UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NUMBER:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification Number) | |
(Address of principal executive offices) | (Zip code) |
(
(Registrant’s telephone number, including area code)
not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | [_] | Accelerated filer | [_] | |
[X] | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
shares of common stock were issued and outstanding as of January 14, 2022.
PAGE | ||
PART I | FINANCIAL INFORMATION | |
ITEM 1. | Financial Statements | 3 |
Condensed Consolidated Balance Sheets as of November 30, 2021 and February 28, 2021 (Unaudited) | 3 | |
Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 4 | |
Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 5-6 | |
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2021 and 2020 (Unaudited) | 7 | |
Notes to the Consolidated Financial Statements (Unaudited) | 8 | |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 |
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 |
ITEM 4. | Controls and Procedures | 39 |
PART II | OTHER INFORMATION | |
ITEM 1. | Legal Proceedings | 39 |
ITEM 1A. | Risk Factors | 40 |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 |
ITEM 3. | Defaults Upon Senior Securities | 40 |
ITEM 4. | Mine Safety Disclosures | 40 |
ITEM 5. | Other Information | 40 |
ITEM 6. | Exhibits | 40 |
SIGNATURES | 41 |
- 2 -
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 2021 (Unaudited) |
February
28, 2021* |
||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | $ | |||||
Accounts receivable, net of allowance | |||||||
Share proceeds receivable | |||||||
Prepaid expenses | |||||||
Device parts inventory | |||||||
Total current assets | |||||||
Operating lease asset | |||||||
Revenue earning devices, net of accumulated depreciation
of $ |
|||||||
Fixed assets, net of accumulated depreciation of $ |
|||||||
Trademarks | |||||||
Security deposit | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | $ | |||||
Advances payable | |||||||
Balance owed WeSecure | |||||||
Customer deposits | |||||||
Current operating lease liability | |||||||
Current portion of deferred variable payment obligation | |||||||
Current portion of convertible notes payable, net of
discount of $ |
|||||||
Incentive compensation plan payable | |||||||
Loan payable - related party | |||||||
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 November 30, 2021 and February 28, 2021, 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 | |||||||
Series G Preferred Stock, $ par value; shares authorized, shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | |||||||
Common Stock, $ par value; shares authorized and shares issued 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 unaudited condensed consolidated financial statements.
- 3 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended November 30, 2021 |
Three Months Ended November 31, 2020 |
Nine Months Ended November 30, 2021 |
Nine Months Ended November 30, 2020 |
||||||||||
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 income (loss) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||
Net income (loss) per share - basic | $ | $ | $ | ( |
) | $ | |||||||
Net income (loss) per share - diluted | $ | $ | $ | ( |
) | $ | |||||||
Weighted average common share outstanding - basic and diluted | |||||||||||||
Weighted average common share outstanding - diluted |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 4 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S DEFICIT
(Unaudited)
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, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
Rounding shares | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||
Balance at May 31, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Contributed capital | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
Cancellation of Series F Preferred Shares | — | ( |
) | ( |
) | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at August 31, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Contributed capital | — | — | — | — | ||||||||||||||||||||||||||
Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
Common stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||
Warrants issued with promissory notes | — | — | — | — | ||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||
Balance at November 30, 2020 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) |
- 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, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
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 | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
Stock based compensation | — | — | — | |||||||||||||||||||||||||||
Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at May 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Adjustment to derivative liability | — | — | — | — | ||||||||||||||||||||||||||
Common stock issued for debt conversion | — | — | — | |||||||||||||||||||||||||||
Exercise of warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
Cancellation of Series E Shares | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||
Exchange of debt for common shares | — | — | ||||||||||||||||||||||||||||
Stock based compensation on issuable shares | — | — | — | |||||||||||||||||||||||||||
Exchange of Series F Preferred Shares for debt | — | ( |
) | ( |
) | — | — | ( |
) | ( |
) | |||||||||||||||||||
Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at August 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Issuance of shares, net of $ |
— | — | — | |||||||||||||||||||||||||||
Cashless exercise of 100,000,000 warrants | — | — | — | ( |
