UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2021
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-55079
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
Nevada |
| 27-2343603 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
10800 Galaxie Avenue, |
| 48220 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (877) 787-6268
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Title of each class |
| Name of each exchange on which registered |
Common stock, $0.00001 par value |
| OTC PINK |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
[ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
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| Non-accelerated filer | [X] | Smaller reporting company | [X] |
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| Emerging growth company | [ ] | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
[ ] Yes [X] No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of August 31, 2020 based upon the closing price reported on such date was approximately $2,650,151. Shares of voting stock held by each officer and director and by each person who, as of August 31, 2020, may be deemed as have beneficially owned more than 10% of the outstanding voting stock have been excluded. This determination of affiliate status is not necessarily a conclusive determination of affiliate status for any other purpose.
As of May 25, 2021, there were 3,545,772,882 shares of the registrant’s common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2021. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
PART I
ITEM 1. BUSINESS
Business Overview
Robotic Assistance Devices, LLC was incorporated in the State of Nevada on July 26, 2016, as an LLC and was founded by current President Steve Reinharz. Mr. Reinharz, has 25+ years in various leadership/ownership roles in the security industry and was part of a successful exit to a global multinational security company in 2004. Mr. Reinharz started his first security integration company in 1996, which he grew to 30+ employees before closing that company in 2003. In 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc. (“RAD”), through the issuance of 10,000 common shares to its sole shareholder.
Artificial Intelligence Technology Solutions Inc. (formerly known as On the Move Systems Corp.) (“AITX” or the “Company”) was incorporated in Florida on March 25, 2010, and reincorporated in Nevada on February 17, 2015. On August 24, 2018, On the Move Systems Corp. changed its name to Artificial Intelligence Technology Solutions Inc. (“AITX”).
In 2017, AITX acquired all the ownership and equity interests in RAD (the “Acquisition”). Before the Acquisition, AITX’s business focus had been transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships. After the Acquisition, AITX shifted its business focus to align with RAD’s mission. Since that time, AITX has been engaged in pursuing the delivery of artificial intelligence (AI) and robotic solutions for operational, security, and monitoring needs. More specifically, the Company is focused on applying advanced AI-driven technologies, paired with multi-use hardware and supported by custom software and cloud services, to intelligently automate and integrate a variety of high-frequency security, concierge, and operational tasks.
Since substantially all of AITX’s operations were disposed of with the transaction’s consummation, the Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes. AITX recorded no goodwill or other intangible assets as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer. Therefore, the assets, liabilities, and historical operations reflected in these financial statements are those of RAD as if RAD had always been the reporting company.
RAD’s solutions are offered as a recurring monthly subscription, typically with a minimum 12-month subscription contract. RAD’s solutions are expected to earn over 75% gross margin over the life of each deployed asset when under subscription. RAD also sells units which generally limits gross margin to the 50% range. Specifically, RAD provides workflow automation solutions delivered through a system of hardware, software and cloud services. All elements of hardware and software design offered by RAD are 100% designed, developed and owned by RAD except for gunshot detection capabilities. EAGL Technologies supplies RAD with gunshot detection technical features through a dealer agreement.
Mission
AITX’s mission is to apply Artificial Intelligence (AI) technology to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of the client organization.
A short list of basic examples include:
| 1. | Typical security guard-related functions such as monitoring a parking lot during and after hours and responding appropriately. This scenario applies to perimeters, interior yard areas, and related similar environments. |
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| 2. | Integrated hardware/software with AI-driven responses, simulating and expanding on what legacy or manned solutions could perform. |
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| 3. | Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today. |
RAD’s first industry focus is the more than $100 billion global security services market.1 RAD’s current goal is to disrupt and capture a significant portion of both the human security guard market (over $30 billion)2 and “physical security” (video surveillance, access control, visitor management, etc.) market (over $20 billion) through its innovative RAD solution ecosystem.
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1 https://www.statista.com/statistics/323113/distribution-of-the-security-services-market-worldwide/
2 https://www.statista.com/statistics/294206/revenue-of-security-services-in-the-us/
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RAD solutions are unique because they:
| 1. | Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed. |
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| 2. | Use unique hardware purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new functionality. |
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| 3. | Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms. |
AITX Subsidiaries
AITX owns and operates three (3) wholly-owned subsidiaries.
| 1. | Robotic Assistance Devices, Inc. (RAD I) is the primary operating company of AITX. The company holds the dealer and end-user contracts, employs all US employees, operates the California and Michigan facilities, and is the primary industry-facing entity of AITX. RAD I owns all intellectual property related to RADSoC™, RAD Mobile SOC™, RADGuard™, and their core operating architecture. RAD I owns everything related to AITX’s line of stationary devices and their manufacturing. RAD I also implements and services the devices. |
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| 2. | Robotic Assistance Devices Group, Inc. (RAD G) is RAD G is an AITX subsidiary, separate from RAD I and RAD M, created for the purposes of expected future sales through a channel that is incompatible and non-competitive with RAD I’s existing channel. RAD G is focused on the development of advanced software and electronics solutions and hopes to have a solution in the marketplace by the end of 2021. The Company expects that this first solution, which will be software-only, will be marketed through RAD I. Additional solutions under development are likely to have a direct go-to-market strategy that complements RAD I’s strategy. Development efforts for these entities are highly confidential and will remain so until marketable solutions are ready to launch. |
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| 3. | Robotic Assistance Devices Mobile, Inc. (RAD M) is RAD M is an AITX subsidiary, separate from RAD I and RAD G, created for the purposes of future developments, partnerships, and marketing in which the Company may engage in the future. RAD M is focused on the development of autonomous mobile devices, both ground-based and airborne. RAD M’s first solution, the ROAMEO™ unmanned ground vehicle, incorporates RAD M technologies related to the development of custom chassis, drive train, power management, perception, and prediction. ROAMEO features technology from RAD I to perform its functions. The Company believes that ROAMEO will bring the first outdoor, rugged, commercial security and facility robot to market. This mobile solution will complement the stationary systems. ROAMEO is manufactured, implemented, and maintained by RAD I. ROAMEO will begin serial production in RAD’s Michigan facility in June or July 2021. RAD M will continue developing additional mobility solutions that RAD I will bring to market. |
Background - First Commercial Rugged Outdoor Security Robot
Mr. Reinharz started RAD in the summer of 2016. RAD originally partnered with SMP Robotics Systems Corp. (SMP) and commercialized the SMP S5 Robot for the security market. RAD’s commercialization of the platform focused on integrating traditional security industry manufacturers’ solutions onto the robotics platform. After two paid proofs-of-concept for large utility companies (under NDA) and over 18 months of development and testing, RAD began deployments with various Fortune 500 customers. These deployments were scheduled to start in October 2017 but were delayed until December 2017 due to various supply chain challenges.
By March 2018 it was apparent that S5 platform was not sustainable and RAD began to pull robots out of service.
The robots were rejected by customers due to unsatisfactory reliability and some technical flaws that could not be solved, despite full efforts by SMP and RAD. RAD now considers this phase of the company ‘Phase 1’ into robotics. The Company attempted over 40 deployments during this period.
RAD has had no contact with SMP Robotics since April 2018.
Much of RAD’s existing convertible debt was acquired in support of the RAD/SMP robotics program. This convertible debt has largely been converted to long-term debt and warrants as shown in these financial filings.
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ROAMEO will deliver on AITX’s goal of bringing the first outdoor, rugged, commercial security and facility robot to market. This mobile solution will complement the stationary systems AITX already has operating in physical security applications serving customers in a wide range of environments.
Background – RAD’s 2nd Generation Ecosystem
RAD’s primary strategy has always been to use AI technology and modern systems to transform the security industry. Mobile robots, indoor and outdoor, are a part of that strategy. However, to ultimately realize the delivery of these solutions, a set of “stationary robots” required development.
These stationary robots launched in April 2018 with the Security Control and Observation Tower (SCOT), development of which began in August 2017. SCOT performs many of the same functions as a stationary human security guard, plus many tasks that human guards cannot, and does so at approximately 15% of the cost. There is no known comparable solution available today that blends technology, usability, unique features, and price. SCOT received an enthusiastic response from the security market and industry accolades. SCOT’s positive reception reinvigorated RAD, which accelerated the development of the software and cloud services that support SCOT. SCOT runs on the RAD Software Suite™. This software suite is a cloud and mobile platform at the heart of all RAD security solutions.
