
| All Other Fees | — | |||
| Total | $ | 290,000 | ||
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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.
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(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 for Form S-3 (333-259260). * | |
| 23.2 | Consent of Independent Registered Public Accounting Firm for Form S-1 (333-271031). * | |
| 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. |
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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: June 14, 2023 | By: | /s/ Steven Reinharz |
| Steven Reinharz | ||
| President, Chief Executive Officer | ||
| Date: June 14, 2023 | 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) | June 14, 2023 | ||
| Steven Reinharz | ||||
| /s/ Anthony Brenz | Chief Financial Officer (principal financial and accounting officer) | June 14, 2023 | ||
| Anthony Brenz |
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
(FORMERLY ON THE MOVE SYSTEMS CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
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 subsidiaries (the “Company”) as of February 28, 2023 and 2022, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two years ended February 28, 2023, 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 28, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two years ended February 28, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully explained in Note 1, which includes management’s plans in regards to this uncertainty, the Company had a net loss of approximately $18 million, an accumulated deficit of approximately $112 million and stockholders’ deficit of approximately $32 million as of and for the year ended February 28, 2023, and therefore there is substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regard to these matters are 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 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/
June 14, 2023
We have served as the Company’s auditor since 2019.
PCAOB Audit ID:
F-2
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
| February 28, 2023 | February 28, 2022 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash | $ | $ | |||||
| Accounts receivable, net | |||||||
| Device parts inventory, net | |||||||
| Prepaid expenses and deposits | |||||||
| Total current assets | |||||||
| Operating lease asset | |||||||
| Revenue earning devices, net of accumulated depreciation of $ |
|||||||
| Fixed assets, net of accumulated depreciation of $ |
|||||||
| Trademarks | |||||||
| Investment at cost | |||||||
| Security deposit | |||||||
| Total assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | $ | |||||
| Advances payable- related party | |||||||
| Customer deposits | |||||||
| Current operating lease liability | |||||||
| Current portion of deferred variable payment obligation | |||||||
| Current portion of convertible notes payable, net of discount of $ |
|||||||
| Loan payable - related party | |||||||
| Incentive compensation plan payable | |||||||
| Current portion of loans payable, net of discount of $ |
|||||||
| Vehicle loan - current portion | |||||||
| Current portion of accrued interest payable | |||||||
| Derivative liability | |||||||
| Total current liabilities | |||||||
| Non-current operating lease liability | |||||||
| Loans payable, net of discount of $ |
|||||||
| Deferred variable payment obligation | |||||||
| Accrued interest payable | |||||||
| Total liabilities | |||||||
| Commitments and Contingencies | |||||||
| Stockholders' deficit: | |||||||
| Preferred Stock, undesignated; shares authorized; shares issued and outstanding at February 28, 2023 and February 28, 2022, respectively | |||||||
| Series G Convertible Preferred Stock. $ par value; shares authorized, shares issued and outstanding at February 28, 2023 and February 28, 2022, respectively | |||||||
| Series E Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | |||||||
| Series F Convertible Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | |||||||
| Common Stock, $ par value; shares authorized and shares issued, issuable and outstanding, respectively | |||||||
| Additional paid-in capital | |||||||
| Preferred stock to be issued | |||||||
| Accumulated deficit | ( |
) | ( |
) | |||
| Total stockholders' deficit | ( |
) | ( |
) | |||
| Total liabilities and stockholders' deficit | $ | $ | |||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended February 28, 2023 |
Year Ended February 28, 2022 |
||||||
| Revenues | $ | $ | |||||
| Cost of Goods Sold | |||||||
| Gross Profit | |||||||
| Operating expenses: | |||||||
| Research and development | |||||||
| General and administrative | |||||||
| Depreciation and amortization | |||||||
| Operating lease cost and rent | |||||||
| (Gain) loss on disposal of fixed assets | ( |
) | |||||
| Total operating expenses | |||||||
| Loss from operations | ( |
) | ( |
) | |||
| Other income (expense), net: | |||||||
| Change in fair value of derivative liabilities | |||||||
| Interest expense | ( |
) | ( |
) | |||
| Gain (loss) on settlement of debt | ( |
) | |||||
| Total other income (expense), net | ( |
) | ( |
) | |||
| Net Loss | $ | ( |
) | $ | ( |
) | |
| Net loss per share - basic | $ | ( |
) | $ | ( |
) | |
| Net loss per share - diluted | $ | ( |
) | $ | ( |
) | |
| Weighted average common share outstanding - basic | |||||||
