~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

Nine Months Ended
November 30, 2022 Nine Months Ended
November 30, 2021
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $ (12,930,211 ) $ (47,831,733 )
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 332,643 153,261
Revenue earning device sold and expensed in cost of sales — 3,410
Bad debts expense 224,215 107,022
Inventory provision 90,000 —
Reduction of right of use asset 84,298 75,609
Accretion of lease liability 107,187 86,350
(Gain) loss on disposal of fixed assets — (29,125 )
Stock based compensation 481,000 2,158,050
Change in fair value of derivative liabilities (3,595 ) (372,502 )
Interest expense related to penalties from debt defaults — —
Amortization of debt discounts 1,094,388 2,700,233
(Gain) loss on settlement of debt (3,992 ) 33,068,313
Increase in related party accrued payroll and interest 9,720 220,140
Changes in operating assets and liabilities:
Accounts receivable (258,790 ) (289,485 )
Prepaid expenses (224,476 ) (392,811 )
Deposits on right of use asset — (18,462 )
Device parts inventory (805,257 ) (1,864,340 )
Accounts payable and accrued expenses 197,317 177,240
Accrued expense -related party — (178,478 )
Customer deposits (7,617 ) (500 )
Operating lease liabilities (191,485 ) (161,959 )
Current portion of deferred variable payment obligation for payments 171,550 173,640
Balance owed WeSecure — (122,000 )
Accrued interest payable 1,749,833 1,903,365
Net cash used in operating activities (9,883,272 ) (10,434,762 )

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets (217,601 ) (34,534 )
Acquisition of trademarks — (26,327 )
Proceeds on disposal of fixed assets — 30,000
Cash paid for security deposit — (15,880 )
Net cash used in investing activities (217,601 ) (46,741 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Share proceeds net of issuance costs 4,657,979 7,463,654
Proceeds from loans payable 2,600,000 9,426,146
Repayment of loans payable (1,711,009 ) (471,617 )
Proceeds from convertible debt and warrants issued 619,250 —
Repayment of convertible debt — (65,000 )
Series G preferred shares redeemed as payment on incentive plan payable — (1,500,000 )
Dividend and redemption of cancelled issuable Series F preferred shares — (500,000 )
Net borrowings (repayments) on loan payable - related party — (812,234 )
Net cash provided by financing activities 6,166,220 13,540,949

Net change in cash (3,934,653 ) 3,059,446

Cash, beginning of period 4,648,146 1,044,418

Cash, end of period $ 713,493 $ 4,103,864

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest $ 405,117 $ 165,163
Cash paid for income taxes $ — $ —

Noncash investing and financing activities:
Right of use asset for operating lease liability $ — $ 1,341,506
Transfer from device parts inventory to revenue earning devices $ 672,534 $ 592,346
Conversion of convertible notes and interest to shares of common stock $ — $ 898,705
Release of derivative liability on conversion of convertible notes payable $ — $ 422,272
Derivative debt discount on re-valuation on loan amendment $ — $ 438,835
Exchange of notes payable for Series F preferred shares $ — $ 6,732,835
Exchange of warrants for debt $ 3,000,000 $ —
Discount applied to face value of loans $ 434,500 $ 6,162,945
Warrants issued as part of debt $ — $ 8,068,822
Exercise of warrants $ 97 $ 3,951
Series F preferred shares and warrants issued for debt $ 1,240,628 $ 4,000,160
Issuance of Series G preferred shares as payment of incentive plan payable $ — $ 1,500,000
Cancellation of Series E preferred shares and common shares $ 171 $ 1,000
Series F preferred shares converted to common shares $ — $ 3,086
Series F preferred shares issued on exercise of warrants $ — $ 38

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~- 7~~ -

Table of Contents

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 ~~a Limited Liability Company.~~an LLC. On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc., through the issuance of10,000common shares to its sole shareholder.

On August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock. AITX’s prior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of ~~RAD, and~~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.

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~~three months ended ~~November 30, 2022,~~May 31, 2023, the Company had negative cash flow from operating activities of $~~9,883,272~~2,991,003. As of ~~November 30, 2022,~~May 31, 2023, the Company has an accumulated deficit of $~~107,074,465~~116,808,904, and negative working capital of $~~1,046,707~~21,819,216. Management does not anticipate having positive cash flow from operations in the near future. These factors raise a 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 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:

In the near term, management plans to potentially raise an additional $1 million to $3 million before the end of the 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 began raising money through its S-3 Registration Statement this year and made improvements in paying off debt, investing in inventory and at November 30, 2022 had $713,493 of cash on hand.~~ 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. ~~For~~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 2023 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.

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 this fiscal period through to ~~November~~June 30, ~~2022, the Company~~2023 has raised an additional ~~$4.7~~$3.5 million net of issuance costs through the sale of its common ~~shares and raised approximately $3.2 million in current debt.~~shares.

- 87 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 ~~May 27, 2022.~~June 14, 2023. The unaudited condensed consolidated financial statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile, Inc., On the Move Experience, LLC and On the OMV Transports, LLC. 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 ~~six~~three months ended ~~November 30, 2022~~May 31, 2023 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.

Concentrations

Loans payable

At ~~November 30, 2022~~May 31, 2023 there were ~~$30,506,346~~$32,427,346 of loans payable, ~~$26,090,506~~$28,090,506 or ~~85%~~87% of these loans to companies controlled by one individual. At February 28, ~~2022~~2023 there were ~~$26,233,598~~$31,254,345 of loans payable ~~$21,709,459~~$26,540,506 or ~~83%~~85% of these loans to companies controlled by the same individual.

Cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.

Accounts Receivable

Accounts receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. 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 $~~109,890~~16,000 and $~~33,890~~39,000 provided as of ~~November 30, 2022~~May 31, 2023 and February 28, 2023, respectively. For the three months ended May 31, 2023 , two customers account for 51% of total accounts receivable . For the three months ended May 31, 2022 ~~respectively.~~, four customers account for 59% of total accounts receivable.

Device Parts Inventory

Device parts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a valuation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company uses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending on use, the Company will transfer the parts to the corresponding asset or expense if used in research and development. A charge to income is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted. As of ~~November 30, 2022~~both May 31, 2023 and February 28, ~~2022~~2023 there was a valuation reserve of $~~155,000~~195,000 and $~~65,000~~195,000, respectively.

- 98 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 ~~two~~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.

Fixed assets consisted of the following:

Computer equipment and software		2 or 3 years
Office equipment		4 years
Manufacturing equipment		7 years
Warehouse equipment		5 years
Tooling		2 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 ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022,~~2023, the Company had no deferred development costs.

Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

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:

- 109 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	●	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. The Company adopted Topic 606 on March 1, 2018, using the modified retrospective method. Under the modified retrospective method, prior period financial positions and results will not be adjusted. There was no cumulative effect adjustment recognized as a result of this adoption. Refer to Note 4 – Revenue from Contracts with Customers for additional information. For the ~~nine~~three months ended ~~November 30, 2022~~May 31, 2023 , ~~two~~three customers accounted for ~~41%~~57% of total ~~revenue (2021- 60%).~~revenue. For the three months ended May 31, 2022, two customers accounted for 29% of total revenue.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending February 28, 2023, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements

Leases

Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.

- 1110 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 ~~Chief Executive Officer/~~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/~~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:

- 1211 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	●	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 Measurement Using
	Fair Value		Level 1		Level 2		Level 3		Amount at Fair Value		Level 1		Level 2		Level 3
November 30, 2022
May 31, 2023
Liabilities
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares	$	842,000	$	—	$	—	$	842,000	$	1,042,000	$	—	$	—	$	1,042,000
Derivative liability – conversion features pursuant to convertible notes payable	$	—	$	—	$	—	$	—

February 28, 2022
February 28, 2023
Liabilities
Incentive compensation plan payable- revaluation of equity awards payable in Series G shares	$	479,500	$	—	$	—	$	479,500	$	979,000	$	—	$	—	$	979,000
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.

~~- 13 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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.

- 12 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

In November 2021, the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to the company’s financial statements. The guidance is effective for annual periods beginning in 2022 and is to be applied on either a prospective or retrospective basis. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

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).

~~- 14 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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.

- 13 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Three Months
Ended
November 30, 2022 Three Months
Ended
November 30, 2021 Nine Months
Ended
November 30, 2022 Nine Months
Ended
November 30, 2021
Device rental activities $ 154,628 $ 165,353 $ 622,647 $ 383,434
Direct sales of goods and services 247,771 208,544 432,393 692,369
$ 402,399 $ 373,897 $ 1,055,040 1,075,803

	Three Months Ended May 31, 2023		Three Months Ended May 31, 2022
Device rental activities	$	238,149	$	239,805
Direct sales of goods and services		147,059		145,352
Revenues	$	385,208	$	385,157

5. LEASES

We lease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.

There is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Below is a summary of our lease assets and liabilities at ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022.~~2023.

Leases	Classification	November 30, 2022		February 28, 2022		Classification	May 31, 2023		February 28, 2023
Assets
Operating	Operating Lease Assets	$	1,241,152	$	1,331,605	Operating Lease Assets	$	1,179,673	$	1,208,440
Liabilities
Current
Operating	Current Operating Lease Liability	$	111,985	$	254,027	Current Operating Lease Liability	$	244,169	$	248,670
Noncurrent
Operating	Noncurrent Operating Lease Liabilities		1,115,323		1,057,579	Noncurrent Operating Lease Liabilities		926,274		950,541
Total lease liabilities		$	1,227,308	$	1,311,606		$	1,170,443	$	1,199,211

Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above was based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.

~~Rent expense and operating~~Operating lease cost and rent was $~~61,005~~62,542 and $~~194,653~~69,967 for the three ~~and nine~~ months ended ~~November 30,~~May 31, 2023 and May 31, 2022, ~~respectively, and~~respectively.

6. REVENUE EARNING DEVICES

Revenue earning devices consisted of the following:

	May 31, 2023			February 28, 2023
Revenue earning devices	$	2,459,470		$	2,015,058
Less: Accumulated depreciation		(902,680	)		(779,839	)
Total	$	1,556,790		$	1,235,219

During the three months ended May 31, 2023 the Company made total additions to revenue earning devices of $~~103,115~~444,412 which were transfers from inventory. During the three months ended May 31, 2022 the Company made total additions to revenue earning devices of $174,101 which were transfers from inventory.

Depreciation expense was $122,841 and $~~207,201~~71,414 for the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2023, and 2022 respectively.

- 1514 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6. ~~REVENUE EARNING DEVICES~~

~~Revenue earning devices consisted of the following:~~

November 30, 2022 February 28, 2022
Revenue earning devices $ 1,768,818 $ 1,143,724
Less: Accumulated depreciation (676,615 ) (434,661 )
$ 1,092,203 $ 709,063

~~During the three and nine months ended November 30, 2022 the Company made total additions to revenue earning devices of $199,047~~ ~~and $625,094, respectively, which were transfers from inventory. During the three and nine months ended November 30, 2021, the Company made total additions to revenue earning devices of $310,009~~ ~~and $592,346, respectively, which were transfers from inventory. During the nine months ended November 30, 2021 the Company sold a revenue earning device having a net book value of $3,255~~ ~~for revenues of $30,600~~ ~~and included the $3,255~~ ~~in cost of goods sold.~~

~~Depreciation expense was $54,418~~ ~~and $241,957~~ ~~for the three and nine months ended November 30, 2022, respectively, and $61,976~~ ~~and $138,815~~ ~~for the three and nine months ended November 30, 2021, respectively.~~

7. FIXED ASSETS

Fixed assets consisted of the following:

	November 30, 2022			February 28, 2022			May 31, 2023			February 28, 2023
Automobile	$	84,880		$	84,880		$	101,680		$	101,680
Manufacturing equipment		25,625			16,800
Demo devices		63,979			16,539			97,720			69,010
Computer equipment and software		133,959			36,742
Tooling								101,322			101,322
Machinery and equipment								8,825			8,825
Computer equipment								150,387			150,387
Office equipment		15,312			15,312			15,312			15,312
Furniture and fixtures								21,225			21,225
Warehouse equipment		11,415			11,415			14,561			14,561
Tooling		101,320			—
Leasehold improvements		15,568			5,329			19,031			15,568
		452,058			187,017			530,063			497,890
Less: Accumulated depreciation		(139,751	)		(49,065	)		(227,103	)		(182,002	)
	$	312,307		$	137,952		$	302,960		$	315,888

During the three months ended ~~November 30, 2022,~~May 31, 2023 the Company made additions of $~~31,365~~32,173 of which $~~19,961~~28,710 were transfers from inventory with remaining additions of ~~$11,404.~~$3,463. During the ~~nine~~three months ended ~~November 30,~~May 31, 2022 the Company made additions of $~~265,041~~93,730 of which $~~47,440~~5,516 were transfers from inventory with remaining additions of ~~$217,601. During the three months and nine months ended November 30, 2021, the Company made additions of~~ $~~2,372~~ ~~and $34,534, respectively. During the nine months ended November 30, 2021, the Company sold a vehicle having a net book value of $875~~ ~~for fair value proceeds of $30,000~~ ~~and recorded a gain on disposal of fixed assets of $29,125~~88,214.

Depreciation expense was $~~38,437~~45,101 and $~~90,686~~22,581 for the three ~~and nine~~ months ended ~~November 30, 2022, respectively,~~May 31, 2023, and $~~5,951~~ ~~and $14,446~~ ~~for the three and nine months ended November 30,~~ 2021 respectively.

8. DEFERRED VARIABLE PAYMENT OBLIGATION

On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 in exchange for a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues). At February 29, 2020 the investor has advanced the full $900,000.

On May 9, 2019 the Company entered into two similar arrangements with two investors:

~~- 16 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

	(1)	The investor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $400,000 has been paid to the Company.

	(2)	The investor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $50,000 has been paid to the Company.

These variable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount.

In the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future ~~Payments~~Payments..