A beta version SCOT was first shown to potential customers at the end of February 2018 in an exposition held in Ohio that tested customer reception and elicited voice-of-the-customer input. SCOT and the preliminary RAD Software Suite received a favorable customer response. Customer feedback was incorporated into SCOT, and ideas on SCOT derivatives were added to the hardware development roadmap.
In April 2018, at the ISC West, a large annual physical security event held in the United States, SCOT won three awards: (1) The Security Industry Association’s (SIA) New Product Award for Law Enforcement/Guarding3, (2) A 2018 Secure Campus Award from Campus Security and Life Safety Magazine, and (3) A ‘Govie’ award for government security solutions from Security Today Magazine.
RAD has not submitted entries for any awards since mid-2018 but expects future awards participation.
RAD’s pivot to SCOT and its future derivatives is complete, and RAD’s current facilities can produce a mix of up to 100 units per month with moderate additional investment in equipment and manpower.
Currently Available Hardware Solutions
RAD’s hardware lineup has improved and expanded since initial launch in April 2018. RAD’s hardware lineup includes:
| 1. | “SCOT 2.0” , which replaced SCOT 1.x. SCOT 1 was upgraded during the first year after its introduction and became SCOT 1.4., which features a mature software platform and a refined hardware platform. SCOT solutions have operated with over 99% uptime since inception. It SCOT 1.4 embodies and offers the full complement of solutions driven by the RAD Cloud. Scot 2.0 is a SCOT 1.4 enclosed in an appealing modern enclosure. It also features additional LCD monitors (like those used in the WALLY, described below), curved LED panels to support visibility, flexible messaging (as opposed to the flat LED panels used in SCOT 1.x), and an advanced locking system. SCOT 2.0 is the realization of the concepts pioneered, demonstrated, and tested throughout the 1.x series. The SCOT lineup is indoor/outdoor rated. |
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| 2. | ‘WALLY’ was announced in June 2018 at the BOMA International Show in San Antonio, Texas. WALLY is a wall-mounted derivative of SCOT that is also indoor/outdoor rated. It is designed to bring the RAD ecosystem to entryways, elevator lobbies, loading docks, and other areas where wall mounting is preferable. WALLY has been upgraded several times since inception, with the current version being the “WALLY 2.1 HSO,” which includes a Health Screening Option. This feature automates temperature checks of workers and visitors entering a facility and simplifies contact tracing follow-up. RAD anticipates strong demand for this feature as COVID occupancy restrictions loosen and businesses struggle to efficiently process many more people entering their facilities. |
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3 SIA’s New Product Showcase recognizes innovative products, services and solutions in electronic physical security, and SCOT™’s award comes in the Law Enforcement/Guarding Systems category. Technologies within the program are used in the protection of life and property in residential, commercial, and institutional settings, displaying SCOT™’s importance in long-range human detection and acting as a force multiplier for safety and defense against outside threats.
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| 3. | “AVA” was introduced by the Company in March 2020 and replaces “FRED,” which had been introduced in 2018 as a complement to the RAD ecosystem and focused exclusively on verified entry methods. AVA performs not only the tasks previously performed by FRED but also additional tasks. RAD delivered the first AVA unit in September 2020. [Mounted on gate stanchions and appropriate for office access.] |
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| 4. | “ROSA” (Responsive Observation Security Agent) was introduced in 2019. In addition to providing surveillance capabilities, the unit has been designed to deter loitering, vandalism, and other criminal behaviors by autonomously responding to trespassers with escalating lights, sirens, and targeted messaging. Case studies of two successful installations have been shared widely among the security community and have received coverage in the trade press4. ‘ROSA180’ was announced in May 2021 and is the successor to ROSA. |
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| 5. | “ROSA270” was announced in May 2021 and complements the existing RAD I stationary lineup. It offers an expanded 270° field of view. |
Software Solutions
RAD has created a variety of front-end and back-end software solutions to power its ecosystem. RADGUARD is customer-facing software (on the touchscreens of RAD’s field devices), and management solutions include RADSOC (Security Operations Center) and RADPMC (Property Management Center).
RAD has developed a variety of utilities that allow automatic over-the-air updates, most of which are within a back-end application called SCOT Manager.
RAD has developed Visitor Management, Access Control, and other applications itself instead of seeking to partner with legacy manufacturers. It is RAD’s opinion that the legacy paradigm in the physical space underserves the markets in terms of cost, functionality, and integration.
RAD recently introduced its own Video Management System into RADSOC, delivering a fully integrated solution that facilitates robust security and property management capabilities.
The Company believes that RAD’s ability to deliver easy-to-use, easy-to-obtain, and easy-to-support software, combined with custom workflow-automation applications, is key to the Company’s success.
Manufacturing & Assembly
RAD uses various domestic and overseas machine shops for raw material procurement and machining of the required plastic and metal pieces that build RAD devices. RAD’s sourcing has redundancy through use of multiple machine shops producing the same products for RAD. In addition, all pieces within any RAD device can be procured from a choice of suppliers.
RAD’s margins are based on current small batch production and assembly. The Company expects that economies of scale will drive greater gross margin as quantities and efficiencies increase.
Roadmap
RAD expects to introduce new products and updates to several products during the remainder of 2021 and early 2022, including the following:
1) ROAMEO 2.0 in June 2021. This release will significantly improve the robot’s perception, prediction, battery, speed, and autonomous charging.
2) ROSA270 to be announced June 2021. This is a new solution.
3) ROSA180, the successor to last year’s ROSA.
4) Other hardware and software solutions, currently being developed, one of which is expected to be introduced in June 2021.
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4 https://roboticassistancedevices.com/case-study-citrus-construction/ and https://roboticassistancedevices.com/case-study-midway-car-rental/
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RAD’s hardware and software have benefited from continuous significant improvements and to date has over 600,000 paid operating hours.
Team and Culture
AITX has built a strong start-up culture based on performance, sacrifice, and rewards. Attracting employees who can thrive in this environment requires a different approach to corporate growth and development. RAD’s governing philosophy centers around the principles of “Emotional Intelligence. Self-awareness, composure, internal motivation, empathy, and social skills are prerequisites for joining the RAD team, and each candidate interview begins with a review of the foundational elements that comprise RAD culture.
Team members are open to multitasking and wearing multiple hats, as situations demand. This allows management to focus on larger goals and long-term strategies. We try to ensure that our entire staff shares the same core beliefs and values as the Company, allowing us to adapt and adjust quickly to changes that might grind other companies to a halt. Members have been no stranger to the difficulties that face a startup, including unexpected setbacks, delays in funding, or a cash crunch, but they have persevered with dedication and enthusiasm for our greater mission. They have met incredibly tight deadlines, volunteered to make financial sacrifices, and assisted wherever and however they can.
We believe that RAD’s high-EQ work culture creates productive, motivated employees that has allowed the Company to weather the difficult period of robot deployments and our transition to 2nd generation solutions.
Market Environment
RAD believes that its experience has shown that the security market is ripe for disruption. It has captured the interest of many Fortune 500 companies. The Company believes that no other company operating in the physical security space has the solutions, distribution channel, reputation, sales or support model to rival RAD in the near term. In addition, the Company expects that the launch of RAD’s mobile solutions will significantly increase the gap between it and would-be competitors. RAD will be a one-stop-shop for proven and comprehensive mobile and stationary workflow improvement devices and systems.
RAD’s technology model includes a “new paradigm” for the security industry: Security in a Box. Every RAD solution features connection to the RAD Software Suite, a platform for AI processing, usage analytics, cloud-sided video, communications interface, audit logs, and much more.