| Weighted average common share outstanding - diluted | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2023 AND FEBRUARY 28, 2022
| 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, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
| Cancellation of Series E Shares | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||
| Series F Preferred Shares issued with amendment agreement | — | — | — | |||||||||||||||||||||||||||
| Series F Preferred Shares Warrants issued with amendment agreement | — | — | — | — | ||||||||||||||||||||||||||
| Series F Preferred Shares cancelled in exchange for promissory notes | — | ( |
) | ( |
) | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Series F preferred shares issued on exercise of warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
| Series F Preferred Shares converted to common shares | — | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Redemption of 19 Issuable Series F shares | — | — | ( |
) | — | — | ( |
) | ( |
) | ||||||||||||||||||||
| Exchange of Series F Preferred Shares for debt | — | ( |
) | ( |
) | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Issuance of Series G preferred as equity awards per employment agreement | — | — | — | |||||||||||||||||||||||||||
| Redemption of Series G shares as compensation payment | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | — | — | |||||||||||||||||||||||||||
| Exercise of warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
| Exchange of debt for common shares | — | — | — | |||||||||||||||||||||||||||
| Stock based compensation on issuable shares | — | — | — | |||||||||||||||||||||||||||
| Issuance of shares, net of $ |
— | — | — | |||||||||||||||||||||||||||
| Cashless exercise of |
— | — | — | ( |
) | |||||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
| Warrants issued as part of debt | — | — | — | — | ||||||||||||||||||||||||||
| Warrants as issuance cost | — | — | — | — | ||||||||||||||||||||||||||
| Warrants as consideration for debt extensions | — | — | — | — | ||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | ||||||||||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at February 28, 2022 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
F-5
| 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 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
| Issuance of shares net of $ |
— | — | — | |||||||||||||||||||||||||||
| Cashless exercise of |
— | — | — | ( |
) | |||||||||||||||||||||||||
| Penalty shares issued pursuant to a share purchase agreement | — | — | — | ( |
||||||||||||||||||||||||||
| Relative fair value of Series F warrants issued with debt | — | — | — | |||||||||||||||||||||||||||
| Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
| Fair value of warrants cancelled for debt issuance | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Shares issued for services | — | — | — | |||||||||||||||||||||||||||
| Cancelled shares | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock based compensation - employee stock option plan | — | — | — | — | ||||||||||||||||||||||||||
| Rounding | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at February 28, 2023 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended February 28, 2023 |
Year Ended February 28, 2022 |
||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net loss | $ | ( |
) | $ | ( |
) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | |||||||
| Inventory provision | |||||||
| (Gain) loss on disposal of fixed assets | ( |
) | |||||
| Bad debts expense | |||||||
| Revenue earning device sold and expensed in cost of sales | |||||||
| Reduction of right of use asset | |||||||
| Accretion of lease liability | |||||||
| Stock based compensation | |||||||
| Interest expense related to the issuance of warrants for debt extensions | |||||||
| Interest expense related to penalties from debt defaults | |||||||
| Change in fair value of derivative liabilities | ( |
) | ( |
) | |||
| Amortization of debt discounts | |||||||
| (Gain) loss on settlement of debt | ( |
) | |||||
| Increase (decrease) in related party accrued payroll and interest | |||||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | ( |
) | |||||
| Prepaid expenses | ( |
) | ( |
) | |||
| Deposit on right of use asset | ( |
) | |||||
| Device parts inventory | ( |
) | ( |
) | |||
| Accounts payable and accrued expenses | ( |
) | |||||
| Accrued expense, related party | ( |
) | |||||
| Customer deposits | ( |
) | ( |
) | |||
| Operating lease liability payments | ( |
) | ( |
) | |||
| Balance owed WeSecure | ( |
) | |||||
| Current portion of deferred variable payment obligations for Payments | |||||||
| Accrued interest payable | |||||||
| Net cash used in operating activities | ( |
) | ( |
) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchase of fixed assets | ( |
) | ( |
) | |||
| Purchase of investment | ( |
) | |||||
| Acquisition of trademarks | ( |
) | |||||
| Cash paid for security deposit | ( |
) | |||||
| Proceeds on disposal of fixed assets | |||||||
| Net cash used in investing activities | ( |
) | ( |
) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Share proceeds net of issuance costs | |||||||
| Proceeds from convertible notes payable | |||||||
| Repayment of convertible debt | ( |
) | ( |
) | |||
| Proceeds from loans payable | |||||||
| Repayment of loans payable | ( |
) | ( |
) | |||