On November 18, 2019 the Company entered into ~~another~~an arrangement similar ~~arrangement with~~to the (February 1, ~~2019)~~2019 agreement above) investor above whereby the investor would advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues (commencing on quarter ending May 31, 2020). At February 29, 2020 the investor has advanced $109,000 and the investor advanced the $116,000 remainder as of May 2020.

- 15 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On December 30, 2019 the Company entered into ~~another similar~~an arrangement with a new investor whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020). At February 29, 2020 the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020. If the total investor advances turns out to be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.

On April 22, 2020 the Company entered into ~~another similar~~an arrangement with the (first May 9, 2019) investor above whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues. At May 31, 2020 the investor has fully funded this commitment.

On July 1, 2020 the Company entered into ~~a similar~~an agreement with the first investor whereby the investor would pay up to $800,000 in exchange for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue. These Payments are to be made 90 days after the fiscal quarter with the first payment being due no later than May 31, 2021.If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the first payment due July 2020 and the final payment no later than February 28, 2021. As at ~~November 30,~~August 31, 2020 the investor had fully funded the $800,000 commitment

On August 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for ~~$900,000,~~$900,000, November 18, 2019 for ~~$225,000~~$225,000 and July 1, 2020 for ~~$800,000~~$800,000 into a new agreement for a total of $1,925,000. This new agreement is for similar terms as the above agreements save for the following: the rate payment is revised to 14.25% payable on revenues commencing the quarter ended ~~November 30, 2020. Upon an event~~August 31, 2020 and the Payments are secured by the assets of ~~default that we are unable to cure in~~ the ~~time allotted under the agreements, these Payments~~Company. This interest may be secured ~~with a priority lien~~ by UCC filing ~~against all of our assets,~~ but is subordinated to equipment financing ~~or leasing agreements~~ on the products the Company leases to its customers.

In summary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted below. This aggregate asset disposition % was reduced from 43.77 % to 33.77%

~~- 17 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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, 2022,~~May 31, 2023, the Company has accrued approximately ~~$325,600~~$604,811 in Payments, ~~(February~~of which $388,226 is in arrears. As of February 28, ~~2021 -$91,587).~~2023, the Company has accrued approximately $542,177 in Payments, of which $325,600 is in arrears.

On March 1, 2021 the first investor referred to above whose aggregate investment is $1,925,000 revised his agreements as follows:

	1)	The rate payment was reduced from 14.25 % to 9.65 %
	2)	The asset disposition % (see below) was reduced from 31 % to 21%

In consideration for the above changes, the investor received 40 Series F Convertible Preferred Stock and a warrant to purchase 367 shares of its Series F Convertible Preferred Stock with a five-year term and an exercise price of $1.00. During the three months ended May 31, 2021 the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred Stock. The ~~Company~~company attributed a fair value based on recent transactions for the Series F Preferred stock and warrants of $33,015,214 and recorded a loss on settlement of debt with a corresponding adjustment to paid in capital.

The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements. As of ~~November 30, 2022,~~February 28, 2023, and February 28, 2022, the long-term balances other than Payments already owed is the cash received of $2,525,000 and and $2,525,000, respectively.

For both the ~~three months~~years ended February 28, 2023 and ~~nine months ended November 30, 2022 and year ended~~ February 28, 2022, the Company has received $0$0 related to the deferred payment obligation as the balance remains $2,525,000 at both February 28, 2023 and February 28, 2022.

- 16 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three months ended May 31, 2023 and year ended February 28, 2023 , the Company has received $0 related to the deferred payment obligation since there were no new agreements during this period. The balance remains $2,525,000 at both ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022.~~2023.

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, 2022,~~May 31, 2023, the Company has accrued $~~497,150~~388,227 in Payments (February 28, ~~2022~~2023 -$~~325,600~~542,177). At ~~November 30, 2022,~~May 31, 2023, and February 28, ~~2022~~2023 the Company was in default on $~~265,226~~388,226 and $~~90,300~~325,600 of those Payments. No notices have been sent to the Company.

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 2022 2022
July 18, 2016 July 18, 2017^* 8% $0.003⁽¹⁾ $ — $ 3,500
August 9, 2022 August 9, 2023 12% $0.009⁽²⁾ 750,000 —
$ 750,000 $ 3,500

(Less): current portion of convertible notes payable (750,000 ) (3,500 )
(Less): discount on noncurrent convertible notes payable — —
Noncurrent convertible notes payable, net of discount $ — $ —

Current portion of convertible notes payable $ 750,000 $ 3,500
(Less): discount on current portion of convertible notes payable (433,932 ) —
Current portion of convertible notes payable, net of discount $ 316,068 $ 3,500

~~__________~~

*	~~This note was in default as of February 28, 2022. Default interest rate 22%~~
~~(1)~~	~~The conversion price was not subject to adjustment from forward or reverse stock splits. Effective in August 2022 this note (and accrued interest) was no longer convertible.~~
~~(2)~~	~~Subject to adjustment for dilutive issuances~~

~~- 18 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

During both the three and nine months ended November 30, 2022, the Company incurred original issue discounts of $75,000, and relative fair value discounts debt discounts from derivative liabilities of $393,949 and fees of $55,750 related to new convertible notes payable. During both the three and nine months ended November 30, 2021 the Company recognized debt discounts from derivative liabilities of $438,835. During the three and nine months ended November 30, 2022, the Company recognized interest expense related to the amortization of debt discount of $78,149 and $90,767. During the three and nine months ended November 30, 2021, the Company recognized interest expense related to the amortization of debt discount of $694,855 and $775,986, respectively.

~~The note above is unsecured. As of November 30, 2022 and February 28, 2022, the Company had total accrued interest payable of $51,458 and $28,104, respectively, all of which is classified as current.~~

~~During the nine months ended November 30, 2022, the Company also had the following convertible note activity:~~

●	The Company transferred the above July 18, 2016 $3,500 note to loans payable as the note was no longer convertible. This was a result of an SEC action against the debt holder who was also a common stockholder.

●	On August 9, 2022 the Company entered into a new convertible note for $750,000 with a one year maturity, interest rate of 12%, with a warrant (Warrant 1) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.01, and an additional warrant (Warrant 2) to purchase 47,000,000 common shares with a five year maturity and an exercise price of $0.008 to be cancelled and extinguished if the note balance is $375,000 or less by February 9. 2023. The Company received $619,250 in cash proceeds, recorded an original issue discount of $75,000, recognized $393,949 based on a relative fair value calculation as debt discount with a corresponding adjustment to paid-in capital for the attached warrants, and transaction fees of $55,750. The discount is amortized over the term of the loan. This Note shall have priority over all unsecured indebtedness of the Company. The note has certain default provisions such as failure to pay any principal or interest when due and failure to maintain a minimum market capitalization of $30 million. In the event of these or any other default provisions, the note becomes due and payable at 125%.

~~During the nine months ended November 30, 2021, the Company 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~~.

~~- 19 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~10.~~ RELATED PARTY TRANSACTIONS

For both the ~~nine~~three months ended ~~November 30,~~May 31, 2023 and May 31, 2022 , the Company had no repayments of net advances from its loan payable-related party. ~~For the nine months ended November 30, 2021 the Company repaid net advances of $812,234~~. At ~~November 30, 2022,~~May 31, 2023, the loan payable-related party was $~~203,276~~243,256 and $~~193,556~~206,516 at February 28, ~~2022.~~2023. Included in the balance due to the related party at ~~November 30, 2022~~May 31, 2023 is $~~126,744~~139,250 of deferred salary and interest, $~~108,000~~ 133,000of which bears interest at 12%. At February 28, ~~2022, included in the balance due to the related party is~~2023 there was $~~110,700~~108,000 of deferred salary ~~and interest,~~with $~~90,000~~108,000 ~~of which bears~~bearing interest at 12%. The accrued interest included in loan at ~~November 30,~~May 31, 2023 and February 28, 2022 ~~and November 30, 2021~~ was $~~12,420~~19,275 and $~~540~~15,660, respectively.

Pursuant to the amended Employment Agreement with its Chief Executive Officer, for the three months ~~and nine months~~ ended ~~November 30, 2022,~~May 31, 2023 the Company accrued ~~$138,000 and $362,500~~$63,000 (three months ended May 31 2022-$161,500) of incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. At ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022~~2023 there was $~~842,000~~ 1,042,000and $~~479,500~~979,000 of incentive compensation payable.

During the three months ended ~~November 30,~~May 31, 2023 and 2022, ~~and 2021,~~ the Company was charged $~~794,460~~882,015 and $~~647,465, respectively for fees for research and development from a company partially owned by a principal shareholder.~~

~~During the nine months ended November 30, 2022 and 2021, the Company was charged $2,735,589~~ ~~and $1,689,253~~1,001,734, respectively for fees for research and development from a company partially owned by a principal shareholder.

~~11.~~10. OTHER DEBT – VEHICLE LOAN

In December 2016, RAD entered into a vehicle loan for $$47,704 secured by the vehicle. The loan is repayable over 5 years maturing November 9, ~~2021,~~2021, and repayable $1,019per month including interest and principal. In November 2017, RAD entered into another vehicle loan secured by the vehicle for $47,661. The loan is repayable over 5 years, maturing October 24, 2022 and repayable at $923 per month including interest and principal. The principal repayments made were $0$0 for both the year ended February 28, 2022 and February 28, 2021. Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was subsequently sold by the lender for proceeds of $21,907 which went to reduce the outstanding balance of the loan. A loss of $3,257 was recorded as well. A balance of $21,578 remains on this vehicle loan at both February 28, 2021 and February 29, 2020. For the first vehicle loan, the vehicle was retired in 2020, the proceeds of the disposal of $18,766was applied against the balance of the loan with a $5,515 gain on the remaining asset value of $13,251. A balance of $16,944 remains on this vehicle loan at both February 28, 2022 and February 28, 2021. The remaining total balances of the amounts owed on the vehicle loans were $38,522 and $38,522 as of ~~November 30,~~May 31, 2022 and February 28, 2022, respectively, of which all were classified as current.

- ~~20 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~12.~~ ~~LOANS PAYABLE~~

~~Loans payable at November 30, 2022 consisted of the following:~~

Annual
Date Maturity Description Principal Interest Rate
July 18, 2016 July 18, 2017 Promissory note (35) * $ 3,500 22%
June 11, 2018 June 11, 2019 Promissory note (2) (#) — 25%
January 31, 2019 June 30, 2019 Promissory note (1) (#) — 15%
May 9, 2019 June 30, 2019 Promissory note (3) (#) — 15%
May 31, 2019 June 30, 2019 Promissory note (4) (#) — 15%
June 26, 2019 June 26, 2020 Promissory note (5) (#) — 15%
September 24, 2019 June 24, 2020 Promissory note (6) (#) — 15%
January 30, 2020 January 30, 2021 Promissory note (7) (#) — 15%
February 27, 2020 February 27, 2021 Promissory note (8) (#) — 15%
April 16, 2020 April 16, 2021 Promissory note (9) (#) — 15%
May 12, 2020 May 12, 2021 Promissory note (11) (#) — 15%
May 22, 2020 May 22, 2021 Promissory note (12) (#) — 15%
June 2, 2020 June 2, 2021 Promissory note (13) (#) — 15%
June 9, 2020 June 9, 2021 Promissory note (14) (#) — 15%
June 12, 2020 June 12, 2021 Promissory note (15) (#) — 15%
June 16, 2020 June 16, 2021 Promissory note (16) (#) — 15%
September 15, 2020 September 15, 2022 Promissory note (17) (#) — 10%
October 6, 2020 March 6, 2023 Promissory note (18) (#) — 12%
November 12, 2020 November 12, 2023 Promissory note (19) (#) — 12%
November 23, 2020 October 23, 2022 Promissory note (20) (#) — 15.5%
November 23, 2020 November 23, 2023 Promissory note (21) (#) — 15%
December 10, 2020 December 10, 2023 Promissory note (22) (#) — 12%
December 10, 2020 December 10, 2023 Promissory note (23) 3,921,168 12%
December 10, 2020 December 10, 2023 Promissory note (24) 3,054,338 12%
December 10, 2020 December 10, 2023 Promissory note (25) 165,605 12%
December 14, 2020 December 14, 2023 Promissory note (26) 310,375 12%
December 30, 2020 December 30, 2023 Promissory note (27) 350,000 12%
December 31, 2021 December 31, 2024 Promissory note (28) 25,000 12%
December 31, 2021 December 31, 2024 Promissory note (29) 145,000 12%
January 14, 2021 January 14, 2024 Promissory note (30) 550,000 12%
February 22, 2021 February 22, 2024 Promissory note (31) 1,650,000 12%
March 1, 2021 March 1, 2024 Promissory note (10) 6,000,000 12%
June 8, 2021 June 8, 2024 Promissory note (32) 2,750,000 12%
July 12, 2021 July 26, 2026 Promissory note (33) 3,936,360 7%
September 14, 2021 September 14, 2024 Promissory note (34) 1,650,000 12%
July 28, 2022 July 28, 2023 Promissory note (36) 170,000 15%
August 30, 2022 August 30,2024 Promissory note (38) 3,000,000 15%
September 7, 2022 September 7, 2023 Promissory note (37) 400,000 15%
September 8, 2022 September 8, 2023 Promissory note (39) 475,000 15%
October 13, 2022 October 13, 2023 Promissory note (40) 350,000 15%
October 28, 2022 October 31, 2026 Promissory note (41) 400,000 15%
November 9, 2022 October 31, 2026 Promissory note (41) 400,000 15%
November 10, 2022 October 31, 2026 Promissory note (41) 400,000 15%
November 15, 2022 October 31, 2026 Promissory note (41) 400,000 15%
$ 30,506,346

Less: current portion of loans payable (1,398,500 )
Less: discount on non-current loans payable (5,378,890 )
Non-current loans payable, net of discount $ 23,728,956

Current portion of loans payable $ 1,398,500
Less: discount on current portion of loans payable (158,194 )
Current portion of loans payable, net of discount $ 1,240,306

~~- 21~~17 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. LOANS PAYABLE

Loans payable at May 31, 2023 consisted of the following:

							Annual
Date	Maturity	Description		Principal			Interest Rate
July 18, 2016	July 18, 2017	Promissory note	(1) *	$	3,500		22%
December 10, 2020	December 10, 2023	Promissory note	(2)		3,921,168		12%
December 10, 2020	December 10, 2023	Promissory note	(3)		3,054,338		12%
December 10, 2020	December 10, 2023	Promissory note	(4)		165,605		12%
December 14, 2020	December 14, 2023	Promissory note	(5)		310,375		12%
December 30, 2020	December 30, 2023	Promissory note	(6)		350,000		12%
January 1, 2021	January 1, 2024	Promissory note	(7)		25,000		12%
January 1, 2021	January 1, 2024	Promissory note	(8)		145,000		12%
January 14, 2021	January 14, 2024	Promissory note	(9)		550,000		12%
February 22, 2021	February 22, 2024	Promissory note	(10)		1,650,000		12%
March 1, 2021	March 1, 2024	Promissory note	(11)		6,000,000		12%
June 8, 2021	June 8, 2024	Promissory note	(12)		2,750,000		12%
July 12, 2021	July 26, 2026	Promissory note	(13)		3,857,360		7%
September 14, 2021	September 14, 2024	Promissory note	(14)		1,650,000		12%
July 28, 2022	July 28, 2023	Promissory note	(15)		170,000		15%
August 30, 2022	August 30,2024	Promissory note	(16)		3,000,000		15%
September 7, 2022	September 7, 2023	Promissory note	(17)		400,000		15%
September 8, 2022	September 8, 2023	Promissory note	(18)		475,000		15%
October 13, 2022	October 13, 2023	Promissory note	(19)		350,000		15%
October 28, 2022	October 31, 2026	Promissory note	(20)		400,000		15%
November 9, 2022	October 31, 2026	Promissory note	(20)		400,000		15%
November 10, 2022	October 31, 2026	Promissory note	(20)		400,000		15%
November 15, 2022	October 31, 2026	Promissory note	(20)		400,000		15%
January 11, 2023	October 31,2026	Promissory note	(20)		400,000		15%
February 6, 2023	October 31, 2026	Promissory note	(20)		400,000		15%
April 5. 2023	October 31, 2026	Promissory note	(20)		400,000		15%
April 20, 23	October 31, 2026	Promissory note	(20)		400,000		15%
May 11, 2023	October 31, 2026	Promissory note	(20)		400,000		15%
				$	32,427,346

Less: current portion of loans payable					(17,569,985	)
Less: discount on non-current loans payable					(4,973,120	)
Non-current loans payable, net of discount				$	9,884,241

Current portion of loans payable				$	17,569,985
Less: discount on current portion of loans payable					(1,348,996	)
Current portion of loans payable, net of discount				$	16,220,989

*	In ~~default. Default interest rate 22%~~

~~(#)~~	~~Loans with a principal balance of $1,661,953~~ ~~along with associated accrued interest of $342,138~~ ~~totaling $2,004,091~~ ~~were paid in March 2022, with a remaining accrued liability of $62,979.~~default

(1)	~~Original $78,432~~This note ~~may be pre-payable at any time. The note balance includes~~ 33~~% original issue discount of $25,882~~ ~~at issuance. The loan and accrued interest were fully paid~~was transferred from convertible notes payable because in ~~March 2022.~~August 2022 it was no longer convertible due to restrictions placed on the lender.

(2)	~~Repayable in~~ 12 ~~monthly instalments of $4,562~~ ~~commencing August 11, 2018 and secured by revenue earning devices having a net book value of at least $48,000. The loan and accrued interest were fully paid in March 2022.~~

~~(3)~~	~~Original $7,850~~ ~~note may be pre-payable at any time. The note balance includes~~ 33~~% original issue discount of $2,590~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(4)~~	~~Original $86,567~~ ~~note may be pre-payable at any time. The note balance includes~~ 33~~% original issue discount of $28,567~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(5)~~	~~Original $79,104~~ ~~note may be pre-payable at any time. The note balance includes~~ 33~~% original issue discount of $26,104~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(6)~~	~~Original $12,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $3,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(7)~~	~~Original $11,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $2,450~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(8)~~	~~Original $5,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $1,200~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(9)~~	~~Original $13,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $3,850~~ ~~at issuance. The loan and accrued interest were paid in March 2022.~~

~~(10)~~	~~The unsecured note may be pre-payable at any time. Cash proceeds of $5,400,000~~ ~~were received. The note balance of $6,000,000 includes an original issue discount of $600,000~~ ~~and was issued with a warrant to purchase~~ ~~300,000,000~~ ~~shares at an exercise price of $0.135~~ ~~per share with a~~ 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $~~4,749,005~~ ~~with a corresponding adjustment to paid in capital for the relative value of the warrant. For both the three and six months ended November 30, 2022, the Company recorded amortization expense of $~~0 ~~with an unamortized discount of $~~0 at November 30, 2022. The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase 150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $2,850,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022.

~~(11)~~	~~Original $43,500~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $8,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(12)~~	~~Original $85,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $15,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(13)~~	~~Original $62,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $12,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(14)~~	~~Original $31,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $6,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~- 22 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(15)~~	~~Original $50,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $10,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(16)~~	~~Original $42,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of~~ ~~$7,000~~ ~~at issuance. The loan and accrued interest were fully paid in March 2022.~~

~~(17)~~	~~Original $300,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $50,000~~. Interest payable monthly, principal due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The loan and accrued interest were fully paid in March 2022.

~~(18)~~	~~Original principal of $150,000~~ and interest repayable in 28 monthly instalments commencing December 6, 2020, the first 6 months at $2,000 per month, the remaining 22 payments at $ 8,500 per month. Secured by revenue earning devices. The loan and accrued interest were fully paid in March 2022.

~~(19)~~	~~Original $110,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $10,000~~ ~~and was issued with a warrant to purchase~~ ~~70,000,000~~ ~~shares at an exercise price of $0.00165~~ ~~per share, with a~~ 3-year term and having a relative fair value of $41,176. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $~~41,176~~ ~~with a corresponding adjustment to paid in capital. The loan and accrued interest were fully paid in March 2022.~~

~~(20)~~	~~Original principal of $65,000~~ ~~and interest repayable in 21 monthly instalments of $4,060 commencing February 23, 2021. Secured by revenue earning devices. The loan and accrued interest were fully paid in March 2022.~~

~~(21)~~	~~Original $300,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $25,000~~ ~~and was issued with a warrant to purchase~~ ~~230,000,000~~ ~~shares at an exercise price of $0.00165~~ ~~per share with a~~ 3-year term and having a relative fair value of $125,814. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $~~125,814~~ ~~with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022.~~

~~(22)~~	~~Original $82,500~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of~~ ~~7,500~~ ~~and was issued with a warrant to purchase~~ ~~100,000,000~~ ~~shares at an exercise price of $0.002~~ ~~per share with a~~ 3-year term and having a relative fair value of $54,545. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $~~54,545~~ ~~with a corresponding adjustment to paid in capital for the relative value of the warrant. The loan and accrued interest were fully paid in March 2022.~~

~~(23)~~	This promissory note was issued as part of a debt settlement whereby $2,683,357 in convertible notes and associated accrued interest of $1,237,811 totaling $3,921,168 was exchanged for this promissory note of $3,921,168, and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three-year maturity having a relative fair value of $990,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

- 18 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


~~(24)~~(3)	This promissory note was issued as part of a debt settlement whereby $1,460,794 in convertible notes and associated accrued interest of $1,593,544 totaling $3,054,338 was exchanged for this promissory note of $3,054,338, and a warrant to purchase 250,000,000 shares at an exercise price of ~~$.002~~$.002 per share and a three-year maturity having a relative fair value of $550,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

~~(25)~~(4)	This promissory note was issued as part of a debt settlement whereby $103,180 in convertible notes and associated accrued interest of $62,425 totaling $165,605 was exchanged for this promissory note of $165,605, and a warrant to purchase 80,000,000 shares at an exercise price of $.$~~002~~.002 per share and a three-year maturity having a fair value of $176,000.

~~(26)~~(5)	This promissory note was issued as part of a debt settlement whereby $235,000 in convertible notes and associated accrued interest of $75,375 totaling $310,375 was exchanged for this promissory note of $310,375, and a warrant to purchase 25,000,000 shares at an exercise price of $.$~~002~~.002 per share and a three-year maturity having a fair value of $182,500.

~~- 23 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(27)~~
(6)	The note, with an original principal amount of $350,000, may be pre-payable at any time. The note balance includes an original issue discount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of ~~$271,250.~~$271,250. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~22,829~~ ~~and $53,156~~39,904, respectively, with an unamortized discount of $~~223,697~~153,611 at ~~November 30, 2022.~~May 31, 2023.

~~(28)~~(7)	This promissory note was issued as part of a debt settlement whereby $9,200 in convertible notes and associated accrued interest of $6,944 totaling $16,144 was exchanged for this promissory note of $25,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

~~(29)~~(8)	This promissory note was issued as part of a debt settlement whereby $79,500 in convertible notes and associated accrued interest of $28,925 totaling $108,425 was exchanged for this promissory note of $145,000. This note is secured by a general security charging all of the Company’s present and after-acquired property.

~~(30)~~(9)	The note, with an original principal amount of $550,000, may be pre-payable at any time. The note balance includes an original issue discount of $250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of ~~$380,174.~~$380,174. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $380,174 with a corresponding adjustment to paid in capital. For the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~34,441~~51,045 ~~and $85,968~~, respectively, with an unamortized discount of $~~281,264~~188,291 at ~~November 30, 2022.~~May 31, 2023.

~~(31)~~(10)	The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of ~~$1,342,857.~~$1,342,857. The discount and warrant are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. ~~For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $82,582~~ ~~and $184,959, respectively, with an unamortized discount of $1,309,454~~ ~~at November 30, 2022.~~ The maturity date was extended from February 22, 2022 to February 22, 2024 on February 28, 2022 in exchange for warrants to purchase 50,000,000 at an exercise price of ~~$.0164~~$.0164 and a 3 year term. These warrants have a fair value of ~~$950,000~~$950,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. For the three months ended May 31, 2023, the Company recorded amortization expense of $159,064 respectively, with an unamortized discount of $953,197 at May 31, 2023.

~~(32)~~(11)	The unsecured note may be pre-payable at any time. Cash proceeds of $5,400,000 were received. The note balance of $6,000,000 includes an original issue discount of $600,000 and was issued with a warrant to purchase 300,000,000 shares at an exercise price of $0.135 per share with a 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $4,749,005 with a corresponding adjustment to paid in capital for the relative value of the warrant.. The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase 150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $2,850,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. This note has been fully amortized.

- 19 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(12)	The note, with an original principal balance of $2,750,000, may be pre-payable at any time. The note balance includes an original issue discount of $50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $0.064 per share with a 3-year term and having a relative fair value of ~~$2,035,033.~~$2,035,033. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $2,035,033 with a corresponding adjustment to paid in capital. ~~For the three and nine months ended November 30, 2022, the Company recorded amortization expense of $120,297~~ ~~and $319,016, respectively, with an unamortized discount of $930,729 at November 30, 2022.~~ The maturity date was extended from June 8, 2022 to June 8, 2024 on February 28, 2022 in exchange for warrants to purchase 85,000,000 at an exercise price of ~~$.0164~~$.0164 and a 3 year term. These warrants have a fair value of ~~$1,615,000~~$1,615,000 recorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. For the three months ended May 31, 2023, the Company recorded amortization expense of $154,910 respectively, with an unamortized discount of $639,308 at May 31, 2023.

~~(33)~~(13)	This loan, with an original principal balance of $4,000,160, was in exchange for 184 Series F preferred shares from a former director. The interest and principal are payable at maturity. The loan is unsecured. For the ~~quarter and nine~~three months ended ~~November 30, 2022~~May 31, 2023 there ~~was~~were repayments of $~~27,800~~27,000 ~~and $63,800, respectively~~ on the note.

~~(34)~~(14)	The note, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $0.037 per share with a 3-year term and having a relative fair value of ~~$1,284,783,~~$1,284,783, The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $1,284,783 with a corresponding adjustment to paid in capital. For the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~59,646~~86,930 ~~and $122,486~~ ~~respectively.~~respectively, with an unamortized discount of $~~1,279,947~~1,27,501 at ~~November 30, 2022.~~

May 31, 2023.

~~- 24 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(35)~~	~~This note was transferred from convertible notes payable because in August 2022 it was no longer convertible due to restrictions placed on the lender.~~

~~(36)~~(15)	Original $170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $20,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~4,589~~5,287 ~~and $6,048~~respectively, with an unamortized discount of $~~13,952~~3,739 at ~~November 30, 2022.~~May 31, 2023.

~~(37)~~	~~Original $400,000~~ ~~note may be pre-payable at any time. The note balance includes an original issue discount of $50,000~~. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For both the three and nine months ended November 30, 2022, the Company recorded amortization expense of $~~10,691~~ ~~with an unamortized discount of $39,309~~ ~~at November 30, 2022.~~

~~(38)~~(16)	A warrant holder exchanged 955,000,000 warrants for a promissory note of ~~$3,000,000,~~$3,000,000, bearing interest at ~~15%~~15% with a two year maturity. The fair value of the warrants was determined to be $2,960,500 with a corresponding adjustment to paid-in capital and a debt discount of $39,500 which will be amortized over the term of the loan. Principal and interest due at maturity. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~4,248~~4,557, respectively, with an unamortized discount of $~~35,252~~26,312 at ~~November 30, 2022~~May 31, 2023.

~~(39)~~(17)	Original $400,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the three months ended May 31, 2023, the Company recorded amortization expense of $12,342 respectively, with an unamortized discount of $15,479 at May 31, 2023.

(18)	Original $475,000 note may be pre-payable at any time. The note balance includes an original issue discount of $75,000. Principal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~16,473~~18,930 respectively, with an unamortized discount of $~~58,527~~17,799 at ~~November 30, 2022.~~ May 31, 2023.

~~(40)~~(19)	Original $350,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest due at maturity. Secured by a general security charging all of the Company’s s present and after-acquired property. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $~~3,593~~12,290 respectively, with an unamortized discount of $~~46,407~~20,620 at ~~November 30, 2022.~~May 31, 2023.

- 20 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~(41)~~(20)

On October 28, 2022 the Company entered into an loan facility with a lender for up to $4,000,000 including an original issue discount of $500,000. In exchange the Company will issue one series F Preferred Share, extended 329 series F warrants with a March 1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10 tranches with each ~~trance~~tranche of $400,000, with cash proceeds of $350,000 an original issue discount of $50,000, October 31, 2026 maturity, and 61 Series F warrants with a October 31, 2033 maturity. Secured by a general security charging all of the Company’s present and after-acquired property. At November 30, 2022 the Company has issued 46 tranches as follows:

October 28, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $299,399. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $01,866 respectively, with an unamortized discount of $~~349,399~~346,157 at ~~November 30, 2022.~~

May 31, 2023.

November 9, 2022, $400,000 loan, original issue discount of $50,000 , 61 Series F Preferred Share warrants e having a relative fair value of $299,750. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $$$01,838 respectively, with an unamortized discount of $~~349,750~~346,600 at ~~November 30, 2022.~~

May 31, 2023.

November 10, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants e having a relative fair value of $302,020. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $016,678 respectively, with an unamortized discount of $~~352,020~~349,214 at ~~November 30, 2022.~~

May 31, 2023.

November 15, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants e having a relative fair value of $299,959. For ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2022,~~May 31, 2023, the Company recorded amortization expense of $01,881 respectively, with an unamortized discount of $~~349,959~~345,914 at ~~November 30, 2022.~~May 31, 2023.

January 11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959. For the three months ended May 31, 2023, the Company recorded amortization expense of $1,925 respectively, with an unamortized discount of $345,265 at May 31, 2023.

February 6, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959. For the three months ended May 31, 2023, the Company recorded amortization expense of $1,836 respectively, with an unamortized discount of $346,590 at May 31, 2023.

April 5, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $296,245. For the three months ended May 31, 2023, the Company recorded amortization expense of $751 respectively, with an unamortized discount of $345,494 at May 31, 2023.

April 20, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $302,219. For the three months ended May 31, 2023, the Company recorded amortization expense of $196 respectively, with an unamortized discount of $352,023 at May 31, 2023.

May 11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $348,983. For the three months ended May 31, 2023, the Company recorded amortization expense of $0 respectively, with an unamortized discount of $398,983 at May 31, 2023.

- 2521 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~13.~~ ~~DERIVATIVE LIABILITIES~~

As of November 30, 2022, 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 $0~~, and $7,587, respectively. For the three and nine months ended November 30, 2022, the Company recorded a change in fair value of derivative liabilities of $~~0 ~~and $3,595, respectively and a gain on settlement of debt (with a corresponding adjustment to derivative liabilities) of $~~0 ~~and $3,992, respectively.~~

~~14.~~12. STOCKHOLDERS’ EQUITY (DEFICIT)

~~Series F Preferred Shares~~

Each holder of Series E 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

~~There was 1 Series F Preferred Share issued along with debt to a lender.~~No preferred stock activity during the period.

Summary of Preferred Stock Warrant Activity

~~Schedule~~

	Number of Series F Preferred Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2023	695	$1.00	10.00
Issued	183	1.00	9.88
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at May 31, 2023	878	$1.00	9.75

During the three months ended May 31, 2023, as part of ~~Summary~~debt issuance the Company issued 183 Series F Preferred Warrants to a lender for a relative fair value of ~~stock Option Activity~~$947,447. (see Note 11)

Number of Series C Preferred Warrants Weighted Average Exercise Price Weighted Average Remaining Years
Outstanding at March 1, 2022 329 $1.00 11.50
Issued 244 $1.00 10.00
Exercised — — —
Forfeited and cancelled — — —
Outstanding at November 30, 2022 573 $1.00 10.00

Summary of Common Stock Activity

~~The Company increased authorized common shares from 5,000,000,000 to~~ ~~6,000,000,000~~ ~~on July 8, 2022.~~

~~During~~For the ~~nine~~three months ended ~~November 30, 2022,~~May 31, 2023 , the Company issued ~~522,734,247~~280,929,190 common shares with gross proceeds of $~~4,939,161~~1,400,094 and net proceeds of $~~4,657,979~~1,318,809 after issuance costs of $~~282,182~~81,285, issued 9,688,179 shares through the cashless exercise of 61,378,210 warrants, cancelled 17,116,894 shares as a result of an SEC enforcement action against a lender and issued 10,000,000 shares for $118,500 as payment for services..

The table below represent the common shares issued, issuable and outstanding at ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022:~~2023:

Common shares	November 30, 2022		February 28, 2022		May 31, 2023		February 28, 2023
Issued		5,248,415,892		4,733,110,360		6,117,570,789		5,836,641,599
Issuable		12,100,000		2,100,000		12,100,000		12,100,000
Issued, issuable and outstanding		5,260,515,892		4,735,210,360		6,129,670,789		5,848,741,599

~~- 26 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Summary of Common Stock Warrant Activity

Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Years
Outstanding at March 1, 2022 1,216,845,661 $0.07 2.38
Issued 94,000,000 $0.009 4.94
Adjusted⁽¹⁾ 66,750,000 $0.011 1.41
Exercised (61,378,210 ) $0.011 (1.41)
Forfeited, extinguished and cancelled (955,000,000 ) $0.008 (1.61)
Outstanding at November 30, 2022 361,217,451 $0.03 2.52

~~(1)~~

~~Required dilution adjustment per warrant agreement~~

	Number of Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at February 28, 2023	314,217,451	$0.114	1.95
Issued	—	—	—
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at May 31, 2023	314,217,451	$0.114	1.70

For the three months ~~and nine months~~ ended ~~November 30,~~May 31, 2022 and ~~November 30,~~May 31, 2021, the Company recorded a total of $0 and $0, respectively, to stock-based compensation for options and warrants with a corresponding adjustment to additional paid-in capital.

~~On August 30, 2022 a warrant holder exchanged~~ ~~955,000,000~~ ~~warrants for a promissory note of $3,000,000, bearing interest at~~ 15~~% with a two year maturity. The fair value of the warrants was determined to be~~ ~~2,960,500~~ ~~with a corresponding adjustment to paid-in capital and a debt discount of $39,500~~ ~~which will be amortized over the term of the loan.~~

Summary of Common Stock Option Activity

	Number of Warrants		Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at February 28 , 2023	95,725,000		$0.02	4.75
Issued	—		—	—
Exercised	—		—	—
Forfeited, extinguished and cancelled	(13,025,000	)	$0.02	(4.75)
Outstanding at May 31, 2023	82,700,000		$0.02	4.50

~~On August 11, 2022 the Company amended its 2021 Incentive Stock Option Plan increasing the maximum number~~

- 22 -

Table of ~~shares applicable to the Plan from~~ ~~5,000,000~~ to ~~100,000,000~~.Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~15.~~13. COMMITMENTS AND CONTINGENCIES

Litigation

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

The related legal costs are expensed as incurred.

Operating Lease

On December 18, 2020,the Company entered into a 15-month lease agreement for office space at 18009 Sky Park Circle Suite E, Irvine CA, 92614, commencing on December 18, 2020 through to March 31, 2022 with a minimum base rent of $~~3,859~~$3,859 per ~~month~~month.. The Company paid a security deposit of $3,859.

On March 10, 2021,the Company entered into a 10 year lease agreement for q manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan, 48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent of $15,880 per month. The base rent increase by 3% per annum commencing May 1, 2024. The Company paid a security deposit of $15,880.

On September 30, 2021, the Company entered into a 3-year lease agreement for a vehicle commencing September 30, 2021 through to April 30, 2031 with a minimum base rent of $1,538 per month. The Company paid a down payment of ~~$18,462~~$18,462..

On January 28, 2022, the Company entered into a 2-year lease agreement for office space at 1516 E Edinger, Santa Ana, California, 92705, commencing on February 1, 2022 through to January 31, 2024 with a minimum base rent of $1,500 per month. The Company paid a security deposit of $1,500.

~~- 27 -~~

~~Table of Contents~~

~~ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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 ~~$61,005 and $194,653for the three and nine months ended November 30, 2022, respectively, and $103,115 and $207,201~~$62,542 for the three months May 31, 2023 and ~~nine~~$69,967 for the three months ~~ended November 30, 2021, respectively.~~May 31, 2022.

Maturity of Lease Liabilities Operating
Leases
November 30, 2023 $ 250,169
November 30, 2024 229,016
November 30, 2025 207,558
November 30, 2026 207,558
November 30, 2027 207,558
November 30, 2028 and after 709,156
Total lease payments 1,811,015
Less: Interest (583,707 )
Present value of lease liabilities $ 1,227,308

Maturity of Lease Liabilities	Operating Leases
May 31, 2024	$	244,169
May 31, 2025		213,711
May 31, 2026		207,558
May 31, 2027		207,557
May 31, 2028		207,558
May 31, 2029 and after		605,378
Total lease payments		1,685,931
Less: Interest		(515,488	)
Present value of lease liabilities	$	1,170,443

~~16.~~ ~~EARNINGS (LOSS) PER SHARE~~

~~The net income (loss) per common share amounts were determined as follows:~~

For the Three Months Ended For the Nine Months Ended
November 30, November 30,
2022 2021 2022 2021
Numerator:
Net income (loss) available to common shareholders $ (4,085,660 ) $ (7,094,442 ) $ (12,930,211 ) $ (47,831,733 )

Effect of common stock equivalents
Add: interest expense on convertible debt 22,438 38,345 27,863 63,299
Add: amortization of debt discount 78,149 694,855 90,767 775,986
Add (less) loss (gain) on settlement of debt — — (3,992 ) —
Add (less) loss (gain) on change of derivative liabilities — — (3,595 ) 372,502
Net income (loss) adjusted for common stock equivalents (3,985,073 ) (6,361,242 ) (12,819,168 ) (46,619,946 )

Denominator:
Weighted average shares – basic 5,140,405,652 4,183,357,145 4,969,080,716 4,162,382,723

Net income (loss) per share – basic $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )

Dilutive effect of common stock equivalents:
Convertible Debt — — — —
Preferred shares — — — —
Warrants — — — —
— — — —

Denominator:
Weighted average shares – diluted 5,140,405,652 4,183,357,145 4,969,080,716 4,162,382,723

Net income (loss) per share – diluted $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )

- 2823 -

Table of Contents

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

14. EARNINGS (LOSS) PER SHARE

The net income (loss) per common share amounts were determined as follows:


	For the Three Months Ended
	May 31, 2023			May 31, 2022
Numerator:
Net income (loss) available to common shareholders	$	(4,555,193	)	$	(4,671,686	)

Effect of common stock equivalents
Add: interest expense on convertible debt		—			—
Net income (loss) adjusted for common stock equivalents		(4,555,193	)		(4,671,686	)

Denominator:
Weighted average shares – basic		5,964,709,322			4,798,657,871

Net income (loss) per share – basic	$	(0.00	)	$	(0.00	)

Denominator:
Weighted average shares – diluted		5,964,709,322			4,798,657,871

Net income (loss) per share – diluted	$	(0.00	)	$	(0.00	)

The anti-dilutive shares of common stock equivalents for the three ~~and six~~ months ended ~~November 30,~~May 31, 2023 and 2022 ~~and 2021~~ were as ~~follows~~follows::

For the Three Months Ended For the Nine Months Ended
November 30, November 30,
2022 2021 2022 2021

Convertible notes and accrued interest 836,425,685 3,432,063 836,425,685 3,432,063
Convertible Series F Preferred Shares^* — — — —
Stock options and warrants 401,217,451 968,523,386 401,217,451 968,523,386
Total 1,237,643,136 971,955,449 1,237,643,136 971,955,449

	For the Three Months Ended
	May 31, 2023	May 31, 2022
Convertible notes and accrued interest	—	7,093,255
Convertible Series F Preferred Shares	—	—
Stock options and warrants	396,917,451	1,216,845,661
Total	396,917,451	1,223,938,916

~~Had~~ Series F Preferred shares been convertible the dilutive effects would be as follows:

For the Three and Nine Months Ended
November 30
2022 2021

Convertible Series F Preferred Shares 18,148,779,827 15,294,230,742

	For the Three Months Ended
	May 31, 2023	May 31, 2022
Convertible Series F Preferred Shares	21,147,364,222	16,798,367,179

~~17.~~15. SUBSEQUENT EVENTS

Subsequent to ~~November 30, 2022~~May 31, 2023 through to ~~January 9,~~July 14, 2023:

— ~~The~~the Company issued ~~117,488,819~~441,502,460 common shares pursuant to a share purchase agreement for gross proceeds of $~~713,811~~2,922,520, issuance costs of $~~30,174~~132,591 and net proceeds of $~~683,638~~2,789,929.

~~— On December 23, 2022 the Company entered into a Simple Agreement for Future Equity (SAFE) contract to invest $50,000~~ ~~to acquire shares of a company’s capital stock at a discount.~~

- 2924 -

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion of our financial condition and results of operations for the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and ~~November 30,~~May 31, 2021 should be read in conjunction with our unaudited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 28, 2022, as filed on May 27, 2022 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “AITX”, the “Company”, “we”, “us”, and “our” refer to Artificial Intelligence Technology Solutions Inc.

Overview

~~Artificial Intelligence Technology Solutions Inc. (“we”, “our, “us”, “AITX” or the “Company”)~~AITX was incorporated in Florida on March 25, ~~2010 as On the Move Systems Inc. and was quoted on OTC Pinks as ‘OMVS’. We~~2010. AITX reincorporated ininto Nevada on February 17, 2015. ~~Our~~AITX’s fiscal year end is February 28 (February 29 during leap year). ~~We are~~AITX is located at 10800 Galaxie Ave., Ferndale Michigan, 48220, and our telephone number is 877-767-6268. We completed a stock ticker change to AITX in 2018. Steve Reinharz became our Chief Executive Officer in March 2021 and is the founder of our primary wholly owned subsidiary, Robotic Assistance Devices, Inc. (RAD). We have a 3-year executive compensation agreement with our CEO.

~~Our~~AITX’s mission is to apply ~~artificial intelligence~~Artificial Intelligence (AI) technology to solve enterprise ~~security-related~~ problems categorized as expensive, repetitive, difficult to staff, ~~dangerous,~~ and outside of the core competencies of the client organization.

~~For example:~~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.

●	~~Performance of difficult, rare, and high value tasks such as firearm detection and immediate response whether autonomously or with human assistance.~~

●3.	Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging ~~over~~ most legacy solutions in use today.

●	~~Patrol and response of commercial, industrial and government areas requiring heightened security work to be completed via autonomous mobile robotics devices.~~

RAD solutions are unique ~~due to their functionalities, as follows:~~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 ~~RAD’s exclusive~~unique hardware ~~and software,~~ purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new ~~functionality, both mobile and stationary.~~functionality.

●	3.	Deliver services through ~~-RAD developed~~RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms.

●	~~Perform workflow functions via purpose-built fixed and mobile devices with unique technology and methodology.~~

- 3025 -

Table of Contents

Through our subsidiary, Robotic Assistance Devices, Inc. (RAD), AITX is redefining the $25 billion (US) security and guarding services industry through its broad lineup of innovative, AI-driven Solutions-as-a-Service business model. RAD solutions are specifically designed to provide a cost savings to businesses of between 35% and 80% when compared to the industry’s existing and costly manned security guarding and monitoring model. RAD delivers this costs savings via a suite of stationary and mobile robotic security solutions that complement, and at times, directly replace the need for human personnel in environments better suited for machines.

At the beginning of the prior fiscal year ended February 28, 2022, AITX began its 10-year lease at its 29,316 sq ft manufacturing facility outside of Detroit, Michigan, hired the employees, and acquired the infra-structure to support it. This facility, referred to by RAD as ‘the REX’ positions AITX to achieve its growth objectives and meet future sales demands.

As of January 16, 2023, there were approximately 300 RAD units deployed with approximately 290 units on backorder, in production or en route to deployment. Additionally, RAD has reported a total authorized dealer count of 55. RAD distributes its products through a combination of direct sales to end-users and opportunities developed through its dealer channel.

Our 85 employees as of January 16, 2023 constitute our workforce that supports the necessary infrastructure (Engineering, Production, Business Development, Marketing, Administration) built to achieve our growth objectives and meet future sales demands. We strive for rapid growth and creation/expansion of our departments and teams; however, this creates significant challenges that if unsuccessful will negatively impact our results of operations.

~~We and our subsidiaries have launched several new solutions during the 3~~^rd ~~quarter of the current fiscal year (FY2023), including:~~

●	~~RIO™, a portable, solar-powered, wide-area security device. RIO was formally introduced to the security industry at one of its premier trade shows, GSX 2022 in Atlanta in September 2022.~~

●	~~ROSA-P, a switched-powered security and safety solution that powers RAD’s best-selling ROSA 3.x where power does not currently exist in the industry at night.~~

●	~~RADDOG™, the security industry’s purpose-built mobile robot dog.~~

●	ROSS™, a software solution which enables millions of IP security cameras presently deployed with the ability to connect with the RAD ecosystem (RADSoC). ROSS empowers these non-RAD cameras to run the same AI analytic capabilities as other RAD hardware solutions.

●	Wholly owned subsidiary Robotic Assistance Devices Group, Inc. (RAD-G) announced the launch of a sales initiative targeting OEM markets. This market development endeavor marks our first of its kind and involves the placement of hardware and software solutions developed across all subsidiaries for use in other vertical markets through OEM suppliers.

●	~~Wholly owned subsidiary Robotic Assistance Devices Mobile, Inc., is expected to make a new solution announcement sometime in FY2024.~~

These solutions utilize the comprehensive RAD platform to offer unparalleled, all-in-one, security and safety solutions that can be implemented within a half hour. These solutions include cutting-edge features such as the detection of firearms, deterrents for trespassing, peripheral surveillance, management of visitors, and more.

~~RAD’s sales funnel has experienced substantial growth in both volume and value.~~

~~RAD is working towards adding the following deployments to be in place by February 29, 2024:~~

●	25 ROAMEOs, the robust mobile-patrolling security robot. The current schedule, subject to engineering development timelines, parts availability and manufacturing, has these ROAMEO units available to ship to clients and start billing as soon as August 2023. We expect to deploy 5-10 a month beginning in August. Pre-selling has begun with the goal of exceeding 25 units for FY2024.

●	150 RIOs, portable solar-powered, wide-area security devices. RAD’s largest dealer is expected to add this to their line card by May 2023 which we can reasonably expect will drive significant volume. Management expects RIO revenue to begin significance towards the end of Q2 FY2024.

~~- 31 -~~

~~Table of Contents~~

●	350 ROSAs / ROSA-Ps, stationary security and safety solutions. This number of ROSA & ROSA P units is roughly at the same run rate as the last few months of calendar year 2022 and is considered by management to be easily achievable. Management expects a minimum of 30 units being added monthly to recurring monthly revenue beginning March 1, 2023.

●	100 AVAs, an autonomous access control / vehicle access device. AVA 3.0 units hit 10 deployed units by mid-January. Early indications of market reception are positive and it’s expected that dealers will begin ordering in greater quantities as management gathers more case studies and references.

●	15 RADDOG™, the security industry’s purpose-built robot dog. RADDOG version 1.0 was first publicly displayed on December 7, 2022 at the Company’s Investor Open House and Technology Reveal. As was stated at that time all of our tests were successful and we are moving forward with a larger, stronger version to commercialize. This version will be shown at the ISC West trade show in Las Vegas at the end of March and will be available to ship to clients in the May time frame. The projected number of 15 is considered conservative by management for FY2024.

●	5000 IP camera integrations via ROSS. These are expected to be ‘take-over’ or ‘side-by-side’ type deployments featuring pre-existing LAN connected IP security cameras. ‘Take-over’ deployments would replace the pre-existing Video Management System and ‘side-by-side’ deployments would leave the existing systems in place and use secondary camera feeds through ROSS.

●	35 TOM autonomous visitor management devices. TOM, an acronym for ‘The Office Manager’ is the evolution and replacement for Wally™. ‘TOM+’ is scheduled for development and release in FY2024. Currently RAD’s largest single client has deployed TOM units throughout the US and at two European locations. Given monthly sales orders it is expected that this 35 unit target could be met entirely by this one client. We are discussing rolling the product out to its dealer channel as at the moment it is only available to this single client.

The realization of the deployments, if successful and if within a 10% range of standard RAD dealer pricing, will result in our recurring monthly revenues reaching approximately $800,000, and if achieved, would enable us to attain positive cash flow. As such, we will continue to focus on improving existing team members’ efficiency and productivity with a focus on retention. Achievement of the sales goals listed herein will require approximately 5% to 10% headcount growth in the production and deployment teams which could push back the goals of positive cash flow.

Several significant new clients are expected to receive their deployments in FY2024 and are expected to be public. Security is generally a private corporate function and we note that prior clients that have been publicized have been inundated with shareholder phone calls looking for further verification. It is for these reasons that we will continue to rarely pursue publicization of end users.

~~FY2024 will feature balancing efforts on cost savings with accelerated growth in order to increase probability of achieving targeted positive cash flow targets.~~

Management Discussion and Analysis

Results of Operations for the Three Months Ended ~~November 30,~~May 31, 2023 and 2022 ~~and 2021~~

The following table shows our results of operations for the three months ended ~~November 30, 2022~~May 31, 2023 and ~~2021.~~2022. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Period
Three Months
Ended Three Months
Ended Change
November 30, 2022 November 30, 2021 Dollars Percentage
Revenues $ 402,399 $ 373,897 $ 28,502 8%
Gross profit 276,439 230,473 45,966 20%
Operating expenses 3,090,941 5,118,000 (2,027,059 ) (40% )
Loss from operations (2,814,502 ) (4,887,527 ) 2,073,025 42%
Other income (expense), net (1,271,158 ) (2,206,915 ) 935,757 42%
Net income (loss) $ (4,085,660 ) $ (7,094,442 ) $ 3,008,782 42%

~~- 32 -~~

~~Table of Contents~~

	Period
	Three Months Ended			Three Months Ended			Change
	May 31, 2023			May 31, 2022			Dollars			Percentage
Revenues	$	385,208		$	385,157		$	51		0%
Gross profit		293,697			91,433			202,264		221%
Operating expenses		3,242,674			3,588,089			(345,415	)	(10%	)
Loss from operations		(2,948,977	)		(3,496,656	)		547,679		16%
Other income (expense), net		(1,606,216	)		(1,175,030	)		(431,186	)	(37%	)
Net loss	$	(4,555,193	)	$	(4,671,686	)	$	116,493		2%

Revenue

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

	Three Months Ended		Three Months Ended		Change					Three Months Ended		Three Months Ended		Change
	November 30, 2022		November 30, 2021		Dollars			Percentage		May 31, 2023		May 31, 2022		Dollars			Percentage
Device rental activities	$	154,628	$	165,353	$	(10,725	)	(6%	)	$	238,149	$	239,805	$	(1,656	)	(1%	)
Direct sales of goods and services		247,771		208,544		39,227		19%			147,059		145,352		1,707		1%
	$	402,399	$	373,897	$	28,502		8%		$	385,208	$	385,157	$	51		0%

Total revenue for the three-month period ended ~~November 30, 2022~~May 31, 2023 was ~~$402,399~~$385,208 which represented ana small increase of ~~$28,502~~$51 compared to total revenue of ~~$373,897~~$385,157 for the three months ended ~~November 30, 2021. This increase is a result of higher direct sales in the current year’s quarter.~~May 31, 2022.

Gross profit

Total gross profit for the three-month period ended ~~November 30, 2022~~May 31, 2023 was ~~$276,439,~~$293,697 which represented an increase of ~~$45,966~~$202,264 compared to gross profit of ~~$230,473~~ $91,433 for the three months ended ~~November 30, 2021.~~May 31, 2022. The ~~gross profit increased~~increase resulted primarily from inventory adjustments incurred in the prior three month period ended May 31, 2022 totaling $177,475. This was broken down as $152,475 in inventory adjustments due to shrinkage and obsolescence and a $25,000 increase in the ~~higher sales and variations in product mix sales.~~inventory provision to account for obsolescence. The gross profit % of ~~69%~~24% for the three-month period ended ~~November 30,~~May 31, 2022 was ~~higher~~lower than the gross profit % of ~~62%~~76% for the ~~prior year’s corresponding period.~~three month period ended May 31, 2023 due to inventory adjustments previously mentioned. After accounting for those inventory adjustments totaling $177,475, the adjusted gross profit for the three months ended May 31, 2022 would have been 70% for comparative purposes.

Operating Expenses

	Period									Period
	Three Months Ended		Three Months Ended		Change					Three Months Ended		Three Months Ended		Change
	November 30, 2022		November 30, 2021		Dollars			Percentage		May 31, 2023		May 31, 2022		Dollars			Percentage
Research and development	$	813,313	$	982,446	$	(169,133	)	(17%	)	$	891,757	$	1,023,735	$	(131,978	)	(13%	)
General and administrative		2,123,768		3,964,512		(1,840,744	)	(46%	)		2,120,433		2,400,392		(279,959	)	(12%	)
Depreciation and amortization		92,855		67,927		24,928		37%			167,942		93,995		73,947		79%
Operating lease cost and rent		61,005		103,115		(42,110	)	(41%	)		62,542		69,967		(7,425	)	(11%	)
Operating expenses	$	3,090,941	$	5,118,000	$	(2,027,059	)	(40%	)	$	3,242,674	$	3,588,089	$	(345,415	)	(10%	)

- 26 -

Table of Contents

Our operating expenses were comprised of general and administrative expenses, research and development, and depreciation. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the three-month period ended ~~November 30,~~May 31, 2023 and May 31, 2022, were $3,242,674 and ~~November 30, 2021, were $3,090,941 and $5,118,000,~~$3,588,089, respectively. The overall decrease of ~~$2,027,059~~$345,415 was primarily attributable to the following changes in operating expenses of:

●	General and administrative expenses decreased by ~~$1,840,744.~~$279,959. In the three months ended May 31, 2023 the Company undertook cost savings measures including a reduction in force. In comparing the three months ended ~~November 30,~~May 31, 2023 and May 31, 2022 ~~and November 30, 2021 this~~the decrease in G& A was primarily due to ~~the following decreases: stock based compensation of $819,500 for higher prior year charges based on the CEO incentive plan,~~decreases in wages and salaries ~~for prior year bonuses paid,~~of $50,527 due to reduction in force, stock-based compensation of $45,779, office expenses of $7,087, travel $43,876, production supplies by $85,246 and bad debts expense of ~~$25,785 and professional fees of $126,435.~~$89,000 due to fewer slow payers. These decreases were partially offset by ~~the following increases: insurance of $51,485 due to health plan for new employees and increased liability and property insurance due to new manufacturing facility, advertising ,~~increases in sales and marketing of ~~$82,893, subcontractor~~$62,731and professional fees of ~~$13,802, travel of $18,004, duty~~$61,631 mostly due compliance and ~~freight of $36,230 and bad debts expense due to a general provision of $40,000 on slow payers due to present economic factors.~~audit fees increase.

●	Research and development decreased by ~~$169,133~~$131,978 due to ~~higher activity~~a reduction in ~~the prior year in R&D design and equipment for the~~funding on development of ~~new products such as ROAMEO and AVA, as well as upgrades of existing~~future products. ~~That decrease was partially offset by an increase in research and development paid to a related party of $146,995.~~

●	Depreciation and amortization increased by ~~$24,928~~$73,947 due to ~~the acquisition of computer equipment and new~~large increases in revenue earning ~~devices.~~devoices , demo devices, tooling and computer equipment.

●	Operating lease cost and rent decreased by ~~$42,110~~$7,425 due to one less ~~office~~ lease ~~for the~~in three ~~months~~month period ended ~~November 30, 2022 comparing to the three months ended November 30, 2021.~~May 31, 2023.

~~- 33 -~~

~~Table of Contents~~

Other Income (Expense)

Other income (expense) consisted of ~~the change of fair value of derivative instruments, loss on settlement of debt and~~ interest. Other income (expense) during the three months ended ~~November 30,~~May 31, 2023 and May 31, 2022, ~~and November 30, 2021,~~ was ($~~1,271,158)~~1,606,216) and ($~~2,206,915)~~1,175,030), respectively. The ~~$935,757 decrease~~$431,186 increase in other expense ~~net~~ was primarily attributable to ~~reduced~~the increase in interest ~~expense.~~and amortization of debt due to higher loans.

●	~~Interest expense decreased by $779,096 due to a decrease in debt amortization expense. The three months ended November 30, 2021 had higher amortization due to debt settlements.~~

●	~~Loss on settlement of debt was $0 the quarter ended November 30, 2022 and $156,661 in the quarter ended November 30, 2022.~~

Net ~~loss~~incomes

We had a net loss of ~~$4,085,660~~$4,555,193 for the three months ended ~~November 30, 2022,~~May 31, 2023, compared to a net loss of ~~$7,094,442~~$4,671,686 for the three months ended November 30, 2021. The decrease in net loss of $3,008,782 is due to a number of factors: higher gross profit and lower general and administrative and other expense in the three months ended November 30,May 31, 2022.

~~Results of Operations for the Nine Months Ended November 30, 2022 and 2021~~

The following table shows our results of operations for the nine months ended November 30, 2022 and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

~~Revenue~~

Period
Nine Months
Ended Nine Months
Ended Change
November 30, 2022 November 30, 2021 Dollars Percentage
Revenues $ 1,055,040 $ 1,075,803 $ (20,763 ) (2% )
Gross profit 601,142 779,499 (178,357 ) (23% )
Operating expenses 10,090,732 11,102,944 (1,012,212 ) (9% )
Loss from operations (9,489,590 ) (10,323,445 ) 833,855 (8% )
Other income (expense), net (3,440,621 ) (37,508,288 ) 34,067,667 91%
Net loss $ (12,930,211 ) $ (47,831,733 ) $ 34,901,522 73%

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

�� Nine Months
Ended Nine Months
Ended Change
November 30, 2022 November 30, 2021 Dollars Percentage
Device rental activities $ 622,647 $ 383,434 $ 239,213 62%
Direct sales of goods and services 432,393 692,369 (259,976 ) (38% )
$ 1,055,040 $ 1,075,803 $ (20,763 ) (2% )

Total revenue for the nine-month period ended November 30, 2022 was $1,055,040 which represented a decrease of $20,763 compared to total revenue of $1,075,803 for the nine months ended November 30, 2021. The small decrease was a result of unusually large unit sales which includes sales of new units totaling $692,369 which occurred in the nine months ended November 30, 2021. This was partially offset by a 62% increase in rental activities increased as the Company continues to grow its rental business.

~~Gross profit~~

Total gross profit for the nine-month period ended November 30, 2022 was $601,142 which represented a decrease of $178,357, compared to gross profit of $779,449 for the nine months ended November 30, 2021. The decrease resulted both from lower revenues noted above as well as cost of sales increases in 2022 due to inventory changes. The gross profit percentage of 57% for the nine-month period ended November 30, 2022 was lower than the margin of 72% for the prior year’s corresponding period was primarily due to inventory adjustments due to shrinkage and obsolescence totaling $123,309, which occurred in the first quarter. Before these adjustments the gross profit % for the nine months ended November 30, 2022 would have been a comparable 69%.

~~- 34 -~~

~~Table of Contents~~

~~Operating Expenses~~

Period
Nine Months
Ended Nine Months
Ended Change
November 30, 2022 November 30, 2021 Dollars Percentage
Research and development $ 2,800,834 $ 2,316,383 $ 484,451 21%
General and administrative 6,762,602 8,455,224 (1,692,622 ) (20% )
Depreciation and amortization 332,643 153,261 179,382 117%
Operating lease cost and rent 194,653 207,201 (12,548 ) (6% )
(Gain) loss on disposal of fixed assets — (29,125 ) 29,125 100%
Operating expenses $ 10,090,732 $ 11,102,944 $ (1,012,212 ) (9% )

Our operating expenses were comprised of general and administrative expenses, research and development, and depreciation. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the nine-month period ended November 30, 2022 and November 30, 2021, were $10,090,732 and $11,102,944, respectively. The overall decrease of $1,012,212 was primarily attributable to the following changes in operating expenses of:

●	General and administrative expenses decreased by $1,692,622. In comparing the nine-months ended November 30, 2022 and November 30, 2021 may be partially explained by the following decreases: wages and salaries by $144,439, professional fees by $535,117, subcontractor fees $89,492 and stock-based compensation $1,677,050. These were partially offset by increases in the following accounts: sales and marketing by $314,098, travel by $115,122, insurance by $229,562, duty and freight by $66,067,bad debts expense $117,193, and office expense by $73,922.

●	Research and development increased by $484,451 due to funding development of new products as well as upgrades of existing products that mostly took place in the first two quarters of 2022. Included in that increase is the increase in research and development paid to a related party of $1,064,636. This increase was partially offset by the higher development costs incurred in equipment and design on new products for the nine-month period ended November 30, 2021.

●	~~Depreciation and amortization increased by $179,382 due to the acquisition of ERP computer software, computer equipment tooling, and 54 new revenue earning devices.~~

●	~~Operating lease cost and rent decreased by $12,548 due to the expiration of one lease in early fiscal 2022.~~

●	~~(Gain) loss on disposal of fixed assets increase by $29,125 due to a vehicle sold in the prior year.~~

~~Other Income (Expense)~~

~~Other income (expense) during the nine months ended November 30, 2022 and November 30, 2021, was ($3,440,621) and ($37,508,288), respectively. The $34,067,677 increase in other income was primarily attributable to the change in the fair value of derivatives, interest expense, and loss on settlement of debt.~~

●	In comparing the nine months ended November 30, 2022 and the nine months ended November 30, 2021, the change in fair value of derivative liabilities decreased by $368,907 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 as well as reductions in derivative liability as a result of settlements on the underlying debt.

●	~~Interest expense decreased by $1,364,269 due to the decrease in debt amortization expense. The three months ended November 30, 2021 had higher amortization due to debt settlements.~~

●	Gain (loss) on settlement of debt was $3,992 the nine months ended November 30, 2022 and ($33,068,313) in the nine months ended November 30, 2021. This current period the gain was a result of the reduction of the derivative liability , the prior year’s period has an amendment of the deferred variable payment obligation that led to a $33,015,215 loss which was partially offset by gains from accrued liabilities settlements and the debt exchange for common shares. This loss on settlement of debt was non-cash and has no effect on the cash flows of the Company.

~~- 35 -~~

~~Table of Contents~~

~~Net loss~~

~~We had a net loss of $12,930,211 for the nine months ended November 30, 2022, compared to a net loss of $47,831,733 for the nine months ended November 30, 2021.~~ The change is primarily the result of the loss on settlement in the ~~nine~~three months ended ~~November 30, 2021 as well as the lower general and administrative expenses and other items discussed above.~~May 31, 2021.

Liquidity, Capital Resources and Cash Flows

Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern. For the three months ended May 31, 2023, we have generated revenue and are trying to achieve positive cash flows from operations.

As of ~~November 30, 2022,~~May 31, 2023, we had a cash balance of ~~$713,493, net~~$287,202, accounts receivable of ~~$464,044, net~~$391,823, device parts inventory of ~~$1,573,380~~$1,489,429 and ~~$4,470,418~~$24,509,171 in current liabilities. At the current cash consumption rate, we will need to consider additional funding sources going forward. We are taking proactive measures to reduce operating expenses and drive growth in revenue.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

Capital Resources

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

	November 30, 2022			February 28, 2022		May 31, 2023			February 28, 2023
Current assets	$	3,423,711		$	7,050,436	$	2,689,955		$	3,438,992
Current liabilities		4,470,418			4,547,718		24,509,171			16,049,593
Working capital	$	(1,046,707	)	$	2,502,718	$	(21,819,216	)	$	(12,610,601	)

As of ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022,~~2023, we had a cash balance of ~~$713,493~~$287,202 and ~~$4,648,146,~~$939,759, respectively.

- 27 -

Table of Contents

Summary of Cash Flows

Summary of Cash Flows Nine Months
Ended
November 30, 2022 Nine Months
Ended
November 30, 2021
Net cash used in operating activities $ (9,883,272 ) $ (10,434,762 )
Net cash used in investing activities $ (217,601 ) $ (46,741 )
Net cash provided by financing activities $ 6,166,220 $ 13,540,949

	Three Months Ended May 31, 2023			Three Months Ended May 31, 2022
Net cash used in operating activities	$	(2,991,003	)	$	(3,621,572	)
Net cash used in investing activities	$	(3,463	)	$	(88,214	)
Net cash (used in) provided by financing activities	$	2,341,909		$	(16,731	)

Net cash used in operating activities.

Net cash used in operating activities for the ~~nine~~three months ended ~~November 30, 2022~~May 31, 2023 was ~~$9,883,272,~~$2,991,003, which included a net loss of ~~$12,930,211,~~$4,555,193, non-cash activity such as the bad debts expense of ~~$224,215, inventory provision $90,000,~~$16,000, reduction of right of use asset of ~~$84,298,~~$28,767, accretion of lease liability ~~$107,187,~~$33,775, stock based compensation of ~~$481,000,~~$115,721, change in ~~value~~operating assets of ~~derivative liabilities of ($3,595), gain on settlement of debt of ($3,992),~~$608,025, amortization of debt discount of ~~$1,094,388,~~$557,219, increase in related party accrued payroll and interest of ~~$9,720,~~$36,740 and depreciation and amortization of ~~$332,643 and change in operating assets of $631,074,~~$167,942 to derive the uses of cash in operations.

Net cash used in investing activities.

Net cash used in investing activities for the ~~nine~~three months ended ~~November 30, 2022~~May 31, 2023 was ~~$217,601,~~$3,463, which was the purchase of fixed ~~assets.~~assets,

Net cash provided by(used) in financing activities.

Net cash provided by financing activities was ~~$6,166,220~~$2,341,909 for the ~~nine~~three months ended ~~November 30, 2022.~~May 31, 2023. This consisted of share proceeds net of issuance costs of ~~$4,657,979, proceeds from convertible notes payable of $619,250,~~$1,318,909, and proceeds from loans payable of ~~$2,600,000,~~$1,050,000, reduced by repayments on loans payable of ~~$1,711,009.~~

~~- 36 -~~

~~Table of Contents~~$27,000.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended February 28, ~~2022,~~2023, as filed on ~~May 27, 2022.~~June 14, 2023.

Related Party Transactions

For both the ~~nine~~three months ended ~~November 30,~~May 31, 2023 and May 31, 2022 , the Company had no repayments of net advances from its loan payable-related party. ~~For the nine months ended November 30, 2021 the Company repaid net advances of $812,234.~~ At ~~November 30, 2022,~~May 31, 2023, the loan payable-related party was ~~$203,276~~$243,256 and ~~$193,556~~$206,516 at February 28, 2022. Included in the balance due to the related party at ~~November 30, 2022~~May 31, 2023 is ~~$126,744~~$139,250 of deferred salary and interest, ~~$108,000~~$133,000 of which bears interest at 12%. At February 28, ~~2022, included in the balance due to the related party is $110,700~~2023 there was $108,000 of deferred salary ~~and interest, $90,000 of which bears~~with $108,000 bearing interest at 12%. The accrued interest included in loan at ~~November 30,~~May 31, 2023 and February 28, 2022 was $19,275 and ~~November 30, 2021 was $12,420 and $540~~$15,660, respectively.

Pursuant to the amended Employment Agreement with its Chief Executive Officer, for the three months ~~and nine months~~ ended ~~November 30, 2022,~~May 31, 2023 the Company accrued ~~$138,000 and $362,500~~$63,000 (three months ended May 31 2022-$161,500) of incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met. This will be payable in Series G Preferred Shares which are redeemable at the Company’s option at $1,000 per share. At ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022~~2023 there was ~~$842,000~~$1,042,000 and ~~$479,500~~$979,000 of incentive compensation payable.

During the three months ended ~~November 30,~~May 31, 2023 and 2022, ~~and 2021,~~ the Company was charged ~~$794,460~~$882,015 and ~~$647.465,~~$1,001,734, respectively for fees for research and development from a company partially owned by a principal shareholder.

During the nine months ended November 30, 2022 and 2021, the Company was charged $2,735,589 and $1,689,253, respectively for fees for research and development from a company partially owned by a principal shareholder.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

- 28 -

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

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)) as of ~~November 30, 2022.~~May 31, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of ~~November 30, 2022,~~May 31, 2023, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us 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.

	1.	As of ~~November 30, 2022,~~May 31, 2023, we did not maintain effective controls over our control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

	2.	As of ~~November 30, 2022,~~May 31, 2023, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

~~- 37 -~~

~~Table of Contents~~

Our management, including our principal executive officer and principal financial officer, do 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.

Change in Internal Controls over Financial Reporting

The only change in internal controls was the implementation of the Company’s new CRM/ERP/Accounting software. This change in our internal controls over financial reporting that occurred during the period covered by this report, should not have materially affected, or is not reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

This item is not applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Each issuance of securities was issued without registration in reliance of the exemption from registration Section 3(a)9 of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has not defaulted upon senior securities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to the Company.

- 29 -

Table of Contents

ITEM 5. OTHER INFORMATION

None.

~~- 38 -~~

~~Table of Contents~~

ITEM 6. EXHIBITS

Exhibit No.	Description of Document

3.1	Articles of Incorporation (1)

3.2	Bylaws (2)

14	Code of Ethics (2)

21	Subsidiaries of the Registrant (3)

31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. (3)

31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. (3)

32.1	Section 1350 Certification of principal executive officer. (3)

32.2	Section 1350 Certification of principal financial accounting officer. (3)

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. (3)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (3)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (3)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (3)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (3)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (3)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (3)

__________

(1)	Incorporated by reference to our Form 10-KT file with the Securities and Exchange Commission on March 12, 2018.

(2)	Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010.

(3)	Filed or furnished herewith.

SIGNATURES

Pursuant to the requirements 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: ~~January 20,~~July 17, 2023	BY: /s/ Steven Reinharz
	Steven Reinharz
	President, Chief Executive Officer (principal executive officer)


Date: ~~January 20,~~July 17, 2023	BY: /s/ Anthony Brenz
	Anthony Brenz
	Chief Financial Officer (principal financial officer)

- 3930 -

Nevada		27-2343603
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

10800 Galaxie Avenue Ferndale, MI		48220
(Address of principal executive offices)		(Zip code)

Large accelerated filer	[_]	Accelerated filer	[_]

Non-accelerated filer	[X]	Smaller reporting company	[X]
		Emerging growth company	[__]]

		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of ~~November 30, 2022~~May 31, 2023 and February 28, ~~2022~~2023 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three Months Ended May 31, 2023 and ~~Nine Months Ended November 30,~~ 2022 ~~and 2021~~ (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the ~~Nine~~Three Months Ended ~~November 30,~~May 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	~~5-6~~5

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~November 30,~~May 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	76

	Notes to the Consolidated Financial Statements (Unaudited)	87-24

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3025

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3728

ITEM 4.	Controls and Procedures	3729

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	3829

ITEM 1A.	Risk Factors	3829

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3829

ITEM 3.	Defaults Upon Senior Securities	3829

ITEM 4.	Mine Safety Disclosures	3829

ITEM 5.	Other Information	3830

ITEM 6.	Exhibits	3830

SIGNATURES		3830

				^*							^*
	November 30, 2022 (Unaudited)			February 28, 2022^*			May 31, 2023			February 28, 2023^*
ASSETS
Current assets:
Cash	$	713,493		$	4,648,146		$	287,202		$	939,759
Accounts receivable, net		464,044			429,469			391,823			265,024
Device parts inventory, net		1,573,380			1,530,657			1,489,429			1,637,899
Prepaid expenses and deposits		672,794			442,164			521,501			596,310
Total current assets		3,423,711			7,050,436			2,689,955			3,438,992
Operating lease asset		1,241,152			1,331,605			1,179,673			1,208,440
Revenue earning devices, net of accumulated depreciation of $676,615 and $434,661, respectively		1,092,203			709,063
Fixed assets, net of accumulated depreciation of $139,751 and $49,065, respectively		312,307			137,952
Revenue earning devices, net of accumulated depreciation of $902,680 and $778,839, respectively								1,556,790			1,235,219
Fixed assets, net of accumulated depreciation of $227,103 and $182,002, respectively								302,960			315,888
Trademarks		28,723			28,723			27,080			27,080
Investment at cost								50,000			50,000
Security deposit		21,239			21,239			21,239			21,239
Total assets	$	6,119,335		$	9,279,018		$	5,827,697		$	62,96,858

LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	1,166,171		$	968,853		$	1,336,023		$	1,343,379
Advances payable		1,594			1,594
Advances payable- related party								1,594			1,594
Customer deposits		2,383			10,000			36,460			9,900
Current operating lease liability		111,985			254,027			244,169			248,670
Current portion of deferred variable payment obligation		497,150			325,600			604,811			542,177
Current portion of convertible notes payable, net of discount of $433,932 and $0, respectively		316,068			3,500
Loan payable - related party		203,276			193,556			243,256			206,516
Incentive compensation plan payable		842,000			479,500			1,042,000			979,000
Current portion of loans payable, net of discount of $158,194 and $14,745, respectively		1,240,306			1,004,708
Current portion of loans payable, net of discount of $1,348,996 and $1,651,597								16,220,989			9,918,389
Vehicle loan - current portion		38,522			38,522			38,522			38,522
Current portion of accrued interest payable		50,963			1,260,271			4,741,347			2,761,446
Derivative liability		—			7,587
Total current liabilities		4,470,418			4,547,718			24,509,171			16,049,593
Non-current operating lease liability		1,115,323			1,057,579			926,274			950,541
Loans payable, net of discount of $5,378,890 and $4,905,076, respectively		23,728,956			20,309,069
Loans payable, net of discount of $4,973,120 and $4,130,291, respectively								9,884,241			15,554,069
Deferred variable payment obligation		2,525,000			2,525,000			2,525,000			2,525,000
Accrued interest payable		4,775,150			1,816,009			2,062,128			3,060,656
Total liabilities		36,614,847			30,255,375			39,906,814			38,139,859

Commitments and Contingencies
Stockholders’ deficit:
Preferred Stock, undesignated; 15,545,650 shares authorized; no shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively		—			—
Stockholders' deficit:
Preferred Stock, undesignated; 15,545,650 shares authorized; no shares issued and outstanding at May 31, 2023 and February 28, 2023, respectively								—			—
Series G Convertible Preferred Stock. $0.001 par value; 100,000 shares authorized, no shares issued and outstanding at May 31, 2023 and February 28, 2023, respectively								—			—
Series E Preferred Stock, $0.001 par value; 4,350,000 shares authorized; 3,350,000 and 3,350,000 shares issued and outstanding, respectively		3,350			3,350			3,350			3,350
Series F Convertible Preferred Stock, $1.00 par value; 4,350 shares authorized; 2,533 and 2,532 shares issued and outstanding, respectively		2,533			2,532
Series G Preferred Stock, $0.001 par value; 4,350,000 shares authorized, no shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively		—			—
Common Stock, $0.00001 par value; 6,000,000,000 shares authorized 5,260,515,892 and 4,735,210,360 shares issued, issuable and outstanding, respectively		52,607			47,353
Series F Convertible Preferred Stock, $1.00 par value; 4,350 shares authorized; 2,533 and 2,533 shares issued and outstanding, respectively								2,533			2,533
Common Stock, $0.00001 par value; 7,225,000,000 shares authorized 6,129,670,689 and 5,848,741,599 shares issued, issuable and outstanding, respectively								61,298			58,489
Additional paid-in capital		76,421,377			73,015,576			82,563,520			80,247,252
Preferred stock to be issued		99,086			99,086			99,086			99,086
Accumulated deficit		(107,074,465	)		(94,144,254	)		(116,808,904	)		(112,253,711	)
Total stockholders’ deficit		(30,495,512	)		(20,976,357	)
Total liabilities and stockholders’ deficit	$	6,119,335		$	9,279,018
Total stockholders' deficit								(34,079,117	)		(31,843,001	)
Total liabilities and stockholders' deficit							$	5,827,697		$	6,296,858


	Three Months Ended November 30, 2022			Three Months Ended November 30, 2021			Nine Months Ended November 30, 2022			Nine Months Ended November 30, 2021			Three Months Ended May 31, 2023			Three Months Ended May 31, 2022

Revenues	$	402,399		$	373,897		$	1,055,040		$	1,075,803		$	385,208		$	385,157

Cost of Goods Sold		125,960			143,424			453,898			296,304			91,511			293,724

Gross Profit		276,439			230,473			601,142			779,499			293,697			91,433

Operating expenses:
Research and development (Note 10)		813,313			982,446			2,800,834			2,316,383
Research and development (including related party charges of $882,015 (2022-$1,001,734))														891,757			1,023,735
General and administrative		2,123,768			3,964,512			6,762,602			8,455,224			2,120,433			2,400,392
Depreciation and amortization		92,855			67,927			332,643			153,261			167,942			93,995
Operating lease cost and rent		61,005			103,115			194,653			207,201			62,542			69,967
(Gain) loss on disposal of fixed assets		—			—			—			(29,125	)
Total operating expenses		3,090,941			5,118,000			10,090,732			11,102,944			3,242,674			3,588,089

Loss from operations		(2,814,502	)		(4,887,527	)		(9,489,590	)		(10,323,445	)		(2,948,977	)		(3,496,656	)

Other income (expense), net:
Change in fair value of derivative liabilities		—			—			3,595			372,502
Interest expense		(1,271,158	)		(2,050,254	)		(3,448,208	)		(4,812,477	)		(1,606,216	)		(1,175,030	)
Gain (loss) on settlement of debt		—			(156,661	)		3,992			(33,068,313	)
Total other income (expense), net		(1,271,158	)		(2,206,915	)		(3,440,621	)		(37,508,288	)		(1,606,216	)		(1,175,030	)

Net Loss	$	(4,085,660	)	$	(7,094,442	)	$	(12,930,211	)	$	(47,831,733	)
Net income (loss)													$	(4,555,193	)	$	(4,671,686	)

Net income (loss) per share - basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

Net income ( loss) per share - diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Net income (loss) per share - diluted													$	(0.00	)	$	(0.00	)

Weighted average common share outstanding - basic		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,783			5,964,709,322			4,798,657,871

Weighted average common share outstanding - diluted		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,783			5,964,709,322			4,798,657,871


	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	4,350,000			4,350		2,799			176,869		—		$	—		3,229,426,884	$	32,294	$	16,764,554		$	(31,521,754	)	$	(14,543,687	)
Series F Preferred Shares issued with amendment agreement	—			—		40			40							—		—		3,244,700			—			3,244,740
Series F Preferred Shares Warrants issued with amendment agreement	—			—		—			—		—			—		—		—		29,770,474			—			29,770,474
Series F Preferred Shares cancelled in exchange for promissory notes	—			—		(83	)		(83	)	—			—		—		—		(6,732,752	)		—			(6,732,835	)
Series F preferred shares issued on exercise of warrants	—			—		38			38		—			—		—		—		(38	)		—			—
Series F Preferred Shares converted to common shares	—			—		(78	)		(78	)	—			—		316,345,998		3,164		(3,086	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		4,749,006			—			4,749,006
Stock based compensation	—			—		—			—							—		—		69,350			—			69,350
Net income	—			—		—			—		—			—		—		—		—			(35,904,918	)		(35,904,918	)
Balance at May 31, 2021	4,350,000		$	4,350		2,716		$	176,786		—		$	—		3,545,772,882	$	35,458	$	47,862,208		$	(67,426,672	)	$	(19,347,870	)
Adjustment to derivative liability	—			—		—			—		—			—		—		—		422,272			—			422,272
Common stock issued for debt conversion	—			—		—			—		—			—		31,042,436		310		898,395			—			898,705
Exercise of warrants	—			—		—			—		—			—		300,251,561		3,003		(3,003	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		2,035,033			—			2,035,033
Cancellation of Series E Shares	(1,000,000	)		(1,000	)	—			—		—			—		—		—		1,000			—			—
Exchange of debt for common shares	—			—		—			—		—			—		116,104,232		1,161		6,454,235			—			6,455,396
Stock based compensation on issuable shares	—			—		—			—		—			—		2,100,000		21		109,179			—			109,200
Exchange of Series F Preferred Shares for debt	—			—		(184	)		(184	)	—			—		—		—		(3,999,976	)		—			(4,000,160	)
Net income	—			—		—			—		—			—		—		—		—			(4,832,373	)		(4,832,373	)
Balance at August 31, 2021	3,350,000		$	3,350		2,532		$	176,602		—		$	—		3,995,271,111	$	39,953	$	53,779,343		$	(72,259,045	)	$	(18,259,797	)
Issuance of shares, net of $253,811 issuance costs	—			—		—			—		—			—		345,168,473		3,452		8,466,551			—			8,470,003
Cashless exercise of 100,000,000 warrants	—			—		—			—		—			—		94,770,776		948		(948	)		—			—
Relative fair value of warrants issued with debt	—			—		—			—		—			—		—		—		1,284,783			—			1,284,783
Redemption of 19 Issuable Series F shares	—			—		—			(74,984	)	—			—		—		—		—			(425,016	)		(500,000	)
Issuance of Series G preferred as equity awards per employment agreement	—			—		—			—		1,500			1,500,000		—		—		—			—			1,500,000
Redemption of Series G shares as compensation payment	—			—		—			—		(1,500	)		(1,500,000	)	—		—		—			—			(1,500,000	)
Net income	—			—		—			—		—			—		—		—		—			(7,094,442	)		(7,094,442	)
Balance at November 30, 2021	3,350,000		$	3,350		2,532		$	101,618		—		$	—		4,435,210,360	$	44,353	$	63,529,729		$	(79,778,503	)	$	(16,099,453	)


	Series E			Series F						Additional						Total
	Preferred Stock			Preferred Stock			Common Stock			Paid-In			Accumulated			Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital			Deficit			Deficit
Balance at February 28, 2022	3,350,000	$	3,350	2,532	$	101,618	4,735,210,360	$	47,353	$	73,015,576		$	(94,144,254	)	$	(20,976,357	)
Issuance of shares, net of $117,157 issuance costs	—		—	—		—	133,881,576		1,339		1,643,883			—			1,645,222
Relative fair value of Series F warrants issued with loans payable
Rounding	—		—	—		—	—		—		(1	)		—			(1	)
Stock based compensation
Net income	—		—	—		—	—		—		—			(4,671,686	)		(4,671,686	)
Balance at May 31, 2022	3,350,000	$	3,350	2,532	$	101,618	4,869,091,936	$	48,692	$	74,659,458		$	(98,815,940	)	$	(24,002,822	)



Balance at February 28, 2023	3,350,000	$	3,350	2,533	$	101,619	5,848,741,599	$	58,489	$	80,247,252		$	(112,253,711	)	$	(31,843,001	)
Issuance of shares, net of $81,285 issuance costs	—		—	—		—	280,929,190		2,809		1,316,100			—			1,318,909
Relative fair value of Series F warrants issued with loans payable	—		—	—		—	—		—		947,447			—			947,447
Rounding
Stock based compensation	—		—	—		—	—		—		52,721			—			52,721
Net income	—		—	—		—	—		—		—			(4,555,193	)		(4,555,193	)
Balance at May 31, 2023	3,350,000	$	3,350	2,533	$	101,619	6,129,670,789	$	61,298	$	82,563,520		$	(116,808,904	)	$	(34,079,117	)


	Three Months Ended May 31, 2023			Three Months Ended May 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(4,555,193	)	$	(4,671,686	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		167,942			93,995
Bad debts expense		16,000			105,000
Inventory provision		—			25,000
Reduction of right of use asset		28,767			30,046
Accretion of lease liability		33,775			36,355
Stock based compensation		115,721			161,500
Amortization of debt discounts		557,219			415,029
Increase in related party accrued payroll and interest		36,740			3,240
Changes in operating assets and liabilities:
Accounts receivable		(142,799	)		(40,251	)
Prepaid expenses and deposits on inventory		74,809			126,610
Device parts inventory		(324,652	)		(283,209	)
Accounts payable and accrued expenses		(7,354	)		101,557
Customer deposits		26,560			(10,000	)
Operating lease liability payments		(62,542	)		(66,401	)
Current portion of deferred variable payment obligations for payments		62,634			62,627
Accrued interest payable		981,370			289,016
Net cash used in operating activities		(2,991,003	)		(3,621,572	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(3,463	)		(88,214	)
Net cash (used in) investing activities		(3,463	)		(88,214	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Share proceeds net of issuance costs		1,318,909			1,645,222
Proceeds from loans payable		1,050,000			—
Repayment of loans payable		(27,000	)		(1,661,953	)
Net cash provided by (used in) financing activities		2,341,909			(16,731	)

Net change in cash		(652,557	)		(3,726,517	)

Cash, beginning of period		939,759			4,648,146

Cash, end of period	$	287,202		$	921,629

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	1,375		$	342,138
Cash paid for income taxes	$	—		$	—

Noncash investing and financing activities:
Transfer from device parts inventory to fixed assets	$	473,122		$	179,,619
Discount applied to face value of loans	$	150,000		$	—
Series F warrants issued as part of debt issuance	$	947,447		$	—


	Nine Months Ended November 30, 2022			Nine Months Ended November 30, 2021
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss	$	(12,930,211	)	$	(47,831,733	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		332,643			153,261
Revenue earning device sold and expensed in cost of sales		—			3,410
Bad debts expense		224,215			107,022
Inventory provision		90,000			—
Reduction of right of use asset		84,298			75,609
Accretion of lease liability		107,187			86,350
(Gain) loss on disposal of fixed assets		—			(29,125	)
Stock based compensation		481,000			2,158,050
Change in fair value of derivative liabilities		(3,595	)		(372,502	)
Interest expense related to penalties from debt defaults		—			—
Amortization of debt discounts		1,094,388			2,700,233
(Gain) loss on settlement of debt		(3,992	)		33,068,313
Increase in related party accrued payroll and interest		9,720			220,140
Changes in operating assets and liabilities:
Accounts receivable		(258,790	)		(289,485	)
Prepaid expenses		(224,476	)		(392,811	)
Deposits on right of use asset		—			(18,462	)
Device parts inventory		(805,257	)		(1,864,340	)
Accounts payable and accrued expenses		197,317			177,240
Accrued expense -related party		—			(178,478	)
Customer deposits		(7,617	)		(500	)
Operating lease liabilities		(191,485	)		(161,959	)
Current portion of deferred variable payment obligation for payments		171,550			173,640
Balance owed WeSecure		—			(122,000	)
Accrued interest payable		1,749,833			1,903,365
Net cash used in operating activities		(9,883,272	)		(10,434,762	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets		(217,601	)		(34,534	)
Acquisition of trademarks		—			(26,327	)
Proceeds on disposal of fixed assets		—			30,000
Cash paid for security deposit		—			(15,880	)
Net cash used in investing activities		(217,601	)		(46,741	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Share proceeds net of issuance costs		4,657,979			7,463,654
Proceeds from loans payable		2,600,000			9,426,146
Repayment of loans payable		(1,711,009	)		(471,617	)
Proceeds from convertible debt and warrants issued		619,250			—
Repayment of convertible debt		—			(65,000	)
Series G preferred shares redeemed as payment on incentive plan payable		—			(1,500,000	)
Dividend and redemption of cancelled issuable Series F preferred shares		—			(500,000	)
Net borrowings (repayments) on loan payable - related party		—			(812,234	)
Net cash provided by financing activities		6,166,220			13,540,949

Net change in cash		(3,934,653	)		3,059,446

Cash, beginning of period		4,648,146			1,044,418

Cash, end of period	$	713,493		$	4,103,864

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	405,117		$	165,163
Cash paid for income taxes	$	—		$	—

Noncash investing and financing activities:
Right of use asset for operating lease liability	$	—		$	1,341,506
Transfer from device parts inventory to revenue earning devices	$	672,534		$	592,346
Conversion of convertible notes and interest to shares of common stock	$	—		$	898,705
Release of derivative liability on conversion of convertible notes payable	$	—		$	422,272
Derivative debt discount on re-valuation on loan amendment	$	—		$	438,835
Exchange of notes payable for Series F preferred shares	$	—		$	6,732,835
Exchange of warrants for debt	$	3,000,000		$	—
Discount applied to face value of loans	$	434,500		$	6,162,945
Warrants issued as part of debt	$	—		$	8,068,822
Exercise of warrants	$	97		$	3,951
Series F preferred shares and warrants issued for debt	$	1,240,628		$	4,000,160
Issuance of Series G preferred shares as payment of incentive plan payable	$	—		$	1,500,000
Cancellation of Series E preferred shares and common shares	$	171		$	1,000
Series F preferred shares converted to common shares	$	—		$	3,086
Series F preferred shares issued on exercise of warrants	$	—		$	38

				Balance			Balance
		Interest	Conversion	November 30,			February 28,
Issued	Maturity	Rate	Rate per Share	2022			2022
July 18, 2016	July 18, 2017^*	8%	$0.003⁽¹⁾	$	—		$	3,500
August 9, 2022	August 9, 2023	12%	$0.009⁽²⁾		750,000			—
				$	750,000		$	3,500

(Less): current portion of convertible notes payable					(750,000	)		(3,500	)
(Less): discount on noncurrent convertible notes payable					—			—
Noncurrent convertible notes payable, net of discount				$	—		$	—

Current portion of convertible notes payable				$	750,000		$	3,500
(Less): discount on current portion of convertible notes payable					(433,932	)		—
Current portion of convertible notes payable, net of discount				$	316,068		$	3,500

							Annual
Date	Maturity	Description		Principal			Interest Rate
July 18, 2016	July 18, 2017	Promissory note	(35) *	$	3,500		22%
June 11, 2018	June 11, 2019	Promissory note	(2) (#)		—		25%
January 31, 2019	June 30, 2019	Promissory note	(1) (#)		—		15%
May 9, 2019	June 30, 2019	Promissory note	(3) (#)		—		15%
May 31, 2019	June 30, 2019	Promissory note	(4) (#)		—		15%
June 26, 2019	June 26, 2020	Promissory note	(5) (#)		—		15%
September 24, 2019	June 24, 2020	Promissory note	(6) (#)		—		15%
January 30, 2020	January 30, 2021	Promissory note	(7) (#)		—		15%
February 27, 2020	February 27, 2021	Promissory note	(8) (#)		—		15%
April 16, 2020	April 16, 2021	Promissory note	(9) (#)		—		15%
May 12, 2020	May 12, 2021	Promissory note	(11) (#)		—		15%
May 22, 2020	May 22, 2021	Promissory note	(12) (#)		—		15%
June 2, 2020	June 2, 2021	Promissory note	(13) (#)		—		15%
June 9, 2020	June 9, 2021	Promissory note	(14) (#)		—		15%
June 12, 2020	June 12, 2021	Promissory note	(15) (#)		—		15%
June 16, 2020	June 16, 2021	Promissory note	(16) (#)		—		15%
September 15, 2020	September 15, 2022	Promissory note	(17) (#)		—		10%
October 6, 2020	March 6, 2023	Promissory note	(18) (#)		—		12%
November 12, 2020	November 12, 2023	Promissory note	(19) (#)		—		12%
November 23, 2020	October 23, 2022	Promissory note	(20) (#)		—		15.5%
November 23, 2020	November 23, 2023	Promissory note	(21) (#)		—		15%
December 10, 2020	December 10, 2023	Promissory note	(22) (#)		—		12%
December 10, 2020	December 10, 2023	Promissory note	(23)		3,921,168		12%
December 10, 2020	December 10, 2023	Promissory note	(24)		3,054,338		12%
December 10, 2020	December 10, 2023	Promissory note	(25)		165,605		12%
December 14, 2020	December 14, 2023	Promissory note	(26)		310,375		12%
December 30, 2020	December 30, 2023	Promissory note	(27)		350,000		12%
December 31, 2021	December 31, 2024	Promissory note	(28)		25,000		12%
December 31, 2021	December 31, 2024	Promissory note	(29)		145,000		12%
January 14, 2021	January 14, 2024	Promissory note	(30)		550,000		12%
February 22, 2021	February 22, 2024	Promissory note	(31)		1,650,000		12%
March 1, 2021	March 1, 2024	Promissory note	(10)		6,000,000		12%
June 8, 2021	June 8, 2024	Promissory note	(32)		2,750,000		12%
July 12, 2021	July 26, 2026	Promissory note	(33)		3,936,360		7%
September 14, 2021	September 14, 2024	Promissory note	(34)		1,650,000		12%
July 28, 2022	July 28, 2023	Promissory note	(36)		170,000		15%
August 30, 2022	August 30,2024	Promissory note	(38)		3,000,000		15%
September 7, 2022	September 7, 2023	Promissory note	(37)		400,000		15%
September 8, 2022	September 8, 2023	Promissory note	(39)		475,000		15%
October 13, 2022	October 13, 2023	Promissory note	(40)		350,000		15%
October 28, 2022	October 31, 2026	Promissory note	(41)		400,000		15%
November 9, 2022	October 31, 2026	Promissory note	(41)		400,000		15%
November 10, 2022	October 31, 2026	Promissory note	(41)		400,000		15%
November 15, 2022	October 31, 2026	Promissory note	(41)		400,000		15%
				$	30,506,346

Less: current portion of loans payable					(1,398,500	)
Less: discount on non-current loans payable					(5,378,890	)
Non-current loans payable, net of discount				$	23,728,956

Current portion of loans payable				$	1,398,500
Less: discount on current portion of loans payable					(158,194	)
Current portion of loans payable, net of discount				$	1,240,306

	Number of Series C Preferred Warrants	Weighted Average Exercise Price	Weighted Average Remaining Years
Outstanding at March 1, 2022	329	$1.00	11.50
Issued	244	$1.00	10.00
Exercised	—	—	—
Forfeited and cancelled	—	—	—
Outstanding at November 30, 2022	573	$1.00	10.00

Maturity of Lease Liabilities	Operating Leases
November 30, 2023	$	250,169
November 30, 2024		229,016
November 30, 2025		207,558
November 30, 2026		207,558
November 30, 2027		207,558
November 30, 2028 and after		709,156
Total lease payments		1,811,015
Less: Interest		(583,707	)
Present value of lease liabilities	$	1,227,308


	For the Three Months Ended						For the Nine Months Ended
	November 30,						November 30,
	2022			2021			2022			2021
Numerator:
Net income (loss) available to common shareholders	$	(4,085,660	)	$	(7,094,442	)	$	(12,930,211	)	$	(47,831,733	)

Effect of common stock equivalents
Add: interest expense on convertible debt		22,438			38,345			27,863			63,299
Add: amortization of debt discount		78,149			694,855			90,767			775,986
Add (less) loss (gain) on settlement of debt		—			—			(3,992	)		—
Add (less) loss (gain) on change of derivative liabilities		—			—			(3,595	)		372,502
Net income (loss) adjusted for common stock equivalents		(3,985,073	)		(6,361,242	)		(12,819,168	)		(46,619,946	)

Denominator:
Weighted average shares – basic		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,723

Net income (loss) per share – basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

Dilutive effect of common stock equivalents:
Convertible Debt		—			—			—			—
Preferred shares		—			—			—			—
Warrants		—			—			—			—
		—			—			—			—

Denominator:
Weighted average shares – diluted		5,140,405,652			4,183,357,145			4,969,080,716			4,162,382,723

Net income (loss) per share – diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

	For the Three and Nine Months Ended
	November 30
	2022	2021

Convertible Series F Preferred Shares	18,148,779,827	15,294,230,742

	Period
	Nine Months Ended			Nine Months Ended			Change
	November 30, 2022			November 30, 2021			Dollars			Percentage
Revenues	$	1,055,040		$	1,075,803		$	(20,763	)	(2%	)
Gross profit		601,142			779,499			(178,357	)	(23%	)
Operating expenses		10,090,732			11,102,944			(1,012,212	)	(9%	)
Loss from operations		(9,489,590	)		(10,323,445	)		833,855		(8%	)
Other income (expense), net		(3,440,621	)		(37,508,288	)		34,067,667		91%
Net loss	$	(12,930,211	)	$	(47,831,733	)	$	34,901,522		73%

��	Nine Months Ended		Nine Months Ended		Change
	November 30, 2022		November 30, 2021		Dollars			Percentage
Device rental activities	$	622,647	$	383,434	$	239,213		62%
Direct sales of goods and services		432,393		692,369		(259,976	)	(38%	)
	$	1,055,040	$	1,075,803	$	(20,763	)	(2%	)