Positive market reception for RAD solutions is due to the following conditions:
| 1. | The security guard industry is characterized by poor customer satisfaction and industry consolidation. It’s self-described to be a “race to the bottom” to provide the lowest cost to end-users who require at least some level of security services for crime deterrence and insurance purposes. There are 1.1 million security guards in the United States and the security guard industry represents over $20 billion in annual sales. The average security guard hourly rate is $20 per hour. |
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| 2. | Enterprise organizations’ security divisions/groups are continuously challenged to reduce cost. For example, Universal Parcel Service (UPS) spends over $120 million per year in security guard services, Lockheed Martin over $60 million per year, and NBC Universal over $25 million per/year. The security guard industry has not had any significant disruption or innovation since its inception. |
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| 3. | Guard companies struggle to offer quality service at a reasonable price. Security organizations are eagerly receptive to solutions that improve performance and reduce cost. Guard companies are facing a worker shortage, to the point that they are turning away customers. There is a glut of low-wage jobs available, and compared to opportunities in the retail and service sector, guard positions are undesirable. The work is lonely and boring, and there is little or no room for career growth. Security companies have two alternatives; drastically increase hourly pay to attract more candidates, or automate their processes to require fewer workers who perform more interesting jobs. The former option is expected to increase the cost of services to the end-user; the latter option is expected to reduce the price while delivering security services that may equal or exceed the quality of services performed by individual guards. RAD is uniquely positioned to facilitate this second model, thereby helping to eliminate the staffing crisis for guard companies who embrace RAD’s solutions. |
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| 4. | RAD’s device rental model delivers significantly lower operating costs. With RAD’s current stationary solutions retailing from under $1/hour to $5/hour, customers immediately benefit from substantial savings and more comprehensive security. |
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| 5. | RAD’s services options allow end-users to incorporate or fully replace their existing Security Operation Centers with RAD solutions. RAD’s “Solutions-As-A-Service” Rental Program offers customized options to help organizations achieve operational and security goals. |
The above conditions speak to the historical lack of innovation in the guarding market. RAD upends this tradition by approaching security challenges through a truly revolutionary approach. The market is now positioned for major disruption with the application of AI-based solutions, as lead by RAD. As such, the interest in RAD solutions has been overwhelming. Major companies, including the largest U.S. guarding company, are aligning with RAD to offer these services to their customer base.
Prospective ROAMEO Impact
The Company’s release of ROAMEO positions it as a near-competitor to Knightscope, a Palo Alto based robotics company in business since 2012. RAD’s approach is different from Knightscope’s on many elements of technology.
RAD expects that a small number of expected ROAMEO orders will make a substantial impact on RAD’s financial performance and create momentum for significant adoption of the entire RAD lineup.
Customer Acceptance of RAD Solutions
RAD end-users include one Fortune Top 10 company and a number of other Fortune 500 companies. RAD is currently deployed in logistics, commercial real estate, healthcare, and retail industries. The Company believes that if RAD is ultimately deployed to only 5% of the facilities within any of these industries, the Company will be profitable.
RAD’s batch production of SCOTs & WALLYs have all been committed prior to the completion of the production cycle, with an average delivery time of 45 days. RAD has set a goal, predicated on steady demand, to reduce delivery time to 15 days.
RAD Industry Leadership Role
Mr. Reinharz has earned a prominent role as a spokesperson for AI and change in the security industry. He has lectured and participated in several panels for some of the security industry’s largest events and organizations. Mr. Reinharz sits on the SIA’s Autonomous Working Group committee, which is dedicated to helping shape the industry and support progressive legislation. Most recently, Mr. Reinharz provided a lecture to NYC’s ASIS CPP group that qualified as a continuing education credit.
It is expected that Mr. Reinharz will continue his promotion of the new paradigm for the next few years until adoption is widespread.
Go To Market Strategy
RAD’s strategy continues to focus on the creation and support of a strong dealer channel. This approach affords multiple benefits to RAD with few downsides. RAD has successfully integrated through the largest U.S. guarding company and recently signed another top-three guarding company as a RAD dealer. Furthermore, RAD has been signing up and developing mid-sized and smaller dealers. RAD is on track to establish a focused group of dealers, most of whom will exclusively represent RAD solutions.
Supplemental to nurturing a solid dealer channel, RAD will, under certain circumstances, accept subscriptions directly from end-users. These situations are largely characterized by the end-user not having a guarding company, having a guarding company that RAD does not want as a dealer, or other extenuating circumstances. RAD has no desired ratio of dealer vs. direct subscriptions. Dealer subscriptions remain the primary focus.
Competition
RAD has no direct competition save for one immediate competitor and one potential competitor.
RAD is considered part of the “drones” category of the security industry, although at RAD we consider ourselves to be in the workflow automation industry.
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RAD deliberately restricts information that is public for three main reasons:
| 1. | Usually, activities are covered by mutual non-disclosure agreements and RAD generally will not ask for permission to publicize customer activities. |
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| 2. | These are generally security applications, and most companies prefer not to advertise the details of their security systems. |
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| 3. | Until RAD hits the “tipping point,” we prefer to keep our solutions somewhat stealth so as not to give our would-be competitors ideas to copy. |
We anticipate that, eventually, some competition may enter the market. RAD seeks to maintain a 2+ year competitive advantage through a broad line of hardware solutions, the fastest and smoothest user interface, and the strongest feature set with the most mature back-end. Furthermore, RAD seeks to expand its sales staff and become the dominant incumbent in this new market that it has created.
Covid Impact
The company issued a Covid Impact notice on March 24, 2020 that can be found here:
https://secureservercdn.net/198.71.233.11/48b.407.myftpupload.com/wp-content/uploads/2020/03/covidUpdate.pdf.
In summary, Covid accelerated some opportunities and sales while stunting others. Overall, the Company believes that the Covid pandemic will spur the use of innovative cost-saving technology like that created by RAD. Indeed, at the time of this writing, RAD is engaged in several large and high-level discussions with companies actively looking to reduce cost due to the pandemic. RAD expects this to remain a priority, even in light of vaccination availability and a reopening economy. Furthermore, the elimination of millions of low-wage jobs at the start of the pandemic and the current widespread competition to now replace those workers has exacerbated the already difficult challenge of attracting candidates for security guard positions. With the security industry facing a severe security guard shortage, RAD’s technology-based solutions are a desirable, affordable, and readily available alternative.
Employees
As of May 9, 2021, we have 50 employees, including full-time contract employees in California and Canada. None of our employees are represented by a union. We consider our employee relations to be excellent. AITX is rolling out its approved (April 2021 8-K) ESOP to all employees during the 2nd and 3rd quarters.
Accomplishments & Highlights
AITX, and its subsidiaries RAD I, RAD M, and RAD G, list of accomplishments highlights successes in adding to the strength of its executive leadership team, expanding its sales and distribution channels, launching new products, while growing its presence, visibility and profile within its existing marketplaces. Milestones and accomplishments over the past 12 months include:
• | Authorized Dealers Added to Dealer Network |
RAD has more than 25 authorized dealers across the United States, Canada, and the EU, with plans for continued expansion. Dealers include the largest security companies in the world, including Allied Universal and Securitas. The ongoing addition of authorized dealers introduces and delivers RAD products to new markets. Dealer announcement and highlights include:
• | 5/18/2020 - Artificial Intelligence Technology Solutions Increases Dealer Network |
• | 9/14/2020 - Robotic Assistance Devices Announces Hawaiian Expansion with Titan Security Services |
• | 9/21/2020 - Robotic Assistance Devices Announces a Strengthened Southern California Presence with GMI Integrated Facility Solutions Inc. |
• | 12/17/2020 - Robotic Assistance Devices Announces Dealer Agreement with Civitas Group |
• | 1/6/2021 - Robotic Assistance Devices Announces Dealer Agreement with Protos Security |
• | 2/12/2021 – NexGen Security Solutions and Servexo Protective Services Sign with Robotic Assistance Devices - Indicates that Momentum for Products Accelerates |
• | 3/5/2021 - Robotic Assistance Devices Announces Dealer Agreement with St. Moritz Security Services |
• | 3/11/2021 - Robotic Assistance Devices Announces Dealer Agreement with DSI |
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• | RAD Took an Active Part in the War Against COVID-19 |
The years 2020 and 2021 thus far have been framed by the global impact of COVID-19. Since the early days of the pandemic, RAD has been active in offering businesses of all sizes all-in-one solutions to maintaining a safe and health work environment. Wally HSO (Health Screening Option) and ROSA (with Face Covering Detection) have been integral in helping businesses open their facilities in a safe and secure manner. COVID-19 related product announcements and orders include:
• | 4/6/2020 - Artificial Intelligence Technology Solutions Conducts Coronavirus Type Pandemic First Response |
• | 5/8/2020 - Artificial Intelligence Technology Solutions Announces Health Screening Product Enhancement |
• | 7/1/2020 - Robotic Assistance Devices Deploys Artificial Intelligence-Powered Face Mask Detection Reporting Analytic |
• | 7/22/2020 - Robotic Assistance Devices Announces Face Mask Detection Orders |
• | 7/29/2020 - Robotic Assistance Devices Announces First Health Screening Device Order |
• | 8/13/2020 - Robotic Assistance Devices Receives Multi Unit Order for Face Mask Detection Enabled ROSAs |
• | 8/28/2020 - Robotic Assistance Devices Announces Second “Wally” Order from Fortune 500 Company |
• | 11/24/2020 - Artificial Intelligence Technology Solutions Receives Wally HSO Order from Top 20 Largest Medical Devices Company in the World |
• | 2/23/2021 - Robotic Assistance Devices Announces Large Expansion Order Received from Fortune 50 Client |
• | 3/30/2021 - Robotic Assistance Devices Receives 2-Unit Wally HSO Order from New Dealer DSI |
• | RAD I and RAD M Continued to Expand Their Product Offerings |
Throughout all of fiscal year 2021, RAD released new products and made important updates to existing solutions. Notably, AVA and ROAMEO formally joined the RAD product lineup, with deployments immediately following their announcements. As fiscal year 2022 got underway, ROSA180 and ROSA270 will be poised to take their places in this expanding product lineup.