| Series G preferred shares redeemed as payment on incentive plan payable | ( |
) | |||||
| Dividend upon redemption of cancelled issuable Series F shares | ( |
) | |||||
| Net borrowings(repayments) on loan payable - related party | ( |
) | |||||
| Net cash provided by financing activities | |||||||
| Net change in cash | ( |
) | |||||
| Cash, beginning of period | |||||||
| Cash, end of period | $ | $ | |||||
| Supplemental disclosure of cash and non-cash transactions: | |||||||
| Cash paid for interest | $ | $ | |||||
| Cash paid for income taxes | $ | $ | |||||
| Noncash investing and financing activities: | |||||||
| Right of use asset for lease liability | $ | $ | |||||
| Transfer from device parts inventory to fixed assets | $ | $ | |||||
| Conversion of convertible notes and interest to shares of common stock | $ | $ | |||||
| Release of derivative liability on conversion of convertible notes payable | $ | $ | |||||
| Derivative debt discount on revaluation of loan amendment | $ | $ | |||||
| Exchange of notes payable for Series F preferred shares | $ | $ | |||||
| Discount applied to face value of loans | $ | $ | |||||
| Warrants issued as part of debt issuance | $ | $ | |||||
| Exchange of warrants for debt | $ | $ | |||||
| Refund on abandoned trademarks | $ | $ | |||||
| Penalty shares pursuant to a share purchase agreement | $ | $ | |||||
| Exercise of warrants | $ | $ | |||||
| Series F preferred shares issued for debt | $ | $ | |||||
| Cancellation of Series E preferred shares | $ | $ | |||||
| Issuance of Series G preferred shares as payment on incentive plan payable | $ | $ | |||||
| Series F preferred shares converted to common shares | $ | $ | |||||
| Series F preferred shares issued on exercise of warrants | $ | $ | |||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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 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 shares of AITX Series E Preferred Stock and 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 28, 2023, the Company
had negative cash flow from operating activities of $
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 $
F-8
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.
Concentrations
Loans payable
At February 28, 2023 there were $
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 $
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 28, 2023 and at February 28, 2022 there was a valuation
reserve of $
F-9
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 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 to years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.
| Computer equipment | ||
| Furniture and fixtures | ||
| Office equipment | ||
| Warehouse equipment | ||
| Demo Devices | ||
| Vehicles | ||
| Leasehold improvements |
The Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.
Research and Development
Research and development costs are expensed in the
period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related
to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly
defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the
costs are deferred and amortized over the expected useful life or written off if a product is abandoned. At February 28, 2023 and February
28, 2022, the Company had
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.
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:
F-10
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| ● | 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 28,
2023 , customers accounted for
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.
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-11
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).
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:
F-12
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| ● | 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:
| Fair Value Measurement Using | |||||||||||||
| Amount at Fair Value |
Level 1 | Level 2 | Level 3 | ||||||||||
| February 28, 2023 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
| February 28, 2022 | |||||||||||||
| Liabilities | |||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
| Derivative liability – conversion features pursuant to convertible notes payable | $ | $ | $ | $ | |||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
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-13
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board (FASB) issued amended guidance on the accounting and reporting of income taxes. The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations and deferred tax liabilities; clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination; and reflecting enacted changes in tax laws or rates in the annual effective tax rate. The Company adopted the new guidance effective February 1, 2021. There was no impact to the Company’s consolidated financial statements upon adoption.
In January 2020, the FASB issued new guidance intended to clarify certain interactions between accounting standards related to equity securities, equity method investments and certain derivatives. The guidance addresses accounting for the transition into and out of the equity method of accounting and measuring certain purchased options and forward contracts to acquire investments. The Company adopted the new guidance effective February 1, 2021. There was no impact to the Company’s consolidated financial statements upon adoption.