) | |||||||||||||||||||||||||
Relative fair value of warrants issued with debt | — | — | — | — | ||||||||||||||||||||||||||
Redemption of 19 Issuable Series F shares | — | — | ( |
) | — | — | ( |
) | ( |
) | ||||||||||||||||||||
Issuance of Series G preferred as equity awards per employment agreement | — | — | — | |||||||||||||||||||||||||||
Redemption of Series G shares as compensation payment | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
Net income | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at November 30, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 6 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended November 30, 2021 |
Nine Months Ended November 30, 2020 |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | ( |
) | $ | ( |
) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | |||||||
(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 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 | ( |
) | ( |
) | |||
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 | |||||||
Settlement of convertible debt | ( |
) | |||||
Proceeds from deferred variable payment obligation | |||||||
Proceeds from loans payable | |||||||
Repayment of loans payable | ( |
) | ( |
) | |||
Series G preferred shares redeemed as payment on incentive plan payable | ( |
) | |||||
Dividend and redemption of cancelled issuable Series F shares | ( |
) | |||||
Cash acquired on consolidation of RAD G | ( |
) | |||||
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 | $ | $ | |||||
Net assets on consolidation of RAD G | $ | $ | |||||
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 | $ | $ | |||||
Settlement of convertible notes payable to accounts payable and accrued expenses | $ | $ | |||||
Exchange of notes payable for Series F preferred shares | $ | $ | |||||
Discount applied to face value of loans | $ | $ | |||||
Warrants issued as part of debt issuance | $ | $ | |||||
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 unaudited condensed consolidated financial statements.
- 7 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL INFORMATION
Artificial Intelligence Technology Solutions Inc. (“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 an 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. 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.
AITX now fully owns three subsidiaries: 1 - Robotic Assistance Devices Inc (‘RAD’), currently the primary operating entity; 2 – Robotic Assistance Devices Group Inc (‘RAD-G’), a company developing technology to be used as an OEM by other companies as well as RAD; 3 – Robotic Devices Mobile Inc (‘RAD-M’), a company that develops mobile robotic solutions such as ROAMEO.
2. GOING CONCERN
The accompanying unaudited 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 nine months ended November 30, 2021, the Company
had negative cash flow from operating activities of $(). As of November 30, 2021, the Company has an accumulated deficit of
$(), and negative working capital of $
The Company does not have the resources at this time to repay 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.
Management has plans to address the Company’s financial situation as follows:
The company began raising money through it’s S-3 this quarter and made improvements in paying off debt, investing in inventory and at November 30, 2021 had $4.1 million of cash on hard. Management continues to raise money through the S-3 and expects to raise approximately another $5 million before the end of this fiscal year. 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. The Company through to December 31, 2021 has raised approximately $8.5 million net of issuance costs through the sale of its common shares and $9.4 in proceeds from debt issuances.
- 8 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company is on track to achieve it’s 2022 fiscal year revenue projections of approximately 4 to 5 times greater than 2021 fiscal year’s revenues. The company again projects 2023 fiscal year revenues to achieve similar growth. This projection is based on the following factors: 1. A continuously improving sales pipeline that yields progressive quarterly sales increases; 2. Implementation of ‘quick ship’ options that allow some solutions to ship off the shelf in 24 hours; 3. Continued improvements in production, inventory handling, forecasting that allows more devices to be ready to ship in a quicker manner; 3. Continued significant improvements in device technology that streamlines deployments and ensures simple scalability; 4. Commercial release of several new solutions, specifically including: ‘RAD Light My Way™’, RAD’s first QUFV (‘robodog’), launch of RAD G’s OEM program, launch of the newly announced delivery vehicle. However, there can be no assurance that the revenues will increase to the extent projected or that the anticipated improvements will actually occur.
The company has, as forecast previously, achieved an employee count of 71 employees at the close of this reporting quarter. This expansion plan will require the Company to continue to increase SG&A/R&D expenses, including the hiring of additional staffing, which the Company expects to finish this next fiscal year with between 80 – 90 employees.
3. ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the condensing instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto in the Company’s latest Annual Report filed with the SEC on Form 10-K as filed on June 1, 2021. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group, Inc., and Robotic Assistance Devices Mobile, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the nine months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the entire year.
Use of Estimates
In order to prepare financial statements in conformity with accounting principles 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 preferred stock and derivative liabilities.
Reclassifications
Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
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 $
- 9 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. As of both November 30, 2021 and February 28, 2021 there was no valuation reserve.
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 | ||
Office 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 November 30, 2021 and February 28, 2021, the Company had no deferred development costs.
Contingencies
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
- 10 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Sales of Future Revenues
The Company has entered into transactions, as more fully described in footnote 8, 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 is 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. Refer to Note 4 – Revenue from Contracts with Customers for additional information.
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.
- 11 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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 preferred 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).
- 12 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. | |
● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured on a Recurring Basis
The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:
Amount at | Fair Value Measurement Using | ||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||
November 30, 2021 | |||||||||||||
Liabilities | |||||||||||||
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
Derivative liability – conversion features pursuant to convertible notes payable | $ | $ | $ | $ | |||||||||
February 28, 2021 | |||||||||||||
Liabilities | |||||||||||||
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | |||||||||
Derivative liability – conversion features pursuant to convertible notes payable | $ | $ | $ | $ |
See Note 12 for specific inputs used in the multinomial lattice model used in determining fair value.
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.
- 13 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Recently Issued Accounting Pronouncements
Accounting for Income Taxes
In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard will be effective for us beginning July 1, 2021, with early adoption permitted. The Company does not expect any material impact of this standard in our consolidated financial statements, including accounting policies, processes, and systems.
Recently Adopted 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 Company is currently assessing the impact this accounting standard will have on its financial statements and related disclosures. The Company adopted this on March 1, 2020.
4. 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 addresses lease accounting and was adopted on March 1, 2019).
As disclosed in the revenue recognition section of Note 3 – Accounting Polices, the Company adopted Topic 606 in accordance with the effective date on March 1, 2018. Note 3 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.
After adopting Topic 842, also referred to above in Note 3, the Company is accounting 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. The Company recognizes revenue from its device rental activities when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction price is fixed or determinable and collection is reasonably assured. Performance obligations associated with device rental transactions are satisfied over the rental period. Rental periods are short-term in nature. Therefore, the Company has elected to apply the practical expedient which eliminates the requirement to disclose information about remaining performance obligations. Payments are due from customers at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected.
The following table presents revenues from contracts with customers disaggregated by product/service:
Three Months Ended November 30, 2021 |
Nine Months Ended November 30, 2021 |
||||||
Device rental activities | $ | $ | |||||
Direct sales of goods and services | |||||||
$ | $ |
Three Months Ended November 30, 2020 |
Nine Months Ended November 30, 2020 |
||||||
Device rental activities | $ | $ | |||||
Direct sales of goods and services | |||||||
$ | $ |
- 14 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. REVENUE EARNING DEVICES
Revenue earning devices consisted of the following:
November 30, 2021 | February 28, 2021 | ||||||
Revenue earning devices | $ | $ | |||||
Less: Accumulated depreciation | ( |
) | ( |
) | |||
$ | $ |
During the nine months ended November 30, 2021, the
Company made total additions through inventory transfers to revenue earning devices of $
During the nine months ended November 30, 2021 the
Company sold a revenue earning device having a net book value of $
Depreciation expense was $
6. FIXED ASSETS
Fixed assets consisted of the following:
November 30, 2021 | February 28, 2021 | ||||||
Vehicles | $ | $ | |||||
Demo devices | |||||||
Computer equipment | |||||||
Office equipment | |||||||
Leasehold improvements | |||||||
Less: Accumulated depreciation | ( |
) | ( |
) | |||
$ | $ |
During the three months and nine months ended November
30, 2021 the Company made additions of $
During the nine months ended November 30, 2021 the
Company sold a vehicle having a net book value of $ for fair value proceeds of $
During the nine months ended November 30, 2020, the
Company disposed of office equipment having an original cost of $
Depreciation expense was $
7. LEASES
We lease certain warehouses and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.
Most leases include one or more options to renew, with renewal terms that can extend the lease term by 10 years or more. The exercise of lease renewal options is at our sole discretion. 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.
- 15 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Below is a summary of our lease assets and liabilities at November 30, 2021 and February 28, 2021.
Leases | Classification | November 30, 2021 | February 28, 2021 | ||||||
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% based on the information available at commencement date in determining the present value of lease payments.
The weighted average remaining lease term is years.
CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
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 $
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.
- 16 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 $
In summary of all agreements mentioned above if in
the event that at least
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
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 November 30, 2021, the Company has not yet completed
its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these
agreements. The Company expects to have completed its analysis of the expected cash flows prior to the filing of the year end February
28, 2023 filing. As of November 30, 2021, and February 28, 2021, the balances under these agreements were $
- 17 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For the three months ended November 30, 2021, the
Company has received $0 related to the deferred payment obligation as the balance remains $
The Payments first become payable on June 30, 2019
(unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and accrue every quarter thereafter. As
of November 30, 2021, the Company has accrued $
9. CONVERTIBLE NOTES PAYABLE
Convertible notes payable consisted of the following:
Balance | Balance | |||||||||||||
Interest | Conversion | November 30, | February 28, | |||||||||||
Issued | Maturity | Rate | Rate per Share | 2021 | 2021 | |||||||||
10% | $ |
(2) | ||||||||||||
8% | 35% discount | (1) | ||||||||||||
12% | $ |
|||||||||||||
10% | $ |
(3) | ||||||||||||
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 | $ | $ |
__________
* | |
(1) | |
(2) | |
(3) |
During both the three months ended November 30, 2021 and 2020, the Company incurred original issue discounts of $0, and debt discounts from derivative liabilities of $438,835 and $0, respectively related to new or re-valued convertible notes payable. During the three months ended November 30, 2021 and 2020, the Company recognized interest expense related to the amortization of debt discount of $694,855 and $23,957, respectively. The Company recorded penalty interest of $0 and $494,428 during the three months ended November 30, 2021 and November 30, 2020, respectively.
- 18 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During both the nine months ended November 30, 2021 and 2020, the Company incurred original issue discounts of $0 and debt discounts from derivative liabilities of $438,835 and $0, respectively related to new or re-valued convertible notes payable. During the nine months ended November 30, 2021 and 2020, the Company recognized interest expense related to the amortization of debt discount of $775,986 and $23,957, respectively. The Company recorded penalty interest of $0 and $939,705 during the nine months ended November 30, 2021 and November 30, 2020, respectively.
All the notes above are unsecured. As of November 30, 2021 and February 28, 2021, the Company had total accrued interest payable of $27,686 and $49,764, respectively, all of which is classified as current.
During the nine months ended November 30, 2021, the Company also had the following convertible note activity:
● | the Company amended the January 27, 2021 agreement with the lender whereby the conversion rate was changed from $0.10 to $0.03 as a result of a dilutive issuance. This resulted a derivative discount of $438,835 and a loss on extinguishment of $360,125. |
● |
holders of certain convertible notes payable elected to convert a total of $825,000 of principal and $71,955 accrued interest, and $1,750 of fees into 31,042,436 shares of common stock. No gain or loss was recognized on conversions as these conversions occurred within the terms of the agreement that provided for conversion.
|
● | the conversion rate of the January 19, 2021 note included above was reduced to $0.027 due to the dilutive issuance provision in the January 19, 2021 agreement. |
10. RELATED PARTY TRANSACTIONS
For the nine months ended November 30, 2021, the Company
repaid net advances of $
Pursuant to the amended Employment Agreement with
its Chief Executive Officer in Note 14, the Company accrued $
During the three and nine months ended November
30, 2021 the Company was charged $
11. OTHER DEBT – VEHICLE LOAN
In December 2016, RAD entered into a vehicle loan
for $
- 19 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12. LOANS PAYABLE
Loans payable at November 30, 2021 consisted of the following:
Annual | ||||||||||
Date | Maturity | Description | Principal | Interest Rate | ||||||
June 11, 2019 | Promissory note | (3) | $ | 25% | * | |||||
September 1, 2018 | Promissory note | (4) | — | 25% | ||||||
August 16, 2019 | Promissory note | (1) | — | 25% | ||||||
October 1, 2018 | Promissory note | (4) | — | 25% | ||||||
October 11, 2019 | Promissory note | 20% | * | |||||||
June 30, 2019 | Promissory note | (2) | 15% | * | ||||||
January 24, 2021 | Loan | (8) | — | 11% | * | |||||
June 30, 2019 | Promissory note | (5) | 15% | * | ||||||
June 30, 2019 | Promissory note | (6) | 15% | * | ||||||
June 26, 2020 | Promissory note | (9) | 15% | * | ||||||
June 24, 2020 | Promissory note | (13) | 15% | * | ||||||
January 30, 2021 | Promissory note | (15) | 15% | * | ||||||
February 27, 2021 | Promissory note | (16) | 15% | * | ||||||
April 16, 2021 | Promissory note | (17) | 15% | * | ||||||
May 12, 2021 | Promissory note | (18) | 15% | * | ||||||
May 22, 2021 | Promissory note | (19) | 15% | * | ||||||
June 2, 2021 | Promissory note | (23) | 15% | * | ||||||
June 9, 2021 | Promissory note | (24) | 15% | * | ||||||
June 12, 2021 | Promissory note | (25) | 15% | * | ||||||
June 16, 2021 | Promissory note | (26) | 15% | * | ||||||
April 3, 2021 | Promissory note | (20) | 20% | * | ||||||
August 13, 2021 | Promissory note | (22) | — | 20% | ||||||
September 8, 2021 | Promissory note | (27) | — | 20% | ||||||
September 15, 2022 | Promissory note | (28) | 10% | |||||||
March 6, 2023 | Promissory note | (29) | 12% | |||||||
November 12, 2023 | Promissory note | (30) | 12% | |||||||
October 23, 2022 | Promissory note | (31) | 15.5% | |||||||
November 23, 2023 | Promissory note | (32) | 15% | |||||||
December 10, 2023 | Promissory note | (33) | 12% | |||||||
December 10, 2023 | Promissory note | (34) | 12% | |||||||
December 10, 2023 | Promissory note | (35) | 12% | |||||||
December 10, 2023 | Promissory note | (36) | 12% | |||||||
December 14, 2023 | Promissory note | (37) | 12% | |||||||
December 14, 2023 | Promissory note | (38) | — | 12% | ||||||
December 30, 2023 | Promissory note | (39) | 12% | |||||||
December 31, 2024 | Promissory note | (40) | 12% | |||||||
December 31, 2024 | Promissory note | (41) | 12% | |||||||
January 14, 2024 | Promissory note | (42) | 12% | |||||||
February 22, 2022 | Promissory note | (43) | 12% | |||||||
March 1, 2022 | Promissory note | (10) | 12% | |||||||
March 23, 2022 | Promissory note | (11) | — | 0% | ||||||
March 23, 2022 | Promissory note | (12) | — | 0% | ||||||
June 8, 2022 | Promissory note | (44) | 12% | |||||||
July 26, 2026 | Promissory note | (45) | 7% | |||||||
September 14, 2022 | Promissory note | (46) | 12% | |||||||
$ | ||||||||||
Less current portion of loans payable | ) | |||||||||
Less discount on loans payable | ( |
) | ||||||||
Loans payable | $ | |||||||||
Current portion of loans payable | $ | |||||||||
Less discount on loans payable | ( |
) | ||||||||
Current portion of loans payable, net of discount | $ |
- 20 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
__________
* | Note is in default. No notice has been given by the note holder to the Company at the time of issuance of these financial statements. |
(1) | |
(2) | |
(3) | |
(4) | |
(5) | |
(6) | |
(8) | |
(9) | |
(10) | |
(11) | |
(12) | |
(13) |
- 21 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(15) | |
(16) | |
(17) | |
(18) | |
(19) | |
(20) | |
(21) | |
(22) | |
(23) | |
(24) | |
(25) | |
(26) | |
(27) | |
(28) | |
(29) | |
(30) | |
(31) |
- 22 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(32) | |
(33) | |
(34) | |
(35) | |
(36) | |
(37) | |
(38) | |
(39) | |
(40) | |
(41) |
- 23 -
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(42) | |
(43) | |
(44) | |
(45) |