The Company and its subsidiaries have been able to attract highly qualified and experienced individuals to help in research and development, procurement, manufacturing, shipping and customer support. Staffing at RAD I, RAD M, and RAD G increased from 18 full time and 4 part-time employees and contract employees at the end of February 2020 to 50 as of May 9, 2021.
Continually expanding its marketability, RAD has formed several symbiotic relationships, meant to enhance the company’s and products’ performance and reach. Notable announced partnerships include:
In fiscal year 2021, RAD undertook two major production investments. First, it initially expanded its facilities in southern California, and it then announced a major expansion to a 30,000 square foot facility near Detroit, Michigan. The new Michigan facility, dubbed REX (RAD Excellence Center) is expected to be fully operational by the end of June 2021, staffed with up to 75 employees.
RAD has issued 2 formal case studies, published in their related industry trade publications. These document the verifiable contributions that the clients’ RAD units have made to enhance their property’s security profile, while reducing overall costs. Excerpts from the case studies include:
The future implementation of such case studies will advance RAD’s reach into new vertical markets. Published case studies include:
See Item 3 - Legal Proceedings.
ITEM 1A. RISK FACTORS
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We maintain our corporate offices at 701 North Green Valley Parkway, Suite 200, Henderson, Nevada, 89704 pursuant to a month-to-month lease. Our annual rental cost for this facility is approximately $936 per year. RAD maintains a mailing address of 31103 Ranch Viejo Road, Suite D2114, San Juan Capistrano, CA 92675, USA for a nominal fee of $264 per year. RAD entered into a 15-month lease at 18009 Sky Park Circle Suite E , Irvine, California 92614, that began on December 18, 2020 and terminates on March 31, 2022, at annual cost of $46,308. This property is used as the West Coast Sales and Service Center. The lease is not renewable.
On March 10, 2021 the Company entered into a ten-year lease of a 29,316 square foot building located at 10800 Galaxie Avenue, Ferndale, Michigan 48220. The lease began on May 1, 2021. These premises are being used for offices, manufacturing and distribution. The annual rental cost for this facility is approximately $190,000, plus a proportionate share of operating expenses of approximately $28,000 annually
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There are no legal proceedings pending at this time.
In April 2019 the principals of WeSecure filed lawsuit in California Superior Court seeking damages for non-payment of the remaining balance from the sale of WeSecure assets. In June 2019, the case was settled for $180,000, payable in 14 monthly installments. The final installment totaling $25,000, unpaid consulting fees payable to the two principals through to September 2019 totaling $125,924, and labor code violations of $48,434 all totaling $199,358 plus attorney’s fees and damages. The parties finally settled all claims with a full release for $180,000 in June 2019 payable in 14 monthly installments. The final $122,000 payment was made in March 2021.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
AITX’s common stock began trading on the “Over the Counter” Bulletin Board (“OTC”) under the symbol “AITX” in June 2011 and as AITX on August 24, 2018. The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter market, as reported and summarized by OTC Markets Group, Inc. On August 24, 2018, the Company undertook a 100:1 reverse stock split and on March 27, 2020 a 10,000:1 reverse split. The share capital has been retrospectively adjusted accordingly to reflect this reverse stock split, except for the conversion price of certain convertible notes as the conversion price is not subject to adjustment from forward and reverse stock splits.
These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions. There is an absence of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile, which may affect the prices listed below.
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| | | | | | |
| | High | | Low |
Fiscal Year Ended February 28, 2021: | | | | | | |
Quarter ended February 28, 2021 | | $ | 0.29 | | $ | 0.00 |
Quarter ended November 30, 2020 | | $ | 0.01 | | $ | 0.00 |
Quarter ended August 31, 2020 | | $ | 0.10 | | $ | 0.00 |
Quarter ended May 31, 2020 | | $ | 2.00 | | $ | 0.03 |
| | | | | | |
Fiscal Year Ended February 29, 2020: | | | | | | |
Quarter ended February 29, 2020 | | $ | 2.00 | | $ | 0.50 |
Quarter ended November 30, 2019 | | $ | 3.00 | | $ | 0.50 |
Quarter ended August 31, 2019 | | $ | 61.00 | | $ | 2.00 |
Quarter ended May 31, 2019 | | $ | 67.00 | | $ | 12.00 |
On May 11, 2021, the closing price per share of the Company’s common stock as quoted on the OTC was $0.08.
Dividends
To date, we have not paid dividends on shares of the Company’s common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, AITX’s financial condition, and other factors deemed relevant by its Board of Directors.
Holders of Common Stock
As of May 12, 2021, there were 12 holders of AITX’s common stock of which 12 were active. The number of foregoing holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Common Stock
The Company is authorized to issue 5,000,000,000 shares of common stock, with a par value of $0.00001. The closing price of its common stock on May 11, 2021, as quoted by OTC Markets Group, Inc., was $0.0752. There were 3,545,772,882 shares of common stock issued and outstanding as of May 11, 2021. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of its assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.
Our Articles of Incorporation, Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders of our securities.
During the years ended February 28, 2021 and February 29, 2020, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
On August 24, 2018, the Company undertook a 100:1 reverse stock split and on March 27, 2020 the Company undertook a 10,000:1 reverse stock split. The share capital has been retrospectively adjusted accordingly to reflect this reverse stock split, except for the conversion price of certain convertible notes as the conversion price is not subject to adjustment from forward and reverse stock splits.
Non-cumulative voting
Holders of shares of the Company’s common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
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Securities Authorized for Issuance under Equity Compensation Plans
On April 14, 2021 the Company adopted an Incentive Stock Plan where full details are disclosed in Exhibit 10.1 of the Company’s 8K filing of April 20,2021. Under the plan the Company may grant options to service providers and employees to acquire up to 5,000,000 shares of the Company’s common stock. The options will be under the varying terms and conditions of an agreement but the exercise price cannot be lower than 100% to 110% of the fair value of the stock at date of grant and the term of the grant can be no longer than 5 years.
As of the date of this filing , no grants have been issued under this plan.
The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance.
| | | | | | |
Plan Category | | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance |
Equity compensation plans approved by security holders. | | — | | — | | 1 |
| | | | | | |
Equity compensation plans not approved by security holders. | | — | | — | | — |
| | | | | | |
Total | | — | | — | | 1 |
Preferred Stock
The Company is authorized to issue up to 20,000,000 shares of $0.001 par value preferred stock. The board of directors is authorized to designate any series of preferred stock up to the total authorized number of shares.
Series E Preferred Stock
The Board of Directors has designated 4,350,000 shares of Series E Preferred Stock. As of the date of this report, there are 4,350,000 shares of Series E Preferred Stock outstanding. The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation. The Series E preferred stock is non-redeemable, does not have rights upon liquidation of the Company and does not receive dividends. The outstanding shares of Series E Preferred Stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of equity instruments with voting rights. As a result, the holders of Series E Preferred Stock have 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
Series F Convertible Preferred Stock
The Board of Directors has designated 4,350 shares of Series F Convertible Preferred Stock with a par value of $1.00 per share. As of the date of this report, there are 2,716 shares of Series F Convertible Preferred Stock outstanding. The Series F Convertible Preferred Stock is non-redeemable, does not have rights upon liquidation of the Company, does not have voting rights and does not receive dividends. Each holder may, at any time and from time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis. So long as any shares of Series F Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders: (a) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible preferred stock; (b) create any Senior Securities; (c) create any pari passu Securities; (d) do any act or thing not authorized or contemplated by the Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time to time amended, (or otherwise suffer to exist any such taxation as a result thereof).
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Series G Preferred Stock
The board of directors has designated 1,000 shares of Series G Preferred Stock. As of the date of this report, there are no shares of Series G Preferred Stock outstanding. The Series G preferred stock does not have voting rights, does not have rights upon liquidation of the Company and does not receive dividends.
Transfer Agent and Registrar
The Transfer Agent for our capital stock is Transhare with an address at 15500 Roosevelt Boulevard, Suite 302, Clearwater, Florida 33760. Their telephone number is Office phone: 303-662-1112.
Recent Sales of Unregistered Securities
The following is a summary of transactions by AITX involving sales of its securities that were not registered under the Securities Act.