In August 2020, the FASB issued amended guidance on the accounting for convertible instruments and contracts in an entity’s own equity. The guidance removes the separation model for convertible debt instruments and preferred stock, amends requirements for conversion options to be classified in equity as well as amends diluted earnings per share (EPS) calculations for certain convertible debt instruments. The amended guidance is effective for interim and annual periods in 2022. The application of the amendments in the new guidance are to be applied either on a modified retrospective or a retrospective basis. We are currently assessing the effect that the adoption of this standard will have on the Company’s consolidated financial statements upon adoption.
Recently Issued Accounting Standards Not Yet Adopted
In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its consolidated financial statements.
In October 2021, the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.
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-14
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 84 2accountiong and instead has accounted for these leases under ASC 606.
The following table presents revenues from contracts with customers disaggregated by product/service:
| Year Ended February 28, 2023 |
Year Ended February 28, 2022 |
||||||
| Device rental activities | $ | $ | |||||
| Direct sales of goods and services | |||||||
| Revenues | $ | $ | |||||
4. LEASES
We lease certain warehouses, and office space. Leases with an initial term of 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 28, 2023 and February 28, 2022.
| Leases | Classification | February 28, 2023 | February 28, 2022 | ||||||
| Assets | |||||||||
| Operating | Operating Lease Assets | $ | $ | ||||||
| Liabilities | |||||||||
| Current | |||||||||
| Operating | Current Operating Lease Liability | $ | $ | ||||||
| Noncurrent | |||||||||
| Operating | Noncurrent Operating Lease Liabilities | ||||||||
| Total lease liabilities | $ | $ | |||||||
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 $
F-15
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 $ to acquire shares of a company’s capital stock at a discount.
6. REVENUE EARNING ROBOTS
Revenue earning robots consisted of the following:
| February 28, 2022 | February 28, 2021 | ||||||
| Revenue earning devices | $ | $ | |||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| $ | $ | ||||||
During the year ended February 28, 2023, the Company
made total additions to revenue earning devices of $
Depreciation expense for these devices was $
7. FIXED ASSETS
Fixed assets consisted of the following:
| February 28, 2023 | February 28, 2022 | ||||||
| Automobile | $ | $ | |||||
| Demo devices | |||||||
| Tooling | |||||||
| Machinery and equipment | |||||||
| Computer equipment | |||||||
| Office equipment | |||||||
| Furniture and fixtures | |||||||
| Warehouse equipment | |||||||
| Leasehold improvements | |||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||
| $ | $ | ||||||
During the year ended February 28, 2023, the Company
made additions to fixed assets of $
During the year ended February 28, 2022, the Company
made additions to fixed assets of $
Depreciation expense was $
F-16
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 $
On May 9, 2019 the Company entered into two similar arrangements with two investors:
| (1) | The investor would pay up to $ | |
| (2) | The investor would pay up to $ |
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.
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 $
On December 30, 2019 the Company entered into another
similar arrangement with a new investor whereby the investor would advance up to $
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 $
On July 1, 2020 the Company entered into a similar
agreement with the first investor whereby the investor would pay up to $
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 $
F-17
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
The Payments will first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and will accrue every quarter thereafter. As of February 28, 2023, the Company has accrued approximately $542,1777 in Payments, of which $325,600 is in arrears. As of February 28, 2022, the Company has accrued approximately $325,600 in Payments, of which $90,300 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) | The rate payment was reduced from | |
| 2) | The asset disposition % (see below) was reduced from |
In consideration for the above changes, the investor
received 40 Series F Convertible Preferred Stock and a warrant to purchase shares of its Series F Convertible Preferred Stock with
a five-year term and an exercise price of $. During the three months ended May 31, 2021 the warrant holder exercised warrants to acquire
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 28, 2023, and February 28, 2022, the
long-term balances other than Payments already owed is the cash received of $
For both the years ended February 28, 2023 and February
28, 2022, the Company has received $
9. CONVERTIBLE NOTES PAYABLE
Convertible notes payable consisted of the following:
| Balance | Balance | |||||||||||||
| Interest | Conversion | February 28, | February 28, | |||||||||||
| Issued | Maturity | Rate | Rate per Share | 2023 | 2022 | |||||||||
| 8% | $(1) | $ | $ | |||||||||||
| 12% | $(2) | |||||||||||||
| $ | $ | |||||||||||||
| (Less): current portion of convertible notes payable | ( |
) | ||||||||||||
| (Less): discount on noncurrent convertible notes payable | ||||||||||||||
| Noncurrent convertible notes payable, net of discount | $ | $ | ||||||||||||
| Current portion of convertible notes payable | $ | $ | ||||||||||||
| (Less): discount on current portion of convertible notes payable | ||||||||||||||
| Current portion of convertible notes payable, net of discount | $ | $ | ||||||||||||
F-18
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
__________
| * | |
| (1) | |
| (2) |
During the years ended February 28, 2023 and February
28, 2022, the Company incurred original issue discounts of $
All the notes above are unsecured. As of February
28, 2023, the Company had total accrued interest payable of $
Convertible notes issued
During the year ended February 28, 2023, the Company had the following convertible note activity:
| ● | |
| ● |
The Company determined that the embedded conversion features which result in a variable conversion rate, in the convertibles notes described below should be accounted for as derivative liabilities as a result of their variable conversion rates.