RAD Sales Continue to Surge
Throughout FY 2021, RAD made great strides in increasing sales and recurring monthly revenue. Through the addition of several new authorized dealers, an expanded product offering, new sales / business development team members and expanded client communications campaigns, the Company has experienced a measurable increase in demand and unit orders. RAD often publicly announces orders that are significant in volume, market penetration, or use case application. Order highlights from FY 2021 include:
Throughout fiscal year 2021, RAD made great strides in increasing sales and recurring monthly revenue. Through the addition of several new authorized dealers, an expanded product offering, new sales/ usiness development team members and expanded client communications campaigns, the Company has experienced a measurable increase in demand and unit orders. RAD often publicly announces orders that are significant in volume, market penetration, or use case application. Order highlights from FY 2021 include:
• | 3/31/2020 - Artificial Intelligence Technology Solutions Secures Seven-Unit Order From Transit Agency |
• | 5/12/2020 - Artificial Intelligence Technology Solutions Secures Nine Unit Order From Real Estate Company |
• | 6/4/2020 - Artificial Intelligence Technology Solutions Receives first AVA Order |
• | 6/24/2020 - Artificial Intelligence Technology Solutions Signs Agreement With Fortune 500 Client |
• | 7/9/2020 - Robotic Assistance Devices Announces Orders |
• | 11/10/2020 - Artificial Intelligence Technology Solutions Receives First Auto Dealership Order |
• | 11/17/2020 - Artificial Intelligence Technology Solutions Receives ROSA Order from Large Construction Company |
• | 12/22/2020 - Robotic Assistance Devices Large Opportunity on the Immediate Horizon |
• | 1/8/2021 - Robotic Assistance Devices Announces That Previously Anticipated Order Is In Hand |
• | 1/13/2021 - Robotic Assistance Devices Receives Opening Order From Civitas Group, RAD’s Recently Signed Dealer in Romania |
• | 1/28/2021 - Robotic Assistance Devices Announces that 2021 is off to a Great Start |
• | 3/1/2021 - Artificial Intelligence Technology Solutions Announces Accelerated Order Activity - New Orders from Fortune Ranked Clients |
• | 4/14/2021 - Robotic Assistance Devices Receives 10-Unit Order from Titan Security Technologies |
• | 4/19/2021 - Major US Airport Poised to Deploy RAD Solutions |
• | 4/21/2021 - Robotic Assistance Devices Receives Opening Order from Recently Signed Dealer St. Moritz Security Services |
• | 4/28/2021 - Robotic Assistance Devices Receives 3-Unit ROSA Order |
• | 5/10/2021 - Robotic Assistance Devices Receives 17 Unit Order |
- 8 -
• | The AITX and RAD Teams Continue to Grow |
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.
Notable Additions to the AITX and RAD Executive Teams:
• | 7/13/2020 - Robotic Assistance Devices Announces Team Expansion |
• | 10/5/2020 - Artificial Intelligence Technology Solutions Announces Board of Advisors |
• | 3/2/2021 - Artificial Intelligence Technology Solutions Announces Executive Team Expansion |
• | 4/12/2021 - Robotic Assistance Devices Welcomes Christopher Almonrode, CPP, as Vice President Security & Industry |
• | 4/26/2021 - Robotic Assistance Devices Appoints New Chief Financial Officer |
• | AITX and RAD Develop Working Relationships with Industry Partners |
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:
• | 9/29/2020 - Artificial Intelligence Technology Solutions Partners With Centralized Vision to Expand Premium Service Offerings |
• | 11/5/2020 - Artificial Intelligence Technology Solutions and Swan Island Networks Announce Strategic Alliance |
• | 3/24/2021 - Robotic Assistance Devices to Integrate EAGL Gunshot Detection Technology into All Security Devices |
• | RAD Expands Its Production Capacity to Keep Up With Demand |
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.
Manufacturing announcements include:
• | 12/30/2020 – Robotic Assistance Devices Announces Growth, Upgrades Two Locations |
• | 3/9/2021 - Robotic Assistance Devices Announces That Its ‘QuickShip’ Turnaround Time in Full Operation |
• | 3/18/2021 - Robotic Assistance Devices Signs Lease for New Production Facility in Greater Detroit Area |
• | 5/5/2021 - Robotic Assistance Devices Experiences Great Advances Through April |
RAD Client Satisfaction – Documented via Case Studies
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:
“Damage to vehicles, graffiti on the exterior of the building, the homeless tampering with our electrical outlets to charge their phones, trash left around the property – that’s all gone since we put the ROSAs in.”
“We’re paying a fraction of what we were paying before and more importantly, we’ve seen a drop in crime. ROSA is doing the same or better than having a security guard in place.”
The future implementation of such case studies will advance RAD’s reach into new vertical markets. Published case studies include:
• | 3/15/2021 - Robotic Assistance Devices Published Case Study Regarding Security and Cost Savings at Client Citrus Construction |
|
|
• | 4/6/2021 - Robotic Assistance Devices’ ROSA Proves Its Value in Automotive Applications |
Legal Proceedings
See Item 3 - Legal Proceedings.
- 9 -
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.
- 10 -
|
| 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.
- 11 -
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).
- 12 -
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 |
- 14 -
(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 -
(continued)
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 -
(continued)
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 |
- 21 -
(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.
- 22 -
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% |
- 23 -
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. |
- 24 -
| - | 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.
- 25 -
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.
- 26 -
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 |
- 28 -
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).
- 29 -
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 |
| 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.
- 30 -
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.
- 31 -
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.
- 32 -
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.
- 33 -
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.
- 34 -
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 |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| Non-Qualified |
| All Other |
| 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 |
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. |
- 36 -
(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.
- 37 -
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.
- 38 -
(3) Exhibits.