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
Number of shares outstanding February 28, 2017 | | | | | | | | | | | | 18 |
March 7, 2017 | | conversion | | $1,840 | | $— | | $— | | $1,840 | | 1 |
March 22, 2017 | | conversion | | 1,971 | | — | | — | | 1,971 | | 1 |
March 27, 2017 | | cancelation*** | | — | | — | | — | | — | | (1) |
April 3, 2017 | | conversion | | 1,487 | | 3,397 | | — | | 4,884 | | 1 |
April 7, 2017 | | conversion | | 1,000 | | — | | — | | 1,000 | | 1 |
April 20, 2017 | | conversion | | 920 | | — | | — | | 920 | | 1 |
April 24, 2017 | | conversion | | 6,876 | | — | | — | | 6,876 | | 1 |
April 26, 2017 | | conversion | | 1,130 | | — | | — | | 1,130 | | 1 |
May 2, 2017 | | conversion | | 1,130 | | — | | — | | 1,130 | | 1 |
May 4, 2017 | | conversion | | 1,240 | | — | | — | | 1,240 | | 1 |
May 4, 2017 | | conversion | | 8,854 | | — | | — | | 8,854 | | 1 |
May 8, 2017 | | conversion | | 9,296 | | — | | — | | 9,296 | | 1 |
May 12, 2017 | | conversion | | 1,432 | | — | | — | | 1,432 | | 1 |
May 15, 2017 | | conversion | | 11,661 | | — | | — | | 11,661 | | 1 |
May 15, 2017 | | conversion | | 1,550 | | — | | — | | 1,550 | | 2 |
May 18, 2017 | | conversion | | 13,629 | | — | | — | | 13,629 | | 2 |
May 23, 2017 | | conversion | | 9,684 | | 3,059 | | — | | 12,743 | | 1 |
May 24, 2017 | | conversion | | 1,730 | | — | | — | | 1,730 | | 2 |
May 30, 2017 | | conversion | | 1,890 | | — | | — | | 1,890 | | 2 |
June 7, 2017 | | conversion | | 1,985 | | — | | — | | 1,985 | | 2 |
June 9, 2017 | | conversion | | 2,085 | | — | | — | | 2,085 | | 2 |
June 12, 2017 | | conversion | | 2,185 | | — | | — | | 2,185 | | 2 |
- 13 -
(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
June 14, 2017 | | conversion | | 2,295 | | — | | — | | 2,295 | | 2 |
June 19, 2017 | | conversion | | 2,400 | | — | | — | | 2,400 | | 2 |
June 20, 2017 | | conversion | | 2,500 | | — | | — | | 2,500 | | 3 |
June 20, 2017 | | conversion | | 3,000 | | 358 | | — | | 3,358 | | — |
June 22, 2017 | | warrant exercise**** | | — | | — | | — | | — | | 3 |
June 28, 2017 | | conversion | | 2,800 | | — | | — | | 2,800 | | 3 |
June 28, 2017 | | warrant exercise**** | | — | | — | | — | | — | | 3 |
July 5, 2017 | | conversion | | 3,050 | | — | | — | | 3,050 | | 3 |
July 6, 2017 | | warrant exercise**** | | — | | — | | — | | — | | 3 |
July 7, 2017 | | warrant exercise**** | | — | | — | | — | | — | | — |
July 7, 2017 | | conversion | | 3,400 | | — | | — | | 3,400 | | 3 |
July 26, 2017 | | conversion | | 3,500 | | — | | — | | 3,500 | | 4 |
July 28, 2017 | | conversion | | 9,750 | | — | | — | | 9,750 | | 1 |
July 28, 2017 | | conversion | | 4,000 | | — | | — | | 4,000 | | 4 |
August 2, 2017 | | conversion | | 75,000 | | — | | — | | 75,000 | | 4 |
August 2, 2017 | | conversion | | 75,000 | | 2,483 | | — | | 77,483 | | 4 |
August 4, 2017 | | conversion | | 11,184 | | — | | — | | 11,184 | | — |
August 14, 2017 | | conversion | | 4,500 | | — | | — | | 4,500 | | 5 |
August 21, 2017 | | conversion | | 4,700 | | — | | — | | 4,700 | | 5 |
August 29, 2017 | | conversion | | 4,900 | | — | | — | | 4,900 | | 5 |
September 5, 2017 | | conversion | | 26,250 | | — | | — | | 26,250 | | 5 |
September 18, 2017 | | conversion | | 27,250 | | — | | — | | 27,250 | | 5 |
September 27, 2017 | | conversion | | 29,000 | | — | | — | | 29,000 | | 6 |
October 16, 2017 | | conversion | | 30,500 | | — | | — | | 30,500 | | 6 |
October 16, 2017 | | conversion | | 10,000 | | — | | — | | 10,000 | | — |
Number of shares outstanding February 28, 2018 | | | | | | | | | | | | 124 |
April 16, 2018 | | conversion | | 132,160 | | — | | — | | 132,160 | | 6 |
April 26, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 1 |
May 1, 2018 | | conversion | | 26,250 | | — | | — | | 26,250 | | 3 |
May 3, 2018 | | conversion | | 5,000 | | — | | — | | 5,000 | | — |
May 7, 2018 | | conversion | | 27,900 | | — | | — | | 27,900 | | 3 |
May 10, 2018 | | conversion | | 32,400 | | — | | — | | 32,400 | | 4 |
May 11, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 2 |
May 15, 2018 | | conversion | | 7,060 | | — | | 500 | | 7,560 | | 2 |
May 15, 2018 | | conversion | | 8,000 | | — | | — | | 8,000 | | 1 |
May 21, 2018 | | conversion | | 20,250 | | — | | — | | 20,250 | | 3 |
May 22, 2018 | | conversion | | 6,075 | | — | | — | | 6,075 | | 1 |
May 24, 2018 | | conversion | | 13,056 | | 3,300 | | — | | 16,356 | | 2 |
May 30, 2018 | | conversion | | 8,182 | | — | | — | | 8,182 | | 2 |
May 30, 2018 | | conversion | | 15,000 | | — | | — | | 15,000 | | 3 |
June 7, 2018 | | conversion | | 2,922 | | — | | — | | 2,922 | | 1 |
June 18, 2018 | | conversion | | 17,000 | | — | | — | | 17,000 | | 4 |
June 19, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 3 |
June 28, 2018 | | conversion | | 18,000 | | — | | — | | 18,000 | | 4 |
June 28, 2018 | | cancellation | | (7,060) | | — | | (500) | | (7,560) | | (2) |
July 5, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 4 |
July 5, 2018 | | conversion | | 8,818 | | — | | — | | 8,818 | | 3 |
July 11, 2018 | | conversion | | 10,200 | | — | | — | | 10,200 | | 4 |
July 11, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 5 |
July 19, 2018 | | conversion | | 16,000 | | — | | 500 | | 16,500 | | 5 |
July 19, 2018 | | conversion | | 11,000 | | 1,366 | | — | | 12,366 | | 4 |
July 23, 2018 | | conversion | | 14,500 | | — | | 500 | | 15,000 | | 7 |
July 25, 2018 | | conversion | | 5,000 | | — | | — | | 5,000 | | 2 |
July 31, 2018 | | conversion | | 11,000 | | 1,455 | | — | | 12,455 | | 6 |
August 24, 2018 | | conversion | | — | | 15,300 | | — | | 15,300 | | 10 |
August 27, 2018 | | conversion | | 5,500 | | — | | 500 | | 6,000 | | 10 |
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(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
August 29, 2018 | | conversion | | 4,280 | | — | | 500 | | 4,780 | | 11 |
August 30, 2018 | | conversion | | 6,000 | | — | | — | | 6,000 | | 10 |
August 30, 2018 | | rounding shares | | — | | — | | — | | — | | — |
August 31, 2018 | | conversion | | 20,000 | | — | | — | | 20,000 | | 11 |
August 31, 2018 | | conversion | | 7,500 | | — | | 500 | | 8,000 | | 11 |
September 5, 2018 | | conversion | | 8,800 | | 1,375 | | — | | 10,175 | | 13 |
September 5, 2018 | | conversion | | 7,800 | | — | | — | | 7,800 | | 13 |
September 7, 2018 | | conversion | | 7,000 | | — | | 500 | | 7,500 | | 13 |
September 12, 2018 | | conversion | | 5,355 | | — | | — | | 5,355 | | 15 |
September 12, 2018 | | conversion | | 6,500 | | — | | 500 | | 7,000 | | 14 |
September 13, 2018 | | conversion | | 5,395 | | — | | — | | 5,395 | | 13 |
September 13, 2018 | | conversion | | 3,436 | | — | | 500 | | 3,936 | | 14 |
September 18, 2018 | | conversion | | 5,670 | | — | | — | | 5,670 | | 19 |
September 20, 2018 | | conversion | | 3,448 | | — | | 500 | | 3,948 | | 19 |
September 21, 2018 | | conversion | | 6,720 | | — | | — | | 6,720 | | 19 |
September 24, 2018 | | conversion | | 5,250 | | — | | — | | 5,250 | | 18 |
September 26, 2018 | | conversion | | 6,132 | | — | | — | | 6,132 | | 23 |
September 28, 2018 | | conversion | | 3,084 | | — | | 500 | | 3,584 | | 23 |
October 1, 2018 | | conversion | | 3,100 | | — | | — | | 3,100 | | 20 |
October 3, 2018 | | conversion | | 4,030 | | — | | — | | 4,030 | | 26 |
October 3, 2018 | | conversion | | 2,202 | | — | | 500 | | 2,702 | | 25 |
October 5, 2018 | | conversion | | 2,750 | | 485 | | — | | 3,235 | | 16 |
October 5, 2018 | | conversion | | 4,449 | | — | | — | | 4,449 | | 29 |
October 8, 2018 | | conversion | | 8,835 | | — | | — | | 8,835 | | 105 |
October 9, 2018 | | conversion | | 4,158 | | — | | 500 | | 4,658 | | 30 |
October 10, 2018 | | conversion | | 4,988 | | — | | — | | 4,988 | | 29 |
October 15, 2018 | | conversion | | 5,935 | | — | | — | | 5,935 | | 33 |
October 18, 2018 | | conversion | | 9,000 | | — | | — | | 9,000 | | 113 |
October 19, 2018 | | conversion | | 4,400 | | 713 | | — | | 5,113 | | 33 |
October 23, 2018 | | conversion | �� | 9,840 | | — | | — | | 9,840 | | 317 |
November 1, 2018 | | conversion | | 9,400 | | — | | — | | 9,400 | | 94 |
November 5, 2018 | | conversion | | 6,195 | | — | | — | | 6,195 | | 52 |
November 15, 2018 | | conversion | | 7,980 | | — | | — | | 7,980 | | 95 |
November 27, 2018 | | conversion | | 3,850 | | 724 | | — | | 4,574 | | 123 |
December 6, 2018 | | conversion | | 4,056 | | 797 | | — | | 4,853 | | 141 |
December 7, 2018 | | conversion | | 2,034 | | — | | — | | 2,034 | | 66 |
December 10, 2018 | | conversion | | 2,367 | | — | | — | | 2,367 | | 76 |
December 10, 2018 | | conversion | | 2,333 | | — | | 500 | | 2,833 | | 91 |
December 10, 2018 | | conversion | | 1,475 | | — | | 500 | | 1,975 | | 91 |
December 10, 2018 | | conversion | | 3,348 | | — | | — | | 3,348 | | 90 |
December 11, 2018 | | conversion | | 2,489 | | — | | — | | 2,489 | | 80 |
December 11, 2018 | | conversion | | 4,340 | | — | | — | | 4,340 | | 140 |
December 12, 2018 | | conversion | | 3,500 | | — | | — | | 3,500 | | 94 |
December 12, 2018 | | conversion | | 6,600 | | 1,306 | | — | | 7,906 | | 213 |
December 13, 2018 | | conversion | | 2,408 | | — | | 500 | | 2,908 | | 134 |
December 13, 2018 | | conversion | | 3,426 | | — | | — | | 3,426 | | 111 |
December 14, 2018 | | conversion | | 4,154 | | — | | — | | 4,154 | | 134 |
December 18, 2018 | | conversion | | 4,368 | | — | | — | | 4,368 | | 141 |
December 19, 2018 | | conversion | | 3,100 | | — | | 500 | | 3,600 | | 160 |
December 19, 2018 | | conversion | | 1,000 | | 3,348 | | — | | 4,348 | | 161 |
December 20, 2018 | | conversion | | — | | — | | — | | — | | 130 |
December 20, 2018 | | conversion | | 2,155 | | — | | 500 | | 2,655 | | 169 |
December 20, 2018 | | conversion | | 3,636 | | — | | — | | 3,636 | | 117 |
December 20, 2018 | | conversion | | 7,480 | | 1,520 | | — | | 9,000 | | 333 |
December 24, 2018 | | conversion | | 2,970 | | — | | — | | 2,970 | | 110 |
December 26, 2018 | | conversion | | 3,213 | | — | | — | | 3,213 | | 143 |
December 27, 2018 | | conversion | | 1,870 | | 1,381 | | — | | 3,252 | | 120 |
- 15 -
(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
December 28, 2018 | | conversion | | 3,700 | | — | | 500 | | 4,200 | | 227 |
December 31, 2018 | | conversion | | 4,869 | | — | | — | | 4,869 | | 216 |
December 31, 2018 | | conversion | | 5,365 | | — | | — | | 5,365 | | 290 |
January 2, 2019 | | conversion | | 7,370 | | 1,562 | | — | | 8,932 | | 425 |
January 7, 2019 | | conversion | | 3,360 | | — | | — | | 3,360 | | 240 |
January 7, 2019 | | conversion | | 3,944 | | — | | — | | 3,944 | | 290 |
January 8, 2019 | | conversion | | 4,080 | | — | | — | | 4,080 | | 300 |
January 9, 2019 | | conversion | | 3,161 | | — | | 500 | | 3,661 | | 317 |
January 10, 2019 | | conversion | | 3,380 | | — | | — | | 3,380 | | 325 |
January 11, 2019 | | conversion | | 5,280 | | 1,150 | | — | | 6,430 | | 397 |
January 11, 2019 | | conversion | | 3,625 | | — | | — | | 3,625 | | 290 |
January 14, 2019 | | conversion | | 3,400 | | — | | — | | 3,400 | | 340 |
January 15, 2019 | | conversion | | 4,100 | | — | | — | | 4,100 | | 410 |
January 15, 2019 | | conversion | | 4,300 | | — | | — | | 4,300 | | 430 |
January 17, 2019 | | conversion | | 4,800 | | — | | — | | 4,800 | | 480 |
January 22, 2019 | | conversion | | 4,435 | | — | | — | | 4,435 | | 504 |
January 22, 2019 | | conversion | | 4,230 | | — | | — | | 4,230 | | 470 |
January 23, 2019 | | conversion | | 3,816 | | — | | — | | 3,816 | | 530 |
January 25, 2019 | | conversion | | 3,781 | | — | | — | | 3,781 | | 556 |
January 28, 2019 | | conversion | | 3,276 | | — | | — | | 3,276 | | 585 |
January 29, 2019 | | conversion | | 3,690 | | — | | — | | 3,690 | | 615 |
January 29, 2019 | | conversion | | 3,870 | | — | | — | | 3,870 | | 645 |
January 30, 2019 | | conversion | | 4,080 | | — | | — | | 4,080 | | 680 |
January 31, 2019 | | conversion | | 4,500 | | — | | — | | 4,500 | | 750 |
January 31, 2019 | | conversion | | 4,290 | | — | | — | | 4,290 | | 715 |
February 4, 2019 | | conversion | | 4,740 | | — | | — | | 4,740 | | 790 |
February 5, 2019 | | cancellation | | (2,658) | | — | | — | | (2,658) | | (17) |
February 5, 2019 | | conversion | | 4,980 | | — | | — | | 4,980 | | 830 |
February 12, 2019 | | conversion | | 5,340 | | — | | — | | 5,340 | | 890 |
February 14, 2019 | | conversion | | 5,236 | | — | | — | | 5,236 | | 935 |
February 21, 2019 | | conversion | | 4,956 | | — | | — | | 4,956 | | 900 |
Number of shares outstanding February 28, 2019 | | | | | | | | | | | | 20,026 |
May 6, 2019 | | conversion | | 5,768 | | — | | — | | 5,768 | | 1,030 |
May 6, 2019 | | conversion | | 15,000 | | — | | — | | 15,000 | | 882 |
May 6, 2019 | | conversion | | 11,900 | | — | | — | | 11,900 | | 992 |
May 7, 2019 | | conversion | | 6,048 | | — | | — | | 6,048 | | 1,080 |
May 7, 2019 | | conversion | | 11,900 | | — | | — | | 11,900 | | 992 |
May 8, 2019 | | conversion | | 6,384 | | — | | — | | 6,384 | | 1,140 |
May 8, 2019 | | conversion | | 11,800 | | — | | — | | 11,800 | | 983 |
May 8, 2019 | | conversion | | 7,312 | | — | | 500 | | 7,812 | | 1,240 |
May 9, 2019 | | conversion | | 12,500 | | — | | — | | 12,500 | | 1,136 |
May 10, 2019 | | conversion | | 7,200 | | — | | — | | 7,200 | | 655 |
May 8, 2019 | | conversion | | 4,400 | | — | | — | | 4,400 | | 1,000 |
May 13, 2019 | | conversion | | 7,493 | | — | | — | | 7,493 | | 1,338 |
May 13, 2019 | | conversion | | 12,650 | | 3,786 | | — | | 16,436 | | 1,957 |
May 21, 2019 | | conversion | | 3,281 | | — | | — | | 3,281 | | 586 |
May 22, 2019 | | conversion | | 11,550 | | 3,526 | | — | | 15,076 | | 2,094 |
July 11, 2019 | | conversion | | 11,000 | | 3,984 | | — | | 14,984 | | 1,921 |
July 25, 2019 | | conversion | | 8,584 | | — | | — | | 8,584 | | 2,000 |
July 30, 2019 | | conversion | | 16,940 | | 6,350 | | — | | 23,290 | | 3,882 |
July 31, 2019 | | conversion | | 9,872 | | — | | — | | 9,872 | | 2,300 |
August 2, 2019 | | conversion | | 10,301 | | — | | — | | 10,301 | | 2,400 |
August 8, 2019 | | conversion | | 21,450 | | 8,170 | | — | | 29,620 | | 4,937 |
August 11, 2019 | | conversion | | 10,945 | | — | | — | | 10,945 | | 2,550 |
August 11, 2019 | | conversion | | 5,837 | | — | | — | | 5,837 | | 1,360 |
August 12, 2019 | | conversion | | 8,800 | | — | | — | | 8,800 | | 2,750 |
- 16 -
(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
August 12, 2019 | | conversion | | 13,915 | | 5,337 | | — | | 19,252 | | 4,011 |
August 13, 2019 | | conversion | | 3,528 | | — | | — | | 3,528 | | 1,260 |
August 14, 2019 | | conversion | | 5,920 | | — | | — | | 5,920 | | 2,960 |
August 15, 2019 | | conversion | | 12,650 | | 4,877 | | — | | 17,527 | | 5,842 |
August 15, 2019 | | conversion | | 6,200 | | — | | — | | 6,200 | | 3,100 |
August 16, 2019 | | conversion | | 8,060 | | — | | — | | 8,060 | | 4,030 |
August 19, 2019 | | conversion | | 6,784 | | — | | — | | 6,784 | | 4,240 |
August 20, 2019 | | conversion | | 7,136 | | — | | — | | 7,136 | | 4,460 |
August 20, 2019 | | conversion | | 12,100 | | 4,705 | | — | | 16,805 | | 7,002 |
August 21, 2019 | | conversion | | 4,284 | | 5,628 | | — | | 9,912 | | 4,690 |
August 22, 2019 | | conversion | | — | | 6,348 | | — | | 6,348 | | 5,290 |
August 23, 2019 | | conversion | | — | | 4,400 | | — | | 4,400 | | 5,500 |
August 26, 2019 | | conversion | | 7,810 | | 3,068 | | — | | 10,878 | | 9,065 |
August 26, 2019 | | conversion | | — | | 3,416 | | — | | 3,416 | | 4,270 |
August 27, 2019 | | conversion | | — | | 2,240 | | — | | 2,240 | | 2,800 |
August 29, 2019 | | conversion | | — | | 5,344 | | — | | 5,344 | | 6,680 |
September 3, 2019 | | conversion | | — | | 5,616 | | — | | 5,616 | | 7,020 |
September 3, 2019 | | conversion | | 6,149 | | 2,449 | | — | | 8,598 | | 14,329 |
September 4, 2019 | | conversion | | — | | 2,956 | | — | | 2,956 | | 7,390 |
September 5, 2019 | | conversion | | — | | 3,240 | | — | | 3,240 | | 8,100 |
September 6, 2019 | | conversion | | — | | 3,560 | | — | | 3,560 | | 8,900 |
September 9, 2019 | | conversion | | — | | 3,752 | | — | | 3,752 | | 9,380 |
September 10, 2019 | | conversion | | — | | 3,944 | | — | | 3,944 | | 9,860 |
September 10, 2019 | | conversion | | 6,826 | | 2,750 | | — | | 9,575 | | 15,959 |
September 11, 2019 | | conversion | | — | | 4,129 | | — | | 4,129 | | 10,300 |
September 12, 2019 | | conversion | | 2,447 | | 2,233 | | — | | 4,680 | | 11,700 |
September 13, 2019 | | conversion | | 4,920 | | — | | — | | 4,920 | | 12,300 |
September 16, 2019 | | conversion | | 2,818 | | 2,342 | | — | | 5,160 | | 12,900 |
September 17, 2019 | | conversion | | — | | 2,960 | | — | | 2,960 | | 7,400 |
September 18, 2019 | | conversion | | — | | 4,760 | | — | | 4,760 | | 11,900 |
September 19, 2019 | | conversion | | — | | 2,920 | | — | | 2,920 | | 7,300 |
September 20, 2019 | | conversion | | 202 | | 1,998 | | — | | 2,200 | | 5,500 |
September 25, 2019 | | conversion | | 4,506 | | 234 | | — | | 4,740 | | 12,600 |
October 3, 2019 | | conversion | | 5,651 | | 349 | | — | | 6,000 | | 15,000 |
October 10, 2019 | | conversion | | 3,760 | | 280 | | — | | 4,040 | | 10,100 |
October 25, 2019 | | conversion | | 2,584 | | 556 | | — | | 3,140 | | 15,700 |
November 4, 2019 | | conversion | | 2,926 | | 354 | | — | | 3,280 | | 16,400 |
November 27, 2019 | | conversion | | 2,970 | | 770 | | — | | 3,740 | | 18,700 |
January 3, 2020 | | conversion | | — | | 2,640 | | — | | 2,640 | | 13,200 |
January 27, 2020 | | conversion | | 3,360 | | — | | — | | 3,360 | | 16,800 |
February 1, 2020 | | cancellation | | (3,360) | | — | | — | | (3,360) | | (16,800) |
February 5, 2020 | | cancellation | | — | | (640) | | — | | (640) | | (3,200) |
February 5, 2020 | | conversion | | — | | 4,060 | | — | | 4,060 | | 20,300 |
February 29, 2020 | | rounding shares issuable | | — | | — | | — | | — | | 2,946 |
Number of shares outstanding February 29, 2020 | | | | | | | | | | | | 418,415 |
- 17 -
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| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
March 29, 2020 | | Conversion | | — | | 2,568 | | — | | 2,568 | | 21,400 |
March 30, 2020 | | Conversion | | 742 | | — | | 500 | | 1,242 | | 20,700 |
March 31, 2020 | | Conversion | | — | | 1,013 | | — | | 1,013 | | 21,100 |
April 3, 2020 | | Conversion | | — | | 936 | | — | | 936 | | 19,500 |
April 6, 2020 | | Conversion | | 868 | | — | | 500 | | 1,368 | | 22,800 |
April 7, 2020 | | Conversion | | — | | 1,186 | | — | | 1,186 | | 24,700 |
April 7, 2020 | | Conversion | | 1,500 | | — | | 500 | | 2,000 | | 25,000 |
April 8, 2020 | | Conversion | | — | | 1,104 | | — | | 1,104 | | 23,000 |
April 13, 2020 | | Conversion | | — | | 1,474 | | — | | 1,474 | | 30,700 |