During the year ended February 28, 2022, the Company had the following convertible note activity:
| ● | |
| ● | |
| ● |
F-19
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. RELATED PARTY TRANSACTIONS
For the years ended February 28, 2023 and February
28, 2022, the Company made net repayments of $
During the year ended February 28, 2023 pursuant to
the amended Employment Agreement with its Chief Executive Officer the Company accrued $
During the year ended February 28, 2022, pursuant
to the amended Employment Agreement with its Chief Executive Officer, the Company issued shares of Series G Preferred Shares which
are redeemable at the Company’s option at $ per share and recorded $ of stock based compensation. The Company redeemed
these shares for $
During the years ended February 28, 2023 and February
28, 2022, the Company was charged $
11. OTHER DEBT – VEHICLE LOANS
In December 2016, RAD entered into a vehicle loan
for $
F-20
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. LOANS PAYABLE
Loans payable at February 28, 2023 consisted of the following:
| Annual | ||||||||||
| Date | Maturity | Description | Principal | Interest Rate | ||||||
| July 18, 2017 | Promissory note | (35) * | $ | |||||||
| June 11, 2019 | Promissory note | (2) (#) | — | |||||||
| June 30, 2019 | Promissory note | (1) (#) | — | |||||||
| June 30, 2019 | Promissory note | (3) (#) | — | |||||||
| June 30, 2019 | Promissory note | (4) (#) | — | |||||||
| June 26, 2020 | Promissory note | (5) (#) | — | |||||||
| June 24, 2020 | Promissory note | (6) (#) | — | |||||||
| January 30, 2021 | Promissory note | (7) (#) | — | |||||||
| February 27, 2021 | Promissory note | (8) (#) | — | |||||||
| April 16, 2021 | Promissory note | (9) (#) | — | |||||||
| May 12, 2021 | Promissory note | (11) (#) | — | |||||||
| May 22, 2021 | Promissory note | (12) (#) | — | |||||||
| June 2, 2021 | Promissory note | (13) (#) | — | |||||||
| June 9, 2021 | Promissory note | (14) (#) | — | |||||||
| June 12, 2021 | Promissory note | (15) (#) | — | |||||||
| June 16, 2021 | Promissory note | (16) (#) | — | |||||||
| September 15, 2022 | Promissory note | (17) (#) | — | |||||||
| March 6, 2023 | Promissory note | (18) (#) | — | |||||||
| November 12, 2023 | Promissory note | (19) (#) | — | |||||||
| October 23, 2022 | Promissory note | (20) (#) | — | |||||||
| November 23, 2023 | Promissory note | (21) (#) | — | |||||||
| December 10, 2023 | Promissory note | (22) (#) | — | |||||||
| December 10, 2023 | Promissory note | (23) | ||||||||
| December 10, 2023 | Promissory note | (24) | ||||||||
| December 10, 2023 | Promissory note | (25) | ||||||||
| December 14, 2023 | Promissory note | (26) | ||||||||
| December 30, 2023 | Promissory note | (27) | ||||||||
| December 31, 2024 | Promissory note | (28) | ||||||||
| December 31, 2024 | Promissory note | (29) | ||||||||
| January 14, 2024 | Promissory note | (30) | ||||||||
| February 22, 2024 | Promissory note | (31) | ||||||||
| March 1, 2024 | Promissory note | (10) | ||||||||
| June 8, 2024 | Promissory note | (32) | ||||||||
| July 26, 2026 | Promissory note | (33) | ||||||||
| September 14, 2024 | Promissory note | (34) | ||||||||
| July 28, 2023 | Promissory note | (36) | ||||||||
| August 30,2024 | Promissory note | (38) | ||||||||
| September 7, 2023 | Promissory note | (37) | ||||||||
| September 8, 2023 | Promissory note | (39) | ||||||||
| October 13, 2023 | Promissory note | (40) | ||||||||
| October 31, 2026 | Promissory note | (41) | ||||||||
| October 31, 2026 | Promissory note | (41) | ||||||||
| October 31, 2026 | Promissory note | (41) | ||||||||
| October 31, 2026 | Promissory note | (41) | ||||||||
| October 31,2026 | Promissory note | (41) | ||||||||
| October 31,2026 | Promissory note | (41) | ||||||||
| $ | ||||||||||
| Less: current portion of loans payable | ( |
) | ||||||||
| Less: discount on non-current loans payable | ( |
) | ||||||||
| Non-current loans payable, net of discount | $ | |||||||||
| Current portion of loans payable | $ | |||||||||
| Less: discount on current portion of loans payable | ( |
) | ||||||||
| Current portion of loans payable, net of discount | $ | |||||||||
F-21
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
__________
| * | |
| (#) | |
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) | |
| (8) | |
| (9) | |
| (10) | |
| (11) | |
| (12) | |
| (13) | |
| (14) |
F-22
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (15) | |
| (16) | |
| (17) | |
| (18) | |
| (19) | |
| (20) | |
| (21) | |
| (22) | |
| (23) | |
| (24) | |
| (25) | |
| (26) |
F-23
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (27) | |
| (28) | |
| (29) | |
| (30) | |
| (31) | |
| (32) | |
| (33) | |
| (34) | |
| (35) |
F-24
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (36) | |
| (37) | |
| (38) | |
| (39) | |
| (40) | |
| (41) |
October 28, 2022, $
November 9, 2022, $
November 10, 2022, $
November 15, 2022, $
January 11, 2023, $
February 6, 2023, $ |
F-25
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. DERIVATIVE LIABILITIES
As of February 28, 2023, and February 28, 2022, the
Company revalued the fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible
notes payable and determined that it had a total derivative liability of $
14. STOCKHOLDERS’ DEFICIT
Preferred Stock: The Company is authorized to issue up to shares of $ 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 E Preferred Stock
The board of directors has designated shares of Series E Preferred Stock. As of the date of this report, there are 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 shares of Series F Convertible Preferred Stock with a par value of $ per share. As of the date of this report, there are 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 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 $
Summary of Preferred Stock Activity
Series E Preferred Stock
During the year ended February 28, 2023 there was no Series E share activity.
During the year ended February 28, 2022 Series E shareholders had the following activity:
| — | A shareholder cancelled Class E shares. The company recorded an adjustment to paid in capital. |
F-26
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Series F Preferred Shares
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.
Summary or Preferred Stock Activity
During the year ended February 28, 2023 Series F shareholders had the following activity:
| — | Series F Preferred Share and a total of Series F Preferred Stock Warrants issued along with debt to a lender. |
During the year ended February 28, 2022 Series F shareholders had the following activity:
| — | Series F Preferred Shares and a warrant to purchase Series F Preferred Shares with a five-year term and an exercise price of $ were issued to an investor in exchange for amending their deferred variable payment obligation agreement. The company attributed a fair value based on recent transactions for the Series F Preferred stock and warrants of $ | |
| — | The warrant holder exercised the warrant in part to acquire Series F Preferred Shares. | |
| — | The shareholder above converted Series F Preferred Shares into 316,345,908 common shares. | |
| — | ||
| — | ||
| — |
Unissued Series F Preferred Stock
At both February 28, 2023 and February 28, 2022 there remains 46 issuable Series F preferred stock at a value of $99,086.
During the year ending February 28, 2022 the Company
redeemed (through cancellation)
Summary of Preferred Stock Warrant Activity
| Number of Series F Preferred Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at March 1, 2022 | $ |
|||||
| Issued | $ |
|||||
| Exercised | — | |||||
| Forfeited and cancelled | — | |||||
| Outstanding at February 28, 2023 | $ |
F-27
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Series G Preferred Stock
During the year ended February 28, 2023 there was no Series G share activity.
During the year ending February 28, 2022 Series G shareholders had the following activity:
| — | ||
| — | The Company has accrued $ |
Summary of Common Stock Activity
The Company increased authorized common shares from to on July 8, 2022 and again increased authorized common shares from to on March 19, 2023.
Summary of Common Stock Activity
During the year ended, February 28, 2023, common shareholders had the following activity:
| — | the Company issued common shares with gross proceeds of $ | |
| — | the Company issued 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 shares as a result of an SEC enforcement action against a lender and issued shares for $ |
During the year ending February 28, 2022, common shareholders had the following activity:
| — | A Series F Preferred shareholder converted Series F Preferred Shares for common shares. | |
| — | holders of certain convertible notes payable elected to convert a total of $ | |
| — | in June 2021, lenders exchanged debt having a face value of $ | |
| — | the Company entered into an investor relations contract whereby shares are issuable as of February 28, 2022. Stock based compensation of $ was recorded in the period ended February 28, 2022. | |
| — | the Company issued common shares with gross proceeds of $ | |
| — | warrant holders exercised warrants to acquire shares on a cashless basis for common shares with a corresponding adjustment to paid in capital. |
| Common shares | February 28, 2023 | February 28, 2022 | |||||
| Issued | |||||||
| Issuable | |||||||
| Issued, issuable and outstanding | |||||||
F-28
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summary of Warrant and Stock Option Activity
| Number of Warrants |
Weighted Average Exercise Price |
Weighted Average Remaining Years | ||||
| Outstanding at February 29, 2021 | $ |
|||||
| Issued | ||||||
| Exercised | ( |
|||||
| Forfeited and cancelled | ( |
— | ||||
| Outstanding at February 28, 2022 | $ |
|||||
| Adjusted(1) | ||||||
| Issued | ||||||
| Exercised | ( |
( |
||||
| Forfeited and cancelled | ( |
( |
||||
| Outstanding at February 28, 2023 | $ |
__________
| (1) |
For the years ended February 28, 2023 and February 28, 2022, the Company recorded a total of $ and $, respectively on stock-based payments for warrants with a corresponding adjustment to additional paid-in capital.
For the years ended February 28, 2023 and February 28, 2022 the Company recorded a total of $ and $ 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 $ and $, 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 28, 2023 warrant holders had the following activity:
| — | On August 30, 2022 a warrant holder exchanged warrants for a promissory note of $ | |
| — | On August 9, 2022 as part of a debt issuance the Company issued two warrants at an exercise price of $ and $ per share, respectively both with a |
| Strike price | $ - $ |
| Fair value of Company’s common stock | $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
| — | Cashless exercise of 108,378,210 warrants for 45,306,557 common shares |
During the year ended February 28, 2022 warrant holders had the following activity:
| — | warrant holders exercised warrants to acquire shares on a cashless basis for 395,022,447 common shares with a corresponding adjustment to paid in capital. | |
| — | in conjunction with debt disclosed in Note 11 (44), |
F-29
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Strike price | $ - $ |
| Fair value of Company’s common stock | $ - $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
| — | in conjunction with debt extensions on notes payable disclosed in Note 12 (10, 43, 44), the Company issued warrants to a lender to purchase a total shares at an exercise price of $ per share with a |
| Strike price | $ |
| Fair value of Company’s common stock | $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
| — | As share issuance costs to a broker the company issued warrants to acquire a total of shares with a fair value of $ |
| Strike price | $ - $ |
| Fair value of Company’s common stock | $ - $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
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 shares at an exercise price of $ $ per share if the trading share price of the Company reaches an average of $ 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 shares at an exercise price of $ $ per share if the trading share price of the Company reaches an average of $ 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. |
F-30
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 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. |
The fair value of the first two awards was obtained
through the use of the Monte Carlo method was $ 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 28, 2023 that amount totaled $
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 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 one hundred million (100,000,000) 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 28, 2023 the Company had the following common stock option activity:
| — | On September 1, 2022, using the Black-Scholes model with assumptions described below: |
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Strike price | $ |
| Fair value of Company’s common stock | $ |
| Dividend yield | |
| Expected volatility | |
| Risk free interest rate | |
| Expected term (years) |
The Company recorded $ in stock-based compensation which represents the current expense over the vesting period.