Exhibit No. |
| Description of Document |
2.1 |
| Stock Purchase Agreement, dated August 28, 2017, by and among the registrant, Steve Reinharz and Robotic Assistance Devices Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Commission on August 31, 2017). |
|
|
|
3.1 |
| Articles of Incorporation of the registrant filed with the Nevada Secretary of State on September 8, 2014. (incorporated by reference to Exhibit 3.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
|
|
|
3.2 |
| Plan and Agreement of Merger of Artificial Intelligence Technology Solutions Inc. (a Florida corporation) and Artificial Intelligence Technology Solutions Inc. (a Nevada corporation). (incorporated by reference to Exhibit 3.2 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
|
|
|
3.3 |
| Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). |
|
|
|
3.4 |
| Certificate of Designations filed with the Nevada Secretary of State on February 8, 2017. (incorporated by reference to Exhibit 3.4 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
|
|
|
3.5 |
| Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017. (incorporated by reference to Exhibit 3.5 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
|
|
|
3.6 |
| Amendment to Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017 (incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the Commission on May 12, 2017). |
|
|
|
10.1 |
| Preferred Stock Purchase Agreement dated January 31, 2017 and entered into between the Company and Capital Venture Holdings LLC. (incorporated by reference to Exhibit 10.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018). |
|
|
|
14.1 |
| Code of Ethics (incorporated by reference to Exhibit 14.1 to the registrant’s registrant statement on Form S-1 (File No. 333-168530), filed with the Commission on August 4, 2010). |
|
|
|
21.1 |
| |
|
|
|
31.1 |
| |
|
|
|
32.1 |
| |
|
|
|
99.1 |
| |
|
|
|
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. |
- 39 -
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 |
|
|
|
|
- 40 -
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
|
| February 28, 2021 |
| February 29, 2020 |
| ||
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
| $ | 1,044,418 |
| $ | 13,307 |
|
Accounts receivable |
|
| 98,544 |
|
| 50,117 |
|
Device parts inventory |
|
| 64,071 |
|
| 24,789 |
|
Total current assets |
|
| 1,207,033 |
|
| 88,213 |
|
Operating lease asset |
|
| 47,753 |
|
| — |
|
Revenue earning devices, net of accumulated depreciation of $226,459 and $123,088 respectively |
|
| 273,714 |
|
| 239,171 |
|
Fixed assets, net of accumulated depreciation of $67,113 and $51,637, respectively |
|
| 34,994 |
|
| 16,258 |
|
Security deposit |
|
| 3,859 |
|
| — |
|
Total assets |
| $ | 1,567,353 |
| $ | 343,642 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 1,373,838 |
| $ | 1,144,660 |
|
Advances payable |
|
| 1,594 |
|
| 1,597 |
|
Balance owed WeSecure |
|
| 122,000 |
|
| 162,500 |
|
Customer deposits |
|
| 10,500 |
|
| 10,000 |
|
Operating lease liability |
|
| 43,894 |
|
| — |
|
Current portion of deferred variable payment obligation |
|
| 91,587 |
|
| 30,534 |
|
Current portion of convertible notes payable, net of discount of $697,276 and $120,602 respectively |
|
| 196,224 |
|
| 6,613,625 |
|
Loan payable - related party |
|
| 904,806 |
|
| 1,310,358 |
|
Current portion of loans payable, net of discount of $0 and $0, respectively |
|
| 944,614 |
|
| 696,154 |
|
Vehicle loan - current portion |
|
| 38,522 |
|
| 38,522 |
|
Current portion of accrued interest payable |
|
| 238,665 |
|
| 2,778,583 |
|
Derivative liability |
|
| 444,466 |
|
| 6,890,688 |
|
Total current liabilities |
|
| 4,410,710 |
|
| 19,677,221 |
|
Non-current operating lease liability |
|
| 3,859 |
|
| — |
|
Convertible notes payable, net of discount of $0 and $30,486 respectively |
|
| — |
|
| 69,515 |
|
Loans payable, net of discount of $2,510,994 and $0, respectively |
|
| 8,867,998 |
|
| — |
|
Deferred variable payment obligation |
|
| 2,525,000 |
|
| 1,559,000 |
|
Accrued interest payable |
|
| 303,473 |
|
| 144,311 |
|
Total liabilities |
|
| 16,111,040 |
|
| 21,450,047 |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
Preferred Stock, undesignated; 15,645,650 shares authorized; no shares issued and outstanding at February 28, 2021 and February 29, 2020, respectively |
|
| — |
|
| — |
|
Series E Preferred Stock, $0.001 par value; 4,350,000 shares authorized; 4,350,000 and 4,350,000 shares issued and outstanding , respectively |
|
| 4,350 |
|
| 4,350 |
|
Series F Convertible Preferred Stock, $1.00 par value; 4,350 shares authorized; 2,799 and 3,450 shares issued and outstanding, respectively |
|
| 2,799 |
|
| 3,450 |
|
Common Stock, $0.00001 par value; 5,000,000,000 shares authorized 3,229,426,884 and 418,415 shares issued and outstanding, respectively |
|
| 32,294 |
|
| 4 |
|
Additional paid-in capital |
|
| 16,764,554 |
|
| 4,334,564 |
|
Preferred stock to be issued |
|
| 174,070 |
|
| 174,070 |
|
Accumulated deficit |
|
| (31,521,754 | ) |
| (25,622,843 | ) |
Total stockholders’ deficit |
|
| (14,543,687 | ) |
| (21,106,405 | ) |
Total liabilities and stockholders’ deficit |
| $ | 1,567,353 |
| $ | 343,642 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Year Ended |
| Year Ended |
| ||
|
|
|
|
|
|
|
|
Revenues,net |
| $ | 360,888 |
| $ | 260,768 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
| 98,167 |
|
| 83,760 |
|
|
|
|
|
|
|
|
|
Gross Profit |
|
| 262,721 |
|
| 177,008 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
|
| 378,236 |
|
| 332,520 |
|
General and administrative |
|
| 2,748,494 |
|
| 1,536,568 |
|
Operating lease cost |
|
| 9,461 |
|
| — |
|
Depreciation and amortization |
|
| 120,846 |
|
| 102,241 |
|
Loss on disposal of fixed assets |
|
| 553 |
|
| (11,515 | ) |
Total operating expenses |
|
| 3,257,590 |
|
| 1,959,814 |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (2,994,869 | ) |
| (1,782,806 | ) |
|
|
|
|
|
|
|
|
Other income (expense), net: |
|
|
|
|
|
|
|
Change in fair value of derivative liabilities |
|
| 764,025 |
|
| (1,127,119 | ) |
Interest expense |
|
| (3,379,833 | ) |
| (3,465,098 | ) |
Gain (loss) on settlement of debt |
|
| (288,234 | ) |
| 161,374 |
|
Total other income (expense), net |
|
| (2,904,042 | ) |
| (4,430,843 | ) |
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (5,898,911 | ) | $ | (6,213,649 | ) |
|
|
|
|
|
|
|
|
Net income (loss) per share - basic |
| $ | (0.01 | ) | $ | (31.46 | ) |
Net income (loss) per share - diluted |
| $ | (0.01 | ) | $ | (31.46 | ) |
|
|
|
|
|
|
|
|
Weighted average common share outstanding - basic |
|
| 1,015,115,270 |
|
| 197,539 |
|
|
|
|
|
|
|
|
|
Weighted average common share outstanding - diluted |
|
| 1,015,115,270 |
|
| 197,539 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2021 AND FEBRUARY 29, 2020
|
| Series E |
| Series F |
|
|
| Additional |
|
|
| Total |
| ||||||||||||
|
| Preferred Stock |
| Preferred Stock |
| Common Stock |
| Paid-In |
| Accumulated |
| Shareholders’ |
| ||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 28, 2019 |
| 4,350,000 |
| $ | 4,350 |
| 3,450 |
| $ | 177,520 |
| 20,026 |
| $ | — |
| $ | 3,395,606 |
| $ | (19,409,194 | ) | $ | (15,831,718 | ) |
Adjustment to derivative liability |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 440,294 |
|
| — |
|
| 440,294 |
|
Common stock issued for debt conversion |
| — |
|
| — |
| — |
|
| — |
| 395,443 |
|
| 4 |
|
| 498,664 |
|
| — |
|
| 498,668 |
|
Common stock issuable on reverse split |
| — |
|
| — |
| — |
|
| — |
| 2,946 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net income |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (6,213,649 | ) |
| (6,213,649 | ) |
Balance at February 29, 2020 |
| 4,350,000 |
| $ | 4,350 |
| 3,450 |
| $ | 177,520 |
| 418,415 |
| $ | 4 |
| $ | 4,334,564 |
| $ | (25,622,843 | ) | $ | (21,106,405 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed capital |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| $ | (8,809 | ) |
| — |
| $ | (8,809 | ) |
Adjustment to derivative liability |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 2,837,687 |
|
| — |
|
| 2,837,687 |
|
Common stock issued for debt conversion |
| — |
|
| — |
| — |
|
| — |
| 2,329,798,068 |
|
| 23,298 |
|
| 3,545,388 |
|
| — |
|
| 3,568,686 |
|
Exercise of warrants |
| — |
|
| — |
| — |
|
| — |