April 14, 2020 | | Conversion | | — | | 1,272 | | — | | 1,272 | | 26,500 |
April 16, 2020 | | Conversion | | 1,456 | | — | | 500 | | 1,956 | | 32,600 |
April 17, 2020 | | Conversion | | — | | 1,613 | | — | | 1,613 | | 33,600 |
April 20, 2020 | | Conversion | | — | | 1,776 | | — | | 1,776 | | 37,000 |
April 20, 2020 | | Conversion | | 1,200 | | — | | 500 | | 1,700 | | 23,611 |
April 21, 2020 | | Conversion | | — | | 1,448 | | — | | 1,448 | | 31,000 |
April 23, 2020 | | Conversion | | — | | 1,773 | | — | | 1,773 | | 38,500 |
April 24, 2020 | | Conversion | | — | | 1,392 | | — | | 1,392 | | 43,500 |
April 24, 2020 | | Conversion | | 1,941 | | — | | 500 | | 2,441 | | 42,420 |
April 27, 2020 | | Conversion | | — | | 1,469 | | — | | 1,469 | | 45,900 |
April 28, 2020 | | Conversion | | — | | 781 | | — | | 781 | | 24,400 |
April 28, 2020 | | Conversion | | — | | 1,376 | | — | | 1,376 | | 43,000 |
April 29, 2020 | | Conversion | | 2,400 | | — | | 500 | | 2,900 | | 48,333 |
April 30, 2020 | | Conversion | | — | | 1,408 | | — | | 1,408 | | 44,000 |
April 30, 2020 | | Conversion | | 2,225 | | — | | 500 | | 2,725 | | 54,500 |
May 1, 2020 | | Conversion | | — | | 1,792 | | — | | 1,792 | | 56,009 |
May 4, 2020 | | Conversion | | — | | 1,728 | | — | | 1,728 | | 54,000 |
May 4, 2020 | | Conversion | | 5,060 | | 2,719 | | — | | 7,779 | | 129,643 |
May 4, 2020 | | Conversion | | 2,724 | | — | | 500 | | 3,224 | | 71,640 |
May 5, 2020 | | Conversion | | — | | 2,365 | | — | | 2,365 | | 73,900 |
May 6, 2020 | | Conversion | | 3,750 | | — | | 500 | | 4,250 | | 78,703 |
May 7, 2020 | | Conversion | | — | | 2,170 | | — | | 2,170 | | 67,800 |
May 7, 2020 | | Conversion | | 2,640 | | — | | 500 | | 3,140 | | 78,500 |
May 8, 2020 | | Conversion | | — | | 1,592 | | — | | 1,592 | | 59,400 |
May 11, 2020 | | Conversion | | 1,843 | | — | | 500 | | 2,343 | | 90,100 |
May 12, 2020 | | Conversion | | — | | 2,095 | | — | | 2,095 | | 100,700 |
May 12, 2020 | | Conversion | | 1,910 | | — | | 500 | | 2,410 | | 95,000 |
May 12, 2020 | | Conversion | | 4,070 | | 2,208 | | — | | 6,278 | | 201,231 |
May 13, 2020 | | Conversion | | — | | 2,413 | | — | | 2,413 | | 116,000 |
May 14, 2020 | | Conversion | | — | | 1,936 | | — | | 1,936 | | 94,000 |
May 14, 2020 | | Conversion | | 2,698 | | — | | 500 | | 3,198 | | 123,000 |
May 14, 2020 | | Conversion | | 3,300 | | — | | 500 | | 3,800 | | 121,794 |
May 15, 2020 | | Conversion | | — | | 1,764 | | — | | 1,764 | | 98,000 |
May 15, 2020 | | Conversion | | 4,510 | | 2,416 | | — | | 6,926 | | 232,206 |
May 18, 2020 | | Conversion | | — | | 2,728 | | — | | 2,728 | | 155,000 |
May 19, 2020 | | Conversion | | — | | 2,546 | | — | | 2,546 | | 148,000 |
May 19, 2020 | | Conversion | | 3,108 | | — | | 500 | | 3,608 | | 164,000 |
May 19, 2020 | | Conversion | | 3,108 | | — | | 500 | | 3,608 | | 164,000 |
May 19, 2020 | | Conversion | | 2,450 | | — | | 500 | | 2,950 | | 121,399 |
May 20, 2020 | | Conversion | | — | | 2,477 | | — | | 2,477 | | 144,000 |
May 21, 2020 | | Conversion | | — | | 3,560 | | — | | 3,560 | | 207,000 |
- 18 -
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| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
May 22, 2020 | | Conversion | | 3,600 | | — | | 500 | | 4,100 | | 210,000 |
May 22, 2020 | | Conversion | | 5,665 | | 3,112 | | — | | 8,777 | | 416,744 |
May 25, 2020 | | Conversion | | 3,238 | | — | | 500 | | 3,738 | | 230,000 |
May 26, 2020 | | Conversion | | — | | 3,120 | | — | | 3,120 | | 240,000 |
May 27, 2020 | | Conversion | | — | | 2,280 | | — | | 2,280 | | 190,000 |
May 28, 2020 | | Conversion | | — | | 2,148 | | — | | 2,148 | | 179,000 |
May 28, 2020 | | Conversion | | 6,050 | | 3,347 | | — | | 9,397 | | 522,072 |
May 28, 2020 | | Rounding shares | | — | | — | | — | | — | | 9 |
May 29, 2020 | | Conversion | | 4,000 | | — | | 500 | | 4,500 | | 257,731 |
June 1, 2020 | | Conversion | | — | | 2,367 | | — | | 2,367 | | 202,000 |
June 1, 2020 | | Conversion | | 4,380 | | — | | — | | 4,380 | | 300,000 |
June 1, 2020 | | Conversion | | 8,680 | | — | | — | | 8,680 | | 620,000 |
June 3, 2020 | | Conversion | | — | | 3,427 | | — | | 3,427 | | 357,000 |
June 4, 2020 | | Conversion | | 4,372 | | — | | 500 | | 4,872 | | 435,000 |
June 4, 2020 | | Conversion | | — | | 2,554 | | — | | 2,554 | | 285,000 |
June 3, 2020 | | Conversion | | 7,095 | | 3,954 | | — | | 11,049 | | 754,703 |
June 4, 2020 | | Conversion | | 9,744 | | — | | — | | 9,744 | | 870,000 |
June 5, 2020 | | Conversion | | — | | 3,916 | | — | | 3,916 | | 445,000 |
June 8, 2020 | | Conversion | | 4,770 | | — | | — | | 4,770 | | 530,000 |
June 8, 2020 | | Conversion | | — | | 2,980 | | — | | 2,980 | | 487,000 |
June 8, 2020 | | Conversion | | 6,600 | | 3,700 | | — | | 10,300 | | 1,122,004 |
June 9, 2020 | | Conversion | | 3,593 | | — | | 500 | | 4,093 | | 535,000 |
June 10, 2020 | | Conversion | | 4,396 | | — | | 500 | | 4,896 | | 640,000 |
June 10, 2020 | | Conversion | | — | | 2,472 | | — | | 2,472 | | 404,000 |
June 11, 2020 | | Conversion | | — | | 2,935 | | — | | 2,935 | | 587,000 |
June 11, 2020 | | Conversion | | 4,320 | | — | | — | | 4,320 | | 720,000 |
June 12, 2020 | | Conversion | | 6,600 | | 3,718 | | — | | 10,318 | | 1,433,000 |
June 15, 2020 | | Conversion | | — | | 3,126 | | — | | 3,126 | | 704,000 |
June 15, 2020 | | Conversion | | 9,435 | | — | | — | | 9,435 | | 1,700,000 |
June 15, 2020 | | Conversion | | 4,218 | | — | | 500 | | 4,718 | | 850,000 |
June 17, 2020 | | Conversion | | — | | 3,135 | | — | | 3,135 | | 825,000 |
June 17, 2020 | | Conversion | | 4,750 | | — | | — | | 4,750 | | 1,000,000 |
June 17, 2020 | | Conversion | | 5,830 | | 3,303 | | — | | 9,133 | | 1,902,773 |
June 18, 2020 | | Conversion | | — | | 2,608 | | — | | 2,608 | | 815,000 |
June 18, 2020 | | Conversion | | 4,300 | | — | | 500 | | 4,800 | | 1,200,000 |
June 19, 2020 | | Conversion | | 3,500 | | — | | 500 | | 4,000 | | 1,000,000 |
June 19, 2020 | | Conversion | | — | | 2,797 | | — | | 2,797 | | 874,000 |
June 19, 2020 | | Conversion | | 6,490 | | 3,686 | | — | | 10,176 | | 2,119,985 |
June 22, 2020 | | Conversion | | — | | 4,627 | | — | | 4,627 | | 1,446,000 |
June 22, 2020 | | Conversion | | 6,930 | | 3,950 | | — | | 10,880 | | 2,266,600 |
June 23, 2020 | | Conversion | | — | | 5,120 | | — | | 5,120 | | 1,600,000 |
June 22, 2020 | | Conversion | | 10,000 | | — | | — | | 10,000 | | 2,500,000 |
June 23, 2020 | | Conversion | | 6,100 | | — | | 500 | | 6,600 | | 1,650,000 |
June 23, 2020 | | Conversion | | 10,120 | | 5,775 | | — | | 15,895 | | 3,311,362 |
June 23, 2020 | | Conversion | | 2,488 | | — | | 500 | | 2,988 | | 747,000 |
June 24, 2020 | | Conversion | | 8,400 | | — | | — | | 8,400 | | 2,100,000 |
June 24, 2020 | | Conversion | | 17,200 | | — | | — | | 17,200 | | 4,300,000 |
June 24, 2020 | | Conversion | | 10,120 | | 5,781 | | — | | 15,901 | | 3,312,766 |
June 24, 2020 | | Conversion | | 1,150 | | — | | 500 | | 1,650 | | 343,750 |
June 25, 2020 | | Conversion | | — | | 7,040 | | — | | 7,040 | | 2,200,000 |
- 19 -
(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
June 25, 2020 | | Conversion | | 10,300 | | — | | 500 | | 10,800 | | 2,700,000 |
June 25, 2020 | | Conversion | | 11,275 | | 6,448 | | — | | 17,723 | | 3,692,421 |
June 26, 2020 | | Conversion | | — | | 6,400 | | — | | 6,400 | | 2,000,000 |
June 29, 1930 | | Conversion | | 12,800 | | — | | — | | 12,800 | | 3,200,000 |
June 29, 2020 | | Conversion | | 3,355 | | 485 | | — | | 3,840 | | 1,200,000 |
June 30, 2020 | | Conversion | | 4,841 | | 119 | | — | | 4,960 | | 1,550,000 |
June 29, 2020 | | Conversion | | 13,000 | | 861 | | — | | 13,861 | | 2,887,685 |
July 1, 2020 | | Conversion | | 12,980 | | — | | 500 | | 13,480 | | 3,370,000 |
July 1, 2020 | | Conversion | | 22,800 | | — | | — | | 22,800 | | 5,700,000 |
July 1, 2020 | | Conversion | | 12,485 | | 7,191 | | — | | 19,676 | | 4,099,085 |
July 1, 2020 | | Conversion | | 5,222 | | 116 | | — | | 5,338 | | 1,668,000 |
July 2, 2020 | | Conversion | | 7,248 | | 112 | | — | | 7,360 | | 2,300,000 |
July 6, 2020 | | Conversion | | 16,088 | | — | | — | | 16,088 | | 4,021,875 |
July 1, 2020 | | Conversion | | 13,250 | | 861 | | — | | 14,111 | | 2,945,058 |
July 6, 2020 | | Conversion | | 17,600 | | 10,195 | | — | | 27,795 | | 5,790,666 |
July 7, 2020 | | Conversion | | 7,462 | | 538 | | — | | 8,000 | | 2,500,000 |
July 8, 2020 | | Conversion | | 6,297 | | 103 | | — | | 6,400 | | 2,000,000 |
July 9, 2020 | | Conversion | | 18,150 | | 10,550 | | — | | 28,700 | | 5,979,187 |
July 9, 2020 | | Conversion | | 20,000 | | — | | — | | 20,000 | | 5,000,000 |
July 10, 2020 | | Conversion | | 9,403 | | 197 | | — | | 9,600 | | 3,000,000 |
July 14, 2020 | | Conversion | | — | | 10,240 | | — | | 10,240 | | 3,200,000 |
July 14, 2020 | | Conversion | | 12,000 | | — | | — | | 12,000 | | 3,000,000 |
July 14, 2020 | | Conversion | | 9,230 | | 370 | | — | | 9,600 | | 3,000,000 |
July 14, 2020 | | Conversion | | 12,114 | | 7,082 | | — | | 19,196 | | 3,999,234 |
July 14, 2020 | | Conversion | | 24,000 | | — | | — | | 24,000 | | 6,000,000 |
July 14, 2020 | | Conversion | | — | | 12,800 | | — | | 12,800 | | 4,000,000 |
July 16, 2020 | | Conversion | | 22,611 | | 13,782 | | — | | 36,392 | | 7,581,749 |
July 17, 2020 | | Conversion | | 33,000 | | 18,736 | | — | | 51,736 | | 10,645,130 |
July 20, 2020 | | Conversion | | — | | 1,600 | | — | | 1,600 | | 500,000 |
July 20, 2020 | | Conversion | | 32,000 | | — | | — | | 32,000 | | 8,000,000 |
July 20, 2020 | | Conversion | | 28,600 | | 16,249 | | — | | 44,849 | | 9,237,550 |
July 20, 2020 | | Conversion | | — | | 10,560 | | — | | 10,560 | | 3,300,000 |
July 21, 2020 | | Conversion | | — | | 6,400 | | — | | 6,400 | | 2,000,000 |
July 22, 2020 | | Conversion | | — | | 6,400 | | — | | 6,400 | | 2,000,000 |
July 22, 2020 | | Conversion | | — | | 24,000 | | — | | 24,000 | | 7,500,000 |
July 23, 2020 | | Conversion | | — | | 6,400 | | — | | 6,400 | | 2,000,000 |
July 24, 2020 | | Conversion | | — | | 6,400 | | — | | 6,400 | | 2,000,000 |
July 24, 2020 | | Conversion | | 9,000 | | — | | — | | 9,000 | | 2,000,000 |
July 24, 2020 | | Conversion | | 27,500 | | 15,741 | | — | | 43,241 | | 6,863,668 |
July 27, 2020 | | Conversion | | 16,018 | | 182 | | — | | 16,200 | | 5,000,000 |
July 27, 2020 | | Conversion | | — | | 22,680 | | — | | 22,680 | | 7,000,000 |
July 28, 2020 | | Conversion | | 9,150 | | 50 | | — | | 9,200 | | 2,500,000 |
July 29, 2020 | | Conversion | | 50,032 | | 7,700 | | — | | 57,732 | | 9,785,085 |
July 29, 2020 | | Conversion | | 10,456 | | 44 | | — | | 10,500 | | 2,500,000 |
July 29, 2020 | | Conversion | | — | | 29,400 | | — | | 29,400 | | 7,000,000 |
July 29, 2020 | | Conversion | | 27,500 | | 15,833 | | — | | 43,333 | | 6,878,219 |
July 30, 2020 | | Conversion | | 10,463 | | 37 | | — | | 10,500 | | 2,500,000 |
July 30, 2020 | | Conversion | | — | | 29,400 | | — | | 29,400 | | 7,000,000 |
July 30, 2020 | | Conversion | | 57,750 | | — | | — | | 57,750 | | 11,000,000 |
- 20 -
(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
July 30, 2020 | | Conversion | | 12,570 | | 30 | | — | | 12,600 | | 3,000,000 |
July 31, 2020 | | Conversion | | — | | 29,400 | | — | | 29,400 | | 7,000,000 |
July 31, 2020 | | Conversion | | 23,100 | | 13,330 | | — | | 36,430 | | 7,019,333 |
July 31, 2020 | | Conversion | | 6,734 | | 66 | | — | | 6,800 | | 2,000,000 |
August 3, 2020 | | Conversion | | 43,500 | | — | | — | | 43,500 | | 10,000,000 |
August 3, 2020 | | Conversion | | — | | 29,400 | | — | | 29,400 | | 7,000,000 |
August 3, 2020 | | Conversion | | — | | 8,500 | | — | | 8,500 | | 2,500,000 |
August 4, 2020 | | Conversion | | 17,985 | | 10,427 | | — | | 28,412 | | 5,474,293 |
August 4, 2020 | | Conversion | | | | 5,800 | | — | | 5,800 | | 2,500,000 |
August 5, 2020 | | Conversion | | 27,500 | | 13,979 | | — | | 41,479 | | 8,837,286 |
August 6, 2020 | | Conversion | | 33,741 | | 18,759 | | — | | 52,500 | | 12,500,000 |
August 6, 2020 | | Conversion | | — | | 17,000 | | — | | 17,000 | | 5,000,000 |
August 10, 2020 | | Conversion | | 43,294 | | 953 | | — | | 44,247 | | 15,000,000 |
August 11, 2020 | | Conversion | | 25,850 | | 15,107 | | — | | 40,957 | | 17,065,350 |
August 11, 2020 | | Conversion | | 12,533 | | 10,000 | | — | | 22,533 | | 11,268,750 |
August 12, 2020 | | Conversion | | 8,965 | | 5,245 | | — | | 14,210 | | 5,920,900 |
August 14, 2020 | | Conversion | | 27,500 | | 15,510 | | — | | 43,010 | | 17,920,835 |
August 14, 2020 | | Conversion | | 16,000 | | — | | — | | 16,000 | | 8,000,000 |
August 17, 2020 | | Conversion | | — | | 12,000 | | — | | 12,000 | | 6,000,000 |
August 19, 2020 | | Conversion | | — | | 12,000 | | — | | 12,000 | | 6,000,000 |
August 19, 2020 | | Conversion | | 26,510 | | 15,040 | | — | | 41,550 | | 17,312,501 |
August 27, 2020 | | Conversion | | 25,441 | | 10,000 | | 500 | | 35,941 | | 17,970,625 |
August 28, 2020 | | Conversion | | 41,000 | | — | | — | | 41,000 | | 20,000,000 |
August 28, 2020 | | Conversion | | 38,500 | | 21,894 | | — | | 60,394 | | 25,164,027 |
August 31, 2020 | | Conversion | | 39,500 | | — | | 500 | | 40,000 | | 20,000,000 |
September 3, 2020 | | Conversion | | 44,990 | | 25,974 | | — | | 70,964 | | 29,568,429 |
September 4, 2020 | | Conversion | | 48,100 | | — | | 500 | | 48,600 | | 27,000,000 |
September 10, 2020 | | Conversion | | 44,000 | | 19,046 | | — | | 63,046 | | 29,188,067 |
September 14, 2020 | | Conversion | | 36,000 | | — | | — | | 36,000 | | 20,000,000 |
September 16, 2020 | | Conversion | | 36,300 | | 15,858 | | — | | 52,158 | | 28,976,854 |
September 17, 2020 | | Conversion | | 30,000 | | — | | — | | 30,000 | | 20,000,000 |
September 21, 2020 | | Conversion | | 29,700 | | 13,074 | | — | | 42,774 | | 35,645,000 |
September 22, 2020 | | Conversion | | 33,500 | | — | | 500 | | 34,000 | | 34,000,000 |
September 22, 2020 | | Conversion | | 20,000 | | — | | — | | 20,000 | | 20,000,000 |
September 25, 2020 | | Conversion | | 27,500 | | 12,179 | | — | | 39,679 | | 38,900,867 |
September 28, 2020 | | Conversion | | 21,000 | | — | | — | | 21,000 | | 30,000,000 |
September 28, 2020 | | Conversion | | 6,850 | | — | | 500 | | 7,350 | | 15,000,000 |
September 29, 2020 | | Conversion | | 23,300 | | — | | 500 | | 23,800 | | 34,000,000 |
September 30, 2020 | | Conversion | | 27,500 | | 12,410 | | — | | 39,910 | | 47,511,901 |
October 5, 2020 | | Conversion | | 27,500 | | 11,991 | | — | | 39,491 | | 50,630,340 |
October 5, 2020 | | Conversion | | 17,500 | | — | | — | | 17,500 | | 25,925,926 |
October 6, 2020 | | Conversion | | 5,881 | | 9,360 | | 500 | | 15,741 | | 24,217,169 |
October 6, 2020 | | Conversion | | 6,780 | | — | | 500 | | 7,280 | | 16,000,000 |
October 8, 2020 | | Conversion | | 33,000 | | 14,762 | | — | | 47,762 | | 61,233,329 |
October 12, 2020 | | Conversion | | 27,500 | | 12,375 | | — | | 39,875 | | 66,458,333 |
October 15, 2020 | | Conversion | | 41,800 | | 26,711 | | — | | 68,511 | | 114,185,778 |
October 15, 2020 | | Conversion | | 6,500 | | — | | 500 | | 7,000 | | 20,000,000 |
October 21, 2020 | | Conversion | | 22,000 | | 10,032 | | — | | 32,032 | | 53,386,667 |
October 26, 2020 | | Conversion | | 10,000 | | 5,000 | | — | | 15,000 | | 25,000,000 |
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(continued)
| | | | | | | | | | | | |
Date | | Transaction (*) | | Principal Converted | | Interest Converted | | Fees Converted | | Total Amount Converted | | Shares Issued** |
October 29, 2020 | | Conversion | | 44,000 | | 20,298 | | — | | 64,298 | | 107,164,443 |
October 29, 2020 | | Conversion | | 27,500 | | 14,000 | | — | | 41,500 | | 69,166,666 |
November 2, 2020 | | Conversion | | 2,500 | | 142 | | — | | 2,642 | | 4,403,700 |
November 9, 2020 | | Conversion | | 38,500 | | 18,044 | | — | | 56,544 | | 94,239,448 |
November 17, 2020 | | Conversion | | 38,500 | | 25,450 | | — | | 63,950 | | 106,582,783 |
November 24, 2020 | | Conversion | | 40,040 | | 26,655 | | — | | 66,695 | | 111,157,519 |
December 1, 2020 | | Conversion | | 44,660 | | 29,938 | | — | | 74,598 | | 124,330,726 |
December 3, 2020 | | Conversion | | 38,170 | | 22,938 | | — | | 61,108 | | 101,847,067 |
December 10, 2020 | | Conversion | | 78,650 | | 47,584 | | — | | 126,234 | | 210,390,074 |
December 28, 2020 | | Warrants | | — | | — | | — | | 1,190 | | 119,000,000 |
January 1, 2021 | | Warrants | | — | | — | | — | | 1,250 | | 125,000,000 |
January 21, 2021 | | Warrants | | — | | — | | — | | 736 | | 73,650,793 |
January 14, 2021 | | Warrants | | — | | — | | — | | 1,300 | | 130,000,000 |
January 20, 2021 | | Warrants | | — | | — | | — | | 323 | | 32,338,030 |
January 20, 2021 | | Warrants | | — | | — | | — | | 1,280 | | 127,992,278 |
February 3, 2021 | | Fees | | — | | — | | — | | — | | 5,000,000 |
February 10, 2021 | | Warrants | | — | | — | | — | | — | | 75,000,000 |
February 16, 2021 | | Warrants | | — | | — | | — | | — | | 14,268,324 |
February 16, 2021 | | Warrants | | — | | — | | — | | — | | 130,000,000 |
February 19, 2021 | | Conversion | | 82,500 | | 27,530 | | — | | 110,030 | | 4,075,191 |
February 23, 2021 | | Warrants | | — | | — | | — | | — | | 42,189,696 |
February 26, 2021 | | Warrants | | — | | — | | — | | — | | 24,771,271 |
Number of shares outstanding February 28, 2021 | | | | | | | | | | | | 3,229,426,884 |
__________
* Conversions occur at discounts ranging from 40-50% of average market price
** Shares adjusted for reverse stock splits: 100: 1 on August 24, 2018 and 10,000:1 on March 27, 2020
*** Total proceeds $600
**** Total proceeds $8,922
In connection with the foregoing, the Registrant relied upon the exemption from registration under the Securities Act of 1933, as amended and the rules and regulations of the Securities and Exchange Commission thereunder, in reliance upon Section 4(a)(2) thereof and Regulation D thereunder.
Penny Stock Regulations
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock falls within the definition of penny stock and therefore is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. In addition, the broker-dealer must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
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In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy and sell our stock.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers
We have not repurchased any shares of our common stock during the fiscal year ended February 28, 2021.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Forward-Looking Statements and Business sections in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’ fiscal year end is February 28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave ,Ferndale Michigan , 48220, and our telephone number is 877-767-6268.
Results of Operations
The following table shows our results of operations for the years ended February 28, 2021 and February 29, 2020. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| | | | | | | | | | | |
| | Period | | Change |
| | Year Ended February 28, 2021 | | Year Ended February 29, 2020 | | Dollars | | Percentage |
| | | | | | | | | | | |
Revenues | | $ | 360,888 | | $ | 260,768 | | $ | 100,120 | | 38% |
| | | | | | | | | | | |
Gross profit | | | 262,721 | | | 177,008 | | | 85,713 | | 48% |
| | | | | | | | | | | |
Operating expenses | | | 3,257,590 | | | 1,959,814 | | | 1,297,776 | | 66% |
| | | | | | | | | | | |
Loss from operations | | | (2,994,869 | ) | | (1,782,806 | ) | | (1,212,063 | ) | (68%) |
| | | | | | | | | | | |
Other income (expense), net | | | (2,904,042 | ) | | (4,430,843 | ) | | 1,526,801 | | 34% |
| | | | | | | | | | | |
Net loss | | $ | (5,898,911 | ) | $ | (6,213,649 | ) | $ | 314,738 | | 5% |
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Revenue
Total revenue for the year ended February 28, 2021 was $360,888, which represented an increase of $100,120 compared to total revenue of $260,768 for the year ended February 29, 2020. Although limited by resources the Company continues its efforts to grow its business. The Company deployed an additional 33 revenue earning devices during the year ended February 28, 2021.
Gross profit
Total gross profit for the year ended February 29, 2021 was $262,721, which represented an increase of $85,713 compared to total gross profit of $177,008 for the year ended February 29, 2020. The increase is a result of the increase in revenues above.
Operating expenses
Operating expenses for the years ended February 28, 2021 and February 29, 2020 comprised of the following:
| | | | | | | | | | | |
| | Period | | Change |
| | Year Ended February 28, 2021 | | Year Ended February 29, 2020 | | Dollars | | Percentage |
| | | | | | | | | | | |
Research and development | | $ | 378,236 | | $ | 332,520 | | $ | 45,716 | | 14% |
| | | | | | | | | | | |
General and administrative | | | 2,748,494 | | | 1,536,568 | | | 1,211,926 | | 79% |
| | | | | | | | | | | |
Depreciation and amortization | | | 120,846 | | | 102,241 | | | 18,605 | | 18% |
| | | | | | | | | | | |
Operating lease cost | | | 9,461 | | | — | | | 9,461 | | 0% |
| | | | | | | | | | | |
Loss (gain) on disposal of fixed assets | | | 553 | | | (11,515 | ) | | 12,068 | | 105% |
| | | | | | | | | | | |
Operating expenses | | $ | 3,257,590 | | $ | $1,959,814 | | $ | 1,297,776 | | 66% |
Our operating expenses were comprised of general and administrative expenses, research and development, depreciation and amortization, and a loss on disposal of fixed assets. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and rent. Our operating expenses during the years ended February 28, 2021 and February 29, 2020 were $3,257,590 and $1,959,814, respectively. The overall $1,297,776 increase in operating expenses was primarily attributable to the following increases in operating expenses of:
| |
● | Research and development expenses increased by $45,716 which was due primarily by the increase in R&D Design costs for the ROAMEO prototypes as well as upgrades in the Wally and Rosa product lines. |
| |
● | General and administrative expenses increased by $1,211,926 primarily due to the following increases: |
| | |
| - | Professional fees increased by $98,626 due to higher reporting costs in 2021. |
| | |
| - | Stock based payments for fees paid to lenders and consultants was $362,084 for the year ended February 28, 2021, and nil for the prior year. |
| | |
| - | Wages, salaries and payroll levies increased by $146,170 as a result of settlements with back pay owed on some employees. Subcontractors increased by $404,300 as well due to the increase in revenues and expansion into new products. |
| | |
| - | Supplies increased by approximately $178,000 through their use in new prototypes and designs. |
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| | |
| - | Rent and operating lease cost increased by approximately $9,000 due to the new operating lease. |
| | |
| - | Trade shows and travel decreased by $98,227 as a result of travel restrictions due to the Covid-19 pandemic. |
| | |
| - | In general, the Company experienced an increase in operating expenses as a result of the factors above as well as other small increase in advertising , and other general and administrative expenses.The Company expects significant increases in future periods as it ramps up its spending levels for advertising and promotion, |
| |
● | Depreciation and amortization increased by $18,605 due to the increase in revenue earning devices and the new vehicle in fixed assets. |
| |
● | Loss (gain) on disposal of fixed assets increased by $12,068 due to disposals in 2020 that generated small gains. |
Other income (expense)
Other income (expense) consisted of the change of fair value of derivative instruments interest expense and gain on settlement of debt. Other income (expense) during the years ended February 28, 2021 and February 29, 2020, was ($2,904,042) and ($4,430,843), respectively.
The change in other income (expense) was due to the following:
| |
● | Change in fair value of derivative liabilities increased by $1,891,144 due to the re-valuation of derivative liability on convertible notes based on the change in the market price of the Company’s common stock and the decrease in convertible notes payable through debt conversions to common stock and settlements. |
| |
● | Interest expense decreased by $85,265 due to the loan settlements in fiscal 2021offset by increased penalties in the current year |
| |
● | Loss on settlement of debt increased by $449,608 due to losses recorded in 2021 versus gains recorded in 2020. |
The Company’s loss from operations for the year ended February 28, 2021 was $2,994,869, which represented an increase in loss of $1,212,063 compared to $1,782,806 for the year ended February 29, 2020. The higher revenues in 2021 were offset by significantly higher operating expenses for the reasons set out above. Note that the Company had a net loss of $5,898,911 for the year ended February 28, 2021 as compared to net loss of $6,213,649 for the year ended February 29, 2020. This change is mostly attributable to the changes in the derivative liability as well as the reasons set out above..
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
For the year ended February 28, 2021, the Company had negative cash flow from operating activities of $3,073,325. As of February 28, 2021 the Company has an accumulated deficit of $31,521,754 and negative working capital of $3,203,677. 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.
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Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to raise an additional $ 15 million to $ 50 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 currently projects that next fiscal year’s revenues will be between 5 and 15 times greater than this fiscal year’s revenues. This projection is based on the following factors: 1. an anticipated significant increase in the orders expected to be received after this fiscal year; 2. an expected significant improvement in the Company’s ability to make timely deliveries; and 3. an anticipated significant improvement in the Company’s ability to support many more devices than this it could support during this fiscal year. However, there can be no assurance that the revenues will increase to the extent projected or that the anticipated improvements will actually occur.
This expansion plan will require the Company to expend significant resources, including the hiring of additional staffing, which the Company expects to finish the next fiscal year with between 75 – 125 employees.
After the end of this fiscal year, the Company increased its sales team from one full-time salesperson to five full-time salespersons. The Company expects to finish the next fiscal year with between 8-12 full-time salespersons. In addition, the Company expects that some planned promotional moves will raise the Company’s stature in the market and industry in the next fiscal year. The Company is also increasing staffing in its subsidiaries and expects to considerably increase its technology over the next fiscal year. Over 60% of the Company’s current staff are engaged in research and development activities. The Company expects to increase its research and development activities by opening a second Canadian research and development office in British Columbia, Canada, in the next fiscal year.
The Company expects to announce at least one significant end-user device relationship in the next fiscal year. Similar to the EAGL relationship (RAD integration of their technology into our ecosystem), RAD will take another vendor’s solution and put it into the RAD ecosystem.
The Company has a number of technology projects in process at this time. The Company expects to file applications for several different types of patents throughout the next fiscal year. Moreover, the Company currently expects that RAD-G will introduce at least one solution to the market by the end of next fiscal year. Management of the Company hopes that some of its solutions, successes and promotional efforts will lead to national press coverage during the next fiscal year, similar to August 2020 when 15 major media markets syndicated KTLA’s RAD-face-mask-analytic story.
The Company currently expects that its new Michigan ‘REX’ (RAD Excellence Center) will provide manufacturing expansion to over 100 various devices per month; the Company is taking significant steps to increase sales volume to match. The Company also expects that REX will become the foremost testing center for the Company’s mobility devices, ground and air, in the next fiscal year.
The Company has embarked on its ‘RAD 3.0’ program in 2021. This program is called ’3.0’ as it will represent the next stage of development. The Company considers RAD 1.0 to be the early stage with the foreign robot and considers RAD 2.0 to be the current stage. The RAD 2.0 current stage is characterized by growing adoption of the Company’s stationary line, market adoption of its first mobility solution (ROAMEO), significant increases in all areas of Company performance (engineering, production, sales), and the Company’s reputation within the industry that RAD’s solutions perform as promised. RAD 3.0 will be characterized by enhanced internal any cyber controls with fully implemented SOC2 Type 2, implementation and adoption of an ERP, design overhaul, and conversion of some operating elements from the Windows OS platform to the Linux platform. The Company expects that completion of the RAD 3.0 elements, along with the Company’s anticipated financing efforts, will allow the Company to continue its status as a going concern.
The Company plans to improve the trading market for its shares by uplisting the shares to the OTCQB during the next fiscal year.
The Company plans to continue regular communication with shareholders and other interested parties through the CEO’s Twitter account (@SteveReinharz), regular press releases and on-time SEC filings.
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Capital Resources
The following table summarizes total current assets, liabilities and working capital for the period indicated:
| | | | | | | |
| | February 28, 2021 | | February 29, 2020 | |
| | | | | | | |
Current assets | | $ | 1,207,033 | | $ | 88,213 | |
Current liabilities(1) | | | 4,410,710 | | | 19,677,221 | |
Working capital | | $ | (3,203,677 | ) | $ | (19,589,008 | ) |
__________
| |
(1) | As February 28, 2021 and February 29, 2020, current liabilities included approximately $0.4 million and $6.9 million, respectively, of derivative liabilities that are expected to be settled in shares of the Company in accordance with the various conversion terms. |
As of February 28, 2021 and February 29, 2020, we had a cash balance of $1,044,418 and $13,307, respectively.
Summary of Cash Flows
| | | | | | | |
| | Year Ended February 28, 2021 | | Year Ended February 29, 2020 | |
| | | | | | | |
Net cash used in operating activities | | $ | (3,073,325 | ) | $ | (1,538,488 | ) |
Net cash used in investing activities | | $ | (40,623 | ) | $ | (17,325 | ) |
Net cash provided by financing activities | | $ | 4,145,059 | | $ | 1,547,928 | |
Net cash used in operating activities for the year ended February 28, 2021 was $3,073,325, which included a net loss of $5,898,911, non-cash activity such as the change in fair value of derivative liabilities of ($764,025), loss on settlement of debt of $288,234, interest expense related to penalties from debt defaults of $939,705, amortization of debt discount of $201,567, stock based payments of $362,084, loss on disposal of fixed assets $553, loss on debt settlements of $294,744,bad debts expense $24,868, depreciation and amortization of $120,846 and change in operating assets and liabilities of $1,357.010.
Net cash used in investing activities.
Net cash used in investing activities for the year ended February 28, 2021 was $40,623. This consisted primarily of the purchase of fixed assets of $37,764 and cash paid for security deposit of $ 3,859 offset by proceeds of disposal of fixed assets of $1,000.
Net cash provided by financing activities.
Net cash provided by financing activities was $4,145,059 for the year ended February 28, 2021. This consisted of proceeds from convertible notes payable of $692,650, proceeds from loans payable $3,603,623 and proceeds from deferred variable payment obligation of $966,000 and offset by settlements of convertible notes of $250,000, net borrowings from loan payable – related party of $693,049 and repayments of loan payable $173,881.
Off-Balance Sheet Arrangements
We do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
- 27 -
Significant Accounting Policies
Use of Estimates
In order to prepare financial statements in conformity with accounting principals generally accepted in the United States, management must make estimates , judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any , are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value derivative liabilities.
Revenue Earning Devices
Revenue earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.
| | |
Demo Devices | | 4 years |
Computer equipment | | 3 years |
Office equipment | | 4 years |
Vehicles | | 3 years |
Leasehold improvements | | 5 years, the life of the lease |
The Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.
Research and Development
Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned. At February 28, 2021 and February 29, 2020, the Company had no deferred development costs.
Sales of Future Revenues
The Company has entered into transactions, as more fully described in footnote 11, in which it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement constitutes a sale of future revenues or debt:
| | |
| ● | Does the agreement purport, in substance, to be a sale |
| ● | Does the Company have continuing involvement in the generation of cash flows due the investor |
| ● | Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets |
| ● | Is the investors rate of return implicitly limited by the terms of the agreement |
| ● | Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return |
| ● | Does the investor have recourse relating to payments due |
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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. While the Company does not expect fiscal year 2020 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning March 1, 2018. Refer to Note 3 – Revenue from Contracts with Customers for additional information.
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.
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).
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The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
| | |
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. |
| | |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| | |
| ● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured on a Recurring Basis
The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:
| | | | | | | | | | | | | |
| | | | Fair Value Measurement Using | |
| | Amount at
Fair Value | | Level 1 | | Level 2 | | Level 3 | |
February 28, 2021 | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | |
Derivative liability – conversion features pursuant to convertible notes payable | | $ | 444,466 | | $ | — | | $ | — | | $ | 444,466 | |
| | | | | | | | | | | | | |
February 29, 2020 | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | |
Derivative liability – conversion features pursuant to convertible notes payable | | $ | 6,890,688 | | $ | — | | $ | — | | $ | 6,890,688 | |
See Note 12 for specific inputs used in determining fair value.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
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.
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Recently Adopted Accounting Pronouncements
See discussion of the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, above.
In May 2017, the FASB issued ASU 2017-09, Modification Accounting for Share-Based Payment Arrangements. The standard amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The new standard is effective for fiscal years beginning after December 15, 2017. There was no impact on the financial statements of adopting this new standard on March 1, 2018.
On March 1, 2019 the Company adopted ASU No. 2016-02, Leases (Topic 842), which is effective for public entities for annual reporting periods beginning after December 15, 2018. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company adopted ASU 2016-02 but does not expect any material impact on the financial statements because the leases commencing March 1, 2019 are month to month.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Company is currently assessing the impact this accounting standard will have on its financial statements and related disclosures. The Company adopted this March 1, 2020.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have any financial instruments that are exposed to significant market risk. We maintain our cash and cash equivalents in bank deposits and short-term, highly liquid money market investments. A hypothetical 100-basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents securities, or our earnings on such cash equivalents.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-35 of this annual report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
From October 31, 2019 through June 1, 2021, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and LJ Soldinger & Associates LLC (“LJ Soldinger”) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of February 28, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of February 28, 2021, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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Limitations on Systems of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses identified in our evaluation, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| |
• | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of February 28, 2021, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: lack of a functioning audit committee; lack of a majority of independent members and a lack of a majority of outside directors on our board of directors; inadequate segregation of duties consistent with control objectives; and, management is dominated by a single individual. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of February 28, 2021.
Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
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This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
No changes were made to our internal control over financial reporting during the quarter ended February 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this report. Our directors serve for one year and until their successors are elected and qualified. Our officers are elected by the board of directors to a term of one year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
| | | | |
Name | | Age | | Position(s) |
Steven Reinharz | | 48 | | Chief Executive Officer, Chief Financial Officer, Secretary and Director(3) |
Garett Parsons | | 37 | | President, Chief Executive Officer, Chief Financial Officer and Director(1) Director (2) |
Biographical information concerning our director and executive officer listed above is set forth below.
| | |
| (1) | Resigned offices (of) President, chief Executive Officer and Chief Financial Officer on March 2 ,2021 |
| (2) | Director only as of March 2, 2021 |
| (3) | Appointed on March 2, 2021 |
Steven Reinharz. RAD was founded by Mr. Reinharz in July of 2016, and he has been continuously employed by RAD and its affiliated companies since that time. He is the holder of a majority of the capital stock of the Company. Mr. Reinharz has served as a member of the Board of Directors since March 2, 2021 and as Chief Executive Officer, Chief Financial Officer, and Secretary of the Company since March 2, 2021. As Chief Executive Officer of the Company and President of RAD, Mr. Reinharz leverages his extensive knowledge and interest in robotics and artificial intelligence to design and develop robotic solutions that increase business efficiency and deliver immediate and impressive cost savings. Mr. Reinharz is an active voice in both the security and artificial intelligence industries. He started and ran his own security integration company from the age of 24 to 31, becoming one of California’s leading system integrators. Mr. Reinharz later was part of a team that successfully sold an integrator to a global security firm for $42 million and has held various other security industry roles. Mr. Reinharz speaks and contributes to panels at ISC East and West, and ASIS. Mr. Reinharz is a leading member of several industry association committees, mostly through the Security Industry Association. Mr. Reinharz has called Orange County, California home since 1995, having grown up in Montreal and Toronto. He earned a dual Bachelor of Science degree in Political Science and Commercial Studies.
Garett Parsons. Mr. Parsons had served as our President, Chief Executive Officer, Chief Financial Officer and member of our board of directors from February 2017 until March 2, 2021. Mr. Parsons now serves as a member of the Board of Directors of the Company. Mr. Parsons has over 10 years of financial consulting for both private and public equity markets. Mr. Parsons has significant experience in the field of asset valuation, funding structures and public release document generation. His education includes a Bachelor of Arts degree in Political Science/Economics from California State University Sacramento and an Associate of Arts in Liberal Studies/ Business San Joaquin Delta College and West Hills College.
There are no family relationships between any of the executive officers and directors. During the past 10 years, Mr. Parsons was not involved in any of the legal proceedings listed in Item 401(f) of Regulation S-K. There are no arrangements or understandings between Mr. Parsons and any other person pursuant to which he was or is to be selected as an executive officer or director.
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Board Committees and Director Independence
Mr. Parsons and Mr. Reinharz serve as directors, and we do not have a separately designated audit committee, compensation committee or nominating and corporate governance committee. The functions of those committees are being undertaken by our directors. Since we do not have any independent directors and have only two directors, our directors believes that the establishment of committees of the Board would not provide any benefits to our company and could be considered more form than substance.
We currently have an employee director, Mr. Reinharz, but no independent directors, as such term is defined in the listing standards of The NASDAQ Stock Market, and we do not anticipate appointing additional directors in the near future.
Our directors are not “audit committee financial experts” within the meaning of Item 401(e) of Regulation S-K. As with most small, early stage companies, until such time that the Company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officer’s insurance, the Company does not have any immediate prospects to attract independent directors. When the Company is able to expand our Board of Directors to include one or more independent directors, the Company intends to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent, and the Company is not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
Procedures for Nominating Directors
There have been no material changes to the procedures by which security holders may recommend nominees to the Board since the most recently completed fiscal quarter. We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our sole director established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our sole director has not considered or adopted any of these policies, as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future.
While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees.
Director Qualifications
Mr. Parsons was appointed to our board in February 2017. Mr. Parsons has significant operational experience in our industry and brings both a practical understanding of the industry and as well as hands-on experience in our business sector to our board and a greater understanding of certain of the challenges we face in executing our growth strategy.
Code of Ethics and Business Conduct
We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethics.
Director Compensation
Mr. Parsons did not receive any additional compensation for his services as a director. We reimburse our directors for all reasonable ordinary and necessary business-related expenses, but we did not pay director’s fees or other cash compensation for services rendered as a director during the years ended February 28, 2021 and February 29, 2020 to any of the individuals serving on our Board during that period.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, or written representations that no other reports were required, and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed all required Forms 3, 4, and 5.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation recorded by us in the past two fiscal years for Mr. Parsons, our President, Chief Executive Officer and Chief Financial Officer.
2021 AND 2020 SUMMARY COMPENSATION TABLE
| | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary
or
Fees
($) | | Bonus
($) | | Stock
Awards
($) | | Option
Awards
($) | | Non-Equity
Incentive Plan
Compensation
($) | | Non-Qualified
Deferred
Compensation
Earnings
($) | | All Other
Compensation
($) | | Total
($) |
Steven Reinharz | | 2021 | | 216,000 | | — | | — | | — | | — | | — | | — | | 216,000 |
Chief Executive Officer,Chief Financial Officer,Secretary | | 2020 | | 216,000 | | — | | — | | — | | — | | — | | — | | 216,000 |
Garett Parsons, | | 2021 | | 93,422 | | — | | — | | — | | — | | — | | — | | 93,422 |
President, Chief Executive Officer and Chief Financial Officer (1) | | 2020 | | 132,690 | | — | | — | | — | | — | | — | | — | | 132,690 |
__________
| |
(1) | Mr. Parsons was appointed President, Chief Executive Officer and Chief Financial Officer on February 16, 2017 and resigned on March 2 ,2021. |
(2) | Mr..Reinharz was appointed Chief Executive Officer, Chief Financial Officer and Secretary on March 2, 2021. |
Employment Agreements
On March 1, 2021 Mr. Parsons entered into a consulting agreement with the Company whereby he would provide services for the Company for a three-year term. The consulting agreement sets his annual compensation as $96,000 for the first year, $108,000 for the second year, and $120,000 for the third year.
On April 9, 2021 Mr. Reinharz entered into an employment agreement with the Company in connection with his service as Chief Executive Officer/ The agreement began on April 9, 2021 and has a three-year term, renewable thereafter on an annual basis if neither party files a notice of termination 90 days prior to the term renewal date. The agreement provides for compensation of $240,000 base salary (to be reviewed annually by the Board of Directors) and bonuses to be granted at the discretion of the Board of Directors.
In addition, the Company will grant stock options to Mr. Reinharz under the following conditions:
Award #1 Mr. Reinharz shall be granted an award of 10,000,000 million shares/options/warrants if Objective #1 is achieved. Objective #1: the price per share of the Company’s common stock has increased in value to an average of $0.30 for ten (10) days in a thirty-day trading period. For example, pursuant to a Company Stock Plan, if one is adopted, Mr. Reinharz may elect to exercise Award #1 on a cash or cashless basis at an exercise price of $0.15 per share/option/warrant.
Award #2 Mr. Reinharz shall be granted an award of 30,000,000 million shares/options/warrants if Objective #2 is achieved. Objective #2: the price per share of the Company’s common stock has increased in value to an average of $0.50 for ten (10) days in a thirty-day trading period. For example, pursuant to a Company Stock Plan, if one is adopted, Mr. Reinharz may elect to exercise Award #2 on a cash or cashless basis at an exercise price of $0.25 per share/option/warrant.
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Outstanding Equity Awards at 2021 Fiscal Year-End
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for Mr. Parsons, our sole executive officer outstanding as of February 28, 2021:
| | | | | | | | | | | | | | | | | | | |
OPTION AWARDS | | STOCK AWARDS | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#) | | Option Exercise Price
($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) | |
Steven Reinharz | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Garett Parsons | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
At February 28, 2021, AITX had 3,229,426,884 shares of its common stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our common stock as of February 28, 2021, and reflects:
| |
● | each of our executive officers; |
| |
● | each of our directors; |
| |
● | all of our directors and executive officers as a group; and |
| |
● | each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock. |
Information on beneficial ownership of securities is based upon a record list of our stockholders and we have determined beneficial ownership in accordance with the rules of the SEC. We believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws, except as otherwise provided below.
| | | | |
Name | | Amount and Nature of Beneficial Ownership (1) | | Percent of
Class (2) |
Named Executive Officers and Directors: | | | | |
Steve Reinharz (4) | | 10,707,626,040 | | 67.86% |
Garett Parsons (3) | | 804,164,568 | | 5.10% |
All executive officers and directors as a group (2 persons) | | 11,511,790,608 | | 72.96% |
| | | | |
5% Stockholders: | | | | |
Steve Reinharz (4) | | 10,707,626,040 | | 67.86% |
__________
| |
(1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable or exercisable within 60 days of the date of this table. In determining the percent of common stock owned by a person or entity as of the date of this Report, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on as of May 11, 2021 3,545,772,882 shares, and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares. |
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| |
(2) | Based on 3,545,772,882 shares of the Company’s common stock issued and outstanding as of May 11, 2021. |
| |
(3) | Mr. Parsons is a Company director and formerly the Company’s President, Chief Executive Officer and Chief Financial Officer and owns 1,000,000 shares of our Series E Preferred Stock and 184 shares of our Series F Preferred Stock. If Mr. Parsons converted the 184 shares of the Company’s Series F Preferred stock, he would receive 804,164,568 shares of the Company’s common stock, which is included in the chart above as if such conversion has occurred. Further, the outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, the holders of Series E preferred stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. |
| |
(4) | Steve Reinharz is a director and the Company’s Chief Executive Officer, Chief Financial Officer and Secretary as well as the CEO of RAD and is the holder of (i) 3,350,000 shares of our Series E Preferred Stock and, (ii) 2,450 shares of our Series F Convertible Preferred Stock. If Mr. Reinharz converted the 2,450 shares of the Company’s Series F Convertible Preferred Stock, he would receive 10,707,626,040 shares of the Company’s common stock, which is included in the chart above as if such conversion has occurred. Further, the outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, the holders of Series E preferred stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions. When such transactions arise, they are referred to our board of directors for its consideration.
For the years ended February 28, 2021 and February 29, 2020, the Company made net repayments of $693,049 and $77,245, respectively, to its loan payable-related party. At February 28, 2021, the loan payable-related party was $904,806 and $1,310,358 at February 29, 2020. As of February 28, 2021, included in the balance due to the related party is $883,710 of deferred salary and interest, $642,000 of which bears interest at 12%. At February 29, 2020 there was $656,334, with $426,000 bearing interest at 12%. The accrued interest included at February 28, 2021 was $118,098 (2020- $50,730).
During the years ended February 28, 2021 and February 29, 2020, the Company was charged $121,973 and $95,562, respectively in consulting fees for research and development to a company owned by a principal shareholder.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On October 31, 2019, Fruci & Associates II, PLLC (“Fruci PLLC”) resigned (‘Termination”) as the independent registered public accounting firm of Artificial Intelligence Technology Solutions Inc. (the “Company”). The Board of Directors of the Company approved and ratified the Termination and the engagement (“Engagement”) of LJ Soldinger & Associates LLC (“LJ Soldinger”) as the Company’s new independent registered public accounting firm. The Engagement is effective immediately.
On May 13, 2019, the Board of Directors of the Company approved and ratified the engagement of Fruci PLLC as the Company’s independent registered public accounting firm effective immediately, and dismissed Marcum LLP (“Marcum”) as the Company’s independent registered public accounting firm.
On October 18, 2018, the Registrant engaged Marcum as its independent registered public accountants. This engagement occurred in connection with the Company’s prior independent public accountants, GBH CPA’s resigning, effective July 1, 2018, as a result of combining its practice with Marcum. The engagement of Marcum has been approved by the Audit Committee of the Company’s Board of Directors.
On September 25, 2017, our Board of Directors approved and ratified the engagement of GBH CPAs, PC (“GBH”) as our independent registered public accounting firm for the Company’s fiscal year ending February 28, 2018, effective immediately, and dismissed Malone Bailey as the Company’s independent registered public accounting firm.
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The following table shows the fees that were billed for the audit and other services provided by LJ Soldinger for the fiscal year ended February 28, 2021.
| | | | |
| | 2021 | |
Audit Fees | | $ | 187,000 | |
Audit-Related Fees | | | — | |
Tax Fees | | | — | |
All Other Fees | | | — | |
Total | | $ | 187,000 | |
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category would include consultation regarding correspondence with the SEC, other accounting consulting and other audit services.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
As part of its responsibility for oversight of the independent registered public accountants, the Board has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board. All of the services provided by LJ Soldinger, Fruci,Marcum, GBH and MaloneBailey described above were approved by our Board.
The Company’s principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements and Financial Statement Schedules on page F-1 and included on pages F-2 through F-35.
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
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(3) Exhibits.
| | |
Exhibit No. | | Description of Document |
2.1 | | Stock Purchase Agreement, dated August 28, 2017, by and among the registrant, Steve Reinharz and Robotic Assistance Devices Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Commission on August 31, 2017). |
| | |
3.1 | | Articles of Incorporation of the registrant filed with the Nevada Secretary of State on September 8, 2014. (incorporated by reference to Exhibit 3.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
| | |
3.2 | | Plan and Agreement of Merger of Artificial Intelligence Technology Solutions Inc. (a Florida corporation) and Artificial Intelligence Technology Solutions Inc. (a Nevada corporation). (incorporated by reference to Exhibit 3.2 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
| | |
3.3 | | Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). |
| | |
3.4 | | Certificate of Designations filed with the Nevada Secretary of State on February 8, 2017. (incorporated by reference to Exhibit 3.4 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
| | |
3.5 | | Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017. (incorporated by reference to Exhibit 3.5 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
| | |
3.6 | | Amendment to Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017 (incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the Commission on May 12, 2017). |
| | |
10.1 | | Preferred Stock Purchase Agreement dated January 31, 2017 and entered into between the Company and Capital Venture Holdings LLC. (incorporated by reference to Exhibit 10.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
| | |
14.1 | | Code of Ethics (incorporated by reference to Exhibit 14.1 to the registrant’s registrant statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). |
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21.1 | | List of Subsidiaries. * |
| | |
31.1 | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * |
| | |
32.1 | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
| | |
99.1 | | Insider Trading Policy. * |
| | |
101.INS | | XBRL Instance ** |
101.SCH | | XBRL Taxonomy Extension Schema ** |
101.CAL | | XBRL Taxonomy Extension Calculation ** |
101.DEF | | XBRL Taxonomy Extension Definition ** |
101.LAB | | XBRL Taxonomy Extension Labels ** |
101.PRE | | XBRL Taxonomy Extension Presentation ** |
__________
| |
* | Filed or furnished herewith. |
** | To be submitted by amendment. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
| ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. |
| | |
Date: May 28, 2021 | By: | /s/ Steven Reinharz |
| | Steven Reinharz |
| | President, Chief Executive Officer and Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | |
Signature | | Title | | Date |
/s/ Steven Reinharz | | President, Chief Executive Officer, Chief Financial Officer, and Director (principal executive officer, principal financial officer and principal accounting officer) | | May 28, 2021 |
Steven Reinharz | | | | |
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ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
(FORMERLY ON THE MOVE SYSTEMS CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| |
Report of Independent Registered Public Accounting Firm | F-2 |
| |
Consolidated Balance Sheets | F-5 |
| |
Consolidated Statements of Operations | F-6 |
| |
Consolidated Statement of Stockholders’ Deficit | F-7 |
| |
Consolidated Statements of Cash Flows | F-8 |
| |
Notes to the Consolidated Financial Statements | F-9 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Artificial Intelligence Technology Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Artificial Intelligence Technology Solutions, Inc. (the “Company”) as of February 28, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two years ended February 28, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two years ended February 28, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully explained in Note 2, which includes management’s plans in regards to this uncertainty, the Company has a negative working capital of $3.2 million and an accumulated deficit of $31.5 million and stockholders’ deficit of $14.5 million as of and for the year ended February 28, 2021, and therefore there is substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Critical Audit Matter Description – Embedded Conversion Feature
The Company has numerous notes payable from prior years which were settled or converted, and two new convertible notes and warrants in the current year with conversions rates that are subjected to full or partial resets. This and other factors require the embedded conversion feature to be bifurcated and evaluated at issuance, settlement, conversion and at each reporting period. Calculations and accounting for the notes payable and embedded conversion features require management’s judgments related to initial and subsequent recognition of the debt and related conversions features, use of a valuation model, and determination of the appropriate inputs used in the selected valuation model.
F-2
Critical Audit Matter Determination
The embedded conversion features and resulting derivative liability is a highly complex area of accounting with significant impact on the liabilities, additional paid in capital and statement of operations of the Company. It takes a high degree of training to understand and recognize the accounting implications of the conversion features and to understand the assumptions and impact of the specific assumptions on the valuation model used in the calculation of the derivative liability.
Critical Audit Matter Audit Procedures
Our audit procedures related to evaluating the Company’s accounting for the convertible note payables with embedded derivatives, warrants issued with the debt, accrued interest and the related derivative liability were as follows:
| | |
| - | We read the various instruments, identified the embedded conversion feature, confirmed the amount of the outstanding debt, and recalculated the accrued interest. |
| | |
| - | We assessed the credentials and reputation of the outside firm retained by the Company who performed the calculation of the derivative liabilities. |
| | |
| - | We reviewed the assumptions used to calculate the derivative liabilities at the balance sheet date and various conversion and settlement dates and the related accounting entries. |
| | |
| - | We performed independent calculations on a test basis of specific derivatives to evaluate the model used in calculating the derivatives at various measurement dates. |
Critical Audit Matter Relevant Financial Statement Disclosures
| | |
| - | We read the Company’s disclosures related to the derivative liabilities and changes during the year as a result of mark to market, conversion of debt and settlement of debt activity to ensure the changes were properly accounted for and fully disclosed in the financial statements. |
Critical Audit Matter Description – Going Concern
As discussed in both Note 2 to the consolidated financial statements and above, the Company has incurred significant losses since inception, and has an accumulated deficit of approximately $31.5 million and a working capital deficit of $3.2 million as of February 28, 2021.
Critical Audit Matter Determination
The following items were considered in determining that a going concern was a critical audit matter.
| | |
| - | Significant losses and negative working capital and lack of liquidity |
| | |
| - | We also took into consideration the Company’s need to raise additional debt and equity financing over the next twelve months and the amounts raised as of the time of filing of its financial statements |
Critical Audit Matter Audit Procedures
We reviewed the Company’s negative cash flows from operations
We noted the negative working capital and continued losses
We noted subsequent events and proceeds from the ongoing private placement offering proceeds received as of the date of our opinion
We compared subsequent funding from the private placements of notes completed as of the filing of these financial statements to the estimated cash flows required to continue operations for the year subsequent to the date of our report.
F-3
Critical Audit Matter Relevant Financial Statement Disclosures
We reviewed the completeness of the Company’s Going Concern footnote and the details of the Company’s plans to continue operations for the next twelve months and management’s disclosure as noted above that there is substantial doubt about the Company’s ability to continue as a going concern.
/s/ L J Soldinger Associates, LLC
We have served as the Company’s auditor since 2019.
Deer Park, Illinois
May 28, 2021
F-4
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