| — | Options to purchase shares were forfeited due to employee terminations |
During the year ended February 28, 2022 the Company had no common stock option activity:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Years | ||||
| Outstanding at March 1, 2022 | $ | — | ||||
| Issued | $ |
|||||
| Exercised | — | |||||
| Forfeited, extinguished and cancelled | ( |
) | $ |
|||
| Outstanding at November 30, 2022 | $ |
15. 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 December 18, 2020,
On March 10, 2021,
On September 30, 2021,
On January 28, 2022,
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 $
F-32
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Maturity of Lease Liabilities | Operating Leases |
||
| February 28, 2024 | $ | ||
| February 28, 2025 | |||
| February 28, 2026 | |||
| February 28, 2027 | |||
| February 28, 2028 | |||
| February 28, 2029 and after | |||
| Total lease payments | |||
| Less: Interest | ( |
) | |
| Present value of lease liabilities | $ | ||
The net income (loss) per common share amounts were determined as follows:
| For the Year Ended | |||||||
| February 28, | February 28, | ||||||
| 2023 | 2022 | ||||||
| Numerator: | |||||||
| Net income (loss) available to common shareholders | $ | ( |
) | $ | ( |
) | |
| Effect of common stock equivalents | |||||||
| Add: interest expense on convertible debt | |||||||
| Add (less) loss (gain) on change of derivative liabilities | ( |
) | ( |
) | |||
| Net income (loss) adjusted for common stock equivalents | ( |
) | ( |
) | |||
| Denominator: | |||||||
| Weighted average shares - basic | |||||||
| Net income (loss) per share – basic | $ | ( |
) | $ | ( |
) | |
| Denominator: | |||||||
| Weighted average shares – diluted | |||||||
| Net income (loss) per share – diluted | $ | ( |
) | $ | ( |
) | |
| For the Year Ended | |||||||
| February 28, | February 28, | ||||||
| 2023 | 2022 | ||||||
| Convertible notes and accrued interest | |||||||
| Convertible Class F Preferred Shares* | |||||||
| Stock options and warrants | |||||||
| Total | |||||||
__________
| * |
| For the Year Ended | |||||
| February 28 | |||||
| 2023 | 2022 | ||||
| Convertible Series F Preferred Shares | |||||
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. 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 28, 2023 and February 28, 2022:
| February 28, 2023 | 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 28, 2023 and February 28, 2022:
| February 28, 2023 | ||||
| Federal statutory rate | $ | ( |
) | |
| State income tax benefit, net of federal benefit | ( |
) | ||
| Non deductible interest | ||||
| Non deductible stock based compensation | ||||
| Change in valuation allowance | ||||
| Total | $ | |||
| February 28, 2022 | ||||
| Federal statutory rate | $ | ( |
) | |
| State income tax benefit, net of federal benefit | ( |
) | ||
| Non deductible interest | ||||
| Non deductible settlement losses | ||||
| Non deductible stock based compensation | ||||
| Non deductible changes in fair value of instruments | ( |
) | ||
| Other non deductible expenses | ||||
| Change in valuation allowance | ||||
| Total | $ | |||
For the year ended February 28, 2023 and February
28, 2022, the expected tax benefit, temporary timing differences and long-term timing differences are calculated at the
F-34
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 28, 2023 and February 28, 2022:
| February 28, 2023 | February 28, 2022 | ||||||
| Deferred tax assets: | |||||||
| Net operating loss carryforwards | $ | $ | |||||
| Debt discount | |||||||
| Total deferred tax assets | |||||||
| Deferred tax liabilities: | |||||||
| Depreciation | |||||||
| Deferred revenue | |||||||
| Total deferred tax liabilities | |||||||
| Net deferred tax assets: | |||||||
| Less valuation allowance | ( |
) | ( |
) | |||
| 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 $
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 28, 2023 and February 28, 2022. 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 28, 2023 and February 28, 2022 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, 2022, and February 28, 2021, and February 29, 2020 are open for examination under Federal statute of limitations.
F-35
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. SUBSEQUENT EVENTS
Subsequent to February 28, 2023 through to June 5, 2023,
— the Company issued common
shares pursuant to a share purchase agreement for gross proceeds of $
— on March 19 ,2023 the shareholders approved an increase to its authorized common stock by shares
—
F-36