| 894,210,392 |
|
| 8,942 |
|
| (8,942 | ) |
| — |
|
| — |
|
Common shares and warrants issued with promissory notes |
| — |
|
| — |
| — |
|
| — |
| 5,000,000 |
|
| 50 |
|
| 2,652,265 |
|
| — |
|
| 2,652,315 |
|
Class F shares issued for services |
| — |
|
| — |
| 110 |
|
| 110 |
| — |
|
| — |
|
| 361,974 |
|
| — |
|
| 362,084 |
|
Cancellation of Series F Preferred Shares |
| — |
|
| — |
| (816 | ) |
| (816 | ) | — |
|
| — |
|
| 816 |
|
| — |
|
| — |
|
Issuance of Series F Preferred Shares as part of Debt Settlement |
| — |
|
| — |
| 55 |
|
| 55 |
| — |
|
| — |
|
| 1,151,111 |
|
| — |
|
| 1,151,166 |
|
Warrants issued as part of debt settlement |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 1,898,500 |
|
| — |
|
| 1,898,500 |
|
Rounding shares |
| — |
|
| — |
| — |
|
| — |
| 9 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net income |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (5,898,911 | ) |
| (5,898,911 | ) |
Balance at February 28, 2021 |
| 4,350,000 |
|
| 4,350 |
| 2,799 |
|
| 176,869 |
| 3,229,426,884 |
| $ | 32,294 |
| $ | 16,764,554 |
| $ | (31,521,754 | ) | $ | (14,543,687 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Year Ended |
| Year Ended |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income (loss) |
| $ | (5,898,911 | ) | $ | (6,213,649 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 120,846 |
|
| 102,241 |
|
Loss (gain) on (disposal) impairment of fixed assets |
|
| 553 |
|
| (11,515 | ) |
Bad debts expense |
|
| 24,868 |
|
| — |
|
Stock based compensation |
|
| 362,084 |
|
| — |
|
Provision for inventory |
|
| — |
|
| 54,702 |
|
Change in fair value of derivative liabilities |
|
| (764,025 | ) |
| 1,127,119 |
|
Interest expense related to derivative liability in excess of face value of debt |
|
| — |
|
| 198,492 |
|
Interest expense related to penalties from debt defaults |
|
| 939,705 |
|
| 314,347 |
|
Amortization of debt discounts |
|
| 201,567 |
|
| 874,187 |
|
(Gain) loss on settlement of debt |
|
| 288,234 |
|
| (159,370 | ) |
Increase in related party accrued payroll and interest |
|
| 294,744 |
|
| 264,456 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
| (73,295 | ) |
| (10,153 | ) |
Prepaid expenses |
|
| — |
|
| 18,778 |
|
Device parts inventory |
|
| (177,196 | ) |
| (6,875 | ) |
Accounts payable and accrued expenses |
|
| 89,229 |
|
| 157,165 |
|
Accrued expense, related party |
|
| (7,247 | ) |
| (45,921 | ) |
Customer deposits |
|
| 500 |
|
|
|
|
Balance owed WeSecure |
|
| (40,500 | ) |
| (17,500 | ) |
Accrued interest payable |
|
| 1,565,519 |
|
| 1,826,048 |
|
Advances payable |
|
| — |
|
| (11,040 | ) |
Net cash used in operating activities |
|
| (3,073,325 | ) |
| (1,538,488 | ) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Purchase of fixed assets |
|
| (37,764 | ) |
| (26,825 | ) |
Proceeds of disposal of fixed assets |
|
| 1,000 |
|
| 9,500 |
|
Cash paid for security deposit |
|
| (3,859 | ) |
| — |
|
Net cash used in investing activities |
|
| (40,623 | ) |
| (17,325 | ) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds from convertible notes payable, net |
|
| 692,650 |
|
| 25,000 |
|
Repayment of convertible debt |
|
| (250,000 | ) |
| — |
|
Proceeds from deferred variable payment obligation |
|
| 966,000 |
|
| 1,366,500 |
|
Proceeds from loans payable |
|
| 3,603,623 |
|
| 768,563 |
|
Repayment of loans payable |
|
| (173,881 | ) |
| (534,890 | ) |
Cash on consolidation of RAD G |
|
| (284 | ) |
| — |
|
Net borrowings(repayments) on loan payable - related party |
|
| (693,049 | ) |
| (77,245 | ) |
Net cash provided by financing activities |
|
| 4,145,059 |
|
| 1,547,928 |
|
|
|
|
|
|
|
|
|
Net change in cash |
|
| 1,031,111 |
|
| (7,885 | ) |
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
| 13,307 |
|
| 21,192 |
|
|
|
|
|
|
|
|
|
Cash, end of period |
| $ | 1,044,418 |
| $ | 13,307 |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash and non-cash transactions: |
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 321,553 |
| $ | 40,815 |
|
Cash paid for income taxes |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
Debt discount from derivative liabilities |
| $ | 143,133 |
| $ | 26,250 |
|
Operating lease asset for lease liability |
| $ | 56,396 |
| $ | — |
|
Transfer from device parts inventory to fixed assets |
| $ | — |
| $ | 106,256 |
|
Conversion of convertible notes and interest to shares of common stock |
| $ | 3,568,686 |
| $ | 498,664 |
|
Release of derivative liability on conversion of convertible notes payable |
| $ | 2,837,687 |
| $ | 440,294 |
|
Settlement and exchange of convertible notes payable |
| $ | 7,091,576 |
| $ | — |
|
Discount added to face value of loans |
| $ | 521,700 |
| $ | — |
|
Exercise of warrants |
| $ | 8,942 |
| $ | — |
|
Capitalization of accrued interest to convertible notes payable and loans payable |
| $ | — |
| $ | 160,282 |
|
Proceeds of disposal offset against vehicle loan |
| $ | — |
| $ | 13,251 |
|
Opening balance sheet RAD G |
| $ | 8,809 |
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND GOING CONCERN
Artificial Intelligence Technology Solutions Inc. (formerly known as On the Move Systems Corp.) (“AITX” or the “Company”) was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).
Robotic Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a LLC. On July 25, 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc. through the issuance of 10,000 common shares to its sole shareholder.
On August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity interest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock. AITX’s prior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, in which AITX purchased all of the outstanding shares of capital stock of RAD. As a result, AITX’s business going forward will consist of one segment activity which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.
The Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill or other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders control the Company after the Acquisition, even though AITX was the legal acquirer. As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
For the year ended February 28, 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. The Company is in default on many of its loans and obligations. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to 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.
F-9
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-K of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). The audited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group , Inc, Robotic Assistance Devices Mobile , Inc. , On the Move Experience, LLC and OMV Transports, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
In order to prepare financial statements in conformity with accounting principals generally accepted in the United States, management must make estimates , judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any , are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value equity instruments derivative liabilities.
Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.
Accounts Receivable
Accounts receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There was a $24,868 allowance provided for the year ended February 28, 2021 and nil for the year ended February 29, 2020.
Device Parts Inventory
Device parts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a valuation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company uses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending on use, the Company will transfer the parts to the corresponding asset or expense if used in research and development. A charge to income is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted. At February 28, 2021 there was no valuation reserve.
Revenue Earning Devices
Revenue earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.
F-10
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.
Computer equipment |
| 3 years |
Office equipment |
| 4 years |
Demo Devices |
| 4 years |
Vehicles |
| 3 years |
Leasehold improvements |
| 5 years, the life of the lease |
The Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.
Research and Development
Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned. At February 28, 2021 and February 29, 2020, the Company had no deferred development costs.
Contingencies
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Sales of Future Revenues
The Company has entered into transactions, as more fully described in footnote 10, in which it has received funding from investors in exchange for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement constitutes a sale of future revenues or debt:
| ● | Does the agreement purport, in substance, to be a sale |
|
|
|
| ● | Does the Company have continuing involvement in the generation of cash flows due the investor |
|
|
|
| ● | Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets |
|
|
|
| ● | Is the investors rate of return implicitly limited by the terms of the agreement |
|
|
|
| ● | Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return |
|
|
|
| ● | Does the investor have recourse relating to payments due |
In the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue method. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method. As of the date of these financial statements, the Company has determined that all such agreements are debt.
F-11
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2021 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.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending February 28, 2021, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements.
Leases
We adopted ASU No. 2016—02—Leases (topic 842), as amended as of March 1, 2019 using the modified retrospective approach. The modified retrospective approach provided a method for recording the existing leases at adoption and in comparative periods. In addition, we elected the package of practical expedient permitted under the transition guidance within the new standard.
In addition, we elected the hindsight practical expedient to determine the lease term for existing leases. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $56,396 and $56,396 respectively, as of December 18, 2020. The standard did not materially impact our consolidated net loss, accumulated deficit, and had no impact on cash flows.
Lease agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset.
If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.
F-12
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.
Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $56,396 and $56,396 respectively, as of December 18, 2020. The standard did not materially impact our consolidated net earnings, retained earnings and had no impact on cash flows
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).
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. |
F-13
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 |
| 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.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The standard did not materially impact our consolidated net loss, accumulated deficit, and had no impact on cash flows. The Company has adopted this on March 1, 2020.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue is earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services are accounted for under Topic 606, and short-term rentals are accounted for under Topic 842 which was adopted. On March 1, 2019.
F-14
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As disclosed in the revenue recognition section of Note 4 – Accounting Polices, the Company adopted Topic 606 in accordance with the effective date on March 1, 2018. Note 4 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s financial statements. Revenue is recognized on direct sales of goods or services when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
Upon adoption of Topic 842, also referred to above in Note 4, the Company accounts for revenue earned from rental activities where an identified asset is transferred to the customer and the customer has the ability to control that asset.
The Company recognizes revenue from its rental operations on a straight line basis over the term for each individual robotic device, as the Company has determined that to date, its leases for these devices are classified as operating leases.
The following table presents revenues from contracts with customers disaggregated by product/service:
|
| Year Ended |
| Year Ended |
| ||
Device rental activities |
| $ | 304,294 |
| $ | 234,956 |
|
Direct sales of goods and services |
|
| 56,594 |
|
| 25,812 |
|
|
| $ | 360,888 |
| $ | 260,768 |
|
NOTE 4 – LEASES
We lease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.
There is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Below is a summary of our lease assets and liabilities at February 28, 2021 and February 29, 2020.
Leases |
| Classification |
| February 28, 2021 |
| February 29, 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
|
Operating |
| Operating Lease Assets |
| $ | 47,753 |
| $ | 483,193 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
Operating |
| Current Operating Lease Liability |
| $ | 43,894 |
| $ | 101,984 |
|
Noncurrent |
|
|
|
|
|
|
|
|
|
Operating |
| Noncurrent Operating Lease Liabilities |
|
| 3,859 |
|
| 365,085 |
|
Total lease liabilities |
|
|
| $ | 47,753 |
| $ | 467,069 |
|
Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above was based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
Operating lease cost and rent was $9,461 and $10,000 for both the twelve months ended February 28, 2021 and February 29, 2020, respectively.
F-15
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. REVENUE EARNING ROBOTS
Revenue earning robots consisted of the following:
|
| February 28, 2021 |
| February 29, 2020 |
| ||
Revenue earning devices |
| $ | 500,173 |
| $ | 362,259 |
|
Less: Accumulated depreciation |
|
| (226,459 | ) |
| (123,088 | ) |
|
| $ | 273,714 |
| $ | 239,171 |
|
During the year ended February 28, 2021, the Company made total additions to revenue earning devices of $137,914 which were transfers from inventory. During the year ended February 29, 2020, the Company made total additions to revenue earning devices of $132,301 including $106,476 in inventory transfers. The company disposed of a revenue earning device having a net book value of $3,500 for $9,500 and recorded a gain on disposal of $6,000 in the year ended February 29, 2020.
Depreciation expense for these devices was $103,371 and $80,305 for the years ended February 28, 2021 and February 29, 2020, respectively.
6. FIXED ASSETS
Fixed assets consisted of the following:
|
| February 28, 2021 |
| February 29, 2020 |
| ||
Automobile |
| $ | 70,896 |
| $ | 41,953 |
|
Demo devices |
|
| 3,670 |
|
| — |
|
Computer equipment |
|
| 23,399 |
|
| 20,262 |
|
Office equipment |
|
| 4,142 |
|
| 5,680 |
|
|
|
| 102,107 |
|
| 67,895 |
|
Less: Accumulated depreciation |
|
| (67,113 | ) |
| (51,637 | ) |
|
| $ | 34,994 |
| $ | 16,258 |
|
During the year ended February 29, 2021, the Company made additions to fixed assets of $37,764. The Company disposed of office equipment having a net book value of $1,553 for proceeds of $1,000 and recorded a loss on disposal of $553. During the year ended February 29, 2020, the Company made additions to fixed assets of $1,000.
Depreciation expense was $17,475 and $21,936 for the years ended February 28, 2021 and February 29, 2020, respectively.
7. DEFERRED VARIABLE PAYMENT OBLIGATION
On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 (including $192,500 paid in January and February 2019) in exchange for a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues). If the total investor advances turns out to be less than $900,000, this would not constitute a breach of the agreement, rather the 9% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in minimum $60,000 monthly installments, concluding November 30, 2019. At February 29, 2020 the investor has advanced the full $900,000.
F-16
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On May 9, 2019 the Company entered into two similar arrangements with two investors:
| (1) | The investor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues. If the total investor advances turns out to be less than $400,000, this would not constitute a breach of the agreement, rather the 4% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in four monthly installments of $64,111 starting July 1, 2019. At February 29, 2020, $400,000 has been paid to the Company. |
|
|
|
| (2) | The investor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues. If the total investor advances turns out to be less than $50,000, this would not constitute a breach of the agreement, rather the 1.11% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in four monthly installments of $8,014 starting July 1, 2019. At February 29, 2020, $50,000 has been paid to the Company. |
These variable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount.
In the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.
On November 18, 2019 the Company entered into another similar arrangement with the (February 1, 2019) investor above whereby the investor would advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues
(commencing on quarter ending May 31, 2020). At February 29, 2020 the investor has advanced $109,000 and the investor advanced the $116,000 remainder as of May 2020.
On December 30 , 2019 the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020). At February 29, 2020 the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020. If the total investor advances turns out to be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted on a pro-rata basis.
On April 22, 2020 the Company entered into another similar arrangement with the (first May 9, 2019) investor above whereby the investor would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues. At May 31, 2020 the investor has fully funded this commitment.
On July 1, 2020 the Company entered into a similar agreement with the first investor whereby the investor would pay up to $800,000 in exchange for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue. These Payments are to be made 90 days after the fiscal quarter with the first payment being due no later than May 31, 2021. If the Payments would deplete RAD’s available cash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the first payment due July 2020 and the final payment no later than February 28, 2021. As at August 31, 2020 the investor had fully funded the $800,000 commitment
On August 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for $900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $1,925,000. This new agreement is for similar terms as the above agreements save for the following: the rate payment is revised to 14.25% payable on revenues commencing the quarter ended August 31, 2020 and the Payments are secured by the assets of the Company. This interest may be secured by UCC filing but is subordinated to equipment financing on the products the Company leases to its customers.
F-17
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In summary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted below. This aggregate asset disposition % was reduced from 43.77 % to 33.77%
The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements. As of February 28, 2021, the Company has not yet completed its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these agreements. The Company expects to have completed its analysis of the expected cash flows prior to the filing of the year end February 28, 2022 filing. As of February 28, 2021, and February 29, 2020, the balances under these agreements were $2,525,000 and $1,559,000, respectively.
For the year ended February 28, 2021, $966,000 has been paid to the Company bringing the balance to $2,525,000 at February 28, 2021.
The Payments will first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended May 31, 2019 and will accrue every quarter thereafter. As of February 28, 2021, the Company has accrued approximately $91,587 in Payments (February 29, 2020 -$30,534).
On March 1, 2021 the first investor referred to above whose aggregate investment is $1,925,000 revised his agreements as follows:
| 1) | The rate payment was reduced from 14,25 % to 9.65 % |
| 2) | The asset disposition % (see below) was reduced from 31 % to 21% |
In consideration for the above changes, the investor will receive 40 Series F Convertible Preferred Stock and a warrant to purchase 367 shares of its Series F Convertible Preferred Stock with a five year term and an exercise price of $1.00.Subsequent to year end the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred Stock.
8. CONVERTIBLE NOTES PAYABLE
Convertible notes payable consisted of the following:
|
|
|
|
|
|
|
|
| Balance |
| Balance |
| ||
|
|
|
|
| Interest |
| Conversion | February 28, |
| February 29, |
| |||
Issued |
| Maturity |
|
| Rate |
| Rate per Share | 2021 |
| 2020 |
| |||
January 31, 2013 |
| February 28, 2017X |
|
| 10% |
| $0.010 | (3) | $ | — |
| $ | 119,091 |
|
May 31, 2013 |
| November 30, 2016X |
|
| 10% |
| $0.010 | (3) |
| — |
|
| 261,595 |
|
August 31, 2014 |
| November 30, 2016X |
|
| 10% |
| $0.002 | (3) |
| — |
|
| 355,652 |
|
November 30, 2014 |
| November 30, 2016X |
|
| 10% |
| $0.002 | (3) |
| — |
|
| 103,950 |
|
February 28, 2015 |
| February 28, 2017X |
|
| 10% |
| $0.001 | (3) |
| — |
|
| 63,357 |
|
May 31, 2015 |
| August 31, 2017X |
|
| 10% |
| $1.000 | (3) |
| — |
|
| 65,383 |
|
August 31, 2015 |
| August 31, 2017X |
|
| 10% |
| $0.300 | (3) |
| — |
|
| 91,629 |
|
November 30, 2015 |
| November 30, 2018X |
|
| 10% |
| $0.300 | (3) |
| — |
|
| 269,791 |
|
February 29, 2016 |
| February 28, 2019X |
|
| 10% |
| 60% discount | (2) |
| — |
|
| 95,245 |
|
May 31, 2016 |
| May 31, 2019*X |
|
| 10% |
| $0.003 | (3) |
| — |
|
| 35,100 |
|
July 18, 2016 |
| July 18, 2017* |
|
| 10% |
| $0.003 | (3) |
| 3,500 |
|
| 3,500 |
|
December 31, 2016 |
| December 31, 2020 |
|
| 8% |
| 35% discount | (2) |
| 65,000 |
|
| 65,000 |
|
January 15, 2017 |
| January 15, 2021XXX |
|
| 8% |
| 35% discount | (2) |
| — |
|
| 50,000 |
|
January 15, 2017 |
| January 15, 2021YY |
|
| 8% |
| 35% discount | (2) |
| — |
|
| 100,000 |
|
January 16, 2017 |
| January 16, 2021Y |
|
| 8% |
| 35% discount | (2) |
| — |
|
| 150,000 |
|
March 8, 2017 |
| March 8, 2020W |
|
| 10% |
| 40% discount | (2) |
| — |
|
| 100,000 |
|
March 9, 2017 |
| March 9, 2021XXX |
|
| 8% |
| 35% discount | (2) |
| — |
|
| 50,000 |
|
April 26, 2017 |
| April 26, 2018* |
|
| 0% |
| $0.001 |
|
| — |
|
| 68 |
|
F-18
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
|
|
|
|
|
|
|
| Balance |
| Balance |
| ||
|
|
|
|
| Interest |
| Conversion | February 28, |
| February 29, |
| |||
Issued |
| Maturity |
|
| Rate |
| Rate per Share | 2021 |
| 2020 |
| |||
May 1, 2017 |
| May 1, 2021XXX |
|
| 8% |
| 35% discount | (2) |
| — |
|
| 50,000 |
|
May 4, 2017 |
| May 4, 2018* |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 22,610 |
|
May 15, 2017 |
| May 15, 2018 |
|
| 0% |
| $0.001 |
|
| — |
|
| 1,280 |
|
May 17, 2017 |
| May 17, 2020XXX |
|
| 10% |
| 40% discount | (1) |
| — |
|
| 85,000 |
|
June 7, 2017 |
| June 7, 2018 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 156,764 |
|
June 16, 2017 |
| June 16, 2018 |
|
| 0% |
| $0.001 |
|
| — |
|
| 750 |
|
July 6, 2017 |
| July 6, 2018 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 200,000 |
|
August 8, 2017 |
| August 8, 2018 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 125,000 |
|
July 28, 2017 |
| July 28, 2018XX |
|
| 15% |
| 40% discount | (2) |
| — |
|
| 47,913 |
|
August 29, 2017 |
| August 29, 2018XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 162,250 |
|
October 4, 2017 |
| May 4, 2018Z |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 150,000 |
|
October 16, 2017 |
| October 16, 2018XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 328,537 |
|
November 22, 2017 |
| November 22, 2018XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 550,275 |
|
December 28, 2017 |
| December 28, 2017 |
|
| 10% |
| 40% discount | (2) |
| — |
|
| 57,008 |
|
December 29, 2017 |
| December 29, 2018XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 363,000 |
|
January 9, 2018 |
| January 9, 2019ZZ |
|
| 8% |
| 40% discount | (2)(1) |
| — |
|
| 79,508 |
|
January 30, 2018 |
| January 30, 2019XX |
|
| 15% |
| 50% discount | (2)(1) |
| — |
|
| 330,000 |
|
February 21, 2018 |
| February 21, 2019XX |
|
| 15% |
| 50% discount | (2)(1) |
| — |
|
| 330,000 |
|
March 14, 2018 |
| March 14, 2019* |
|
| 10% |
| 40% discount | (2) |
| — |
|
| 50,000 |
|
June 7, 2017 |
| June 9, 2019ZZZ |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 200,000 |
|
April 9, 2018 |
| April 9, 2019XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 60,500 |
|
March 21, 2017 |
| March 21, 2018 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 40,000 |
|
April 20, 2018 |
| April 20, 2019ZZ |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 97,659 |
|
May 2, 2018 |
| December 2, 2018* |
|
| 10% |
| 40% discount | (2) |
| — |
|
| 70,682 |
|
May 4, 2018 |
| May 4, 2019ZZ |
|
| 12% |
| 50% discount | (2) |
| — |
|
| 123,750 |
|
May 14, 2018 |
| December 14, 2018* |
|
| 10% |
| 50% discount | (2) |
| — |
|
| 33,542 |
|
May 23, 2018 |
| May 23, 2019 |
|
| 10% |
| 50% discount | (2) |
| — |
|
| 110,000 |
|
June 6, 2018 |
| June 6, 2019XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 282,949 |
|
June 19, 2018 |
| March 19, 2019 |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 43,125 |
|
July 6, 2017 |
| June 9, 2019 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 200,000 |
|
August 1, 2018 |
| August 1, 2019XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 35,750 |
|
August 23, 2018 |
| August 23, 2019YYY |
|
| 8% |
| 45% discount | (2) |
| — |
|
| 70,123 |
|
September 13, 2018 |
| June 30, 2019WWW |
|
| 12% |
| 45% discount | (2) |
| — |
|
| 9,200 |
|
September 17, 2018 |
| March 17, 2019* |
|
| 10% |
| 50% discount | (2) |
| — |
|
| 4,945 |
|
September 20, 2018 |
| September 20, 2019XX |
|
| 15% |
| 50% discount | (2) |
| — |
|
| 43,285 |
|
September 24, 2018 |
| June 24, 2019* |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 63,913 |
|
August 8, 2017 |
| June 9, 2019 |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 125,000 |
|
November 8, 2018 |
| August 15, 2019WW |
|
| 12% |
| 45% discount | (2) |
| — |
|
| 79,500 |
|
November 26, 2018 |
| May 26, 2019* |
|
| 10% |
| 50% discount | (2) |
| — |
|
| 44,799 |
|
August 29, 2019 |
| August 29, 2020ZZZ |
|
| 8% |
| 40% discount | (2) |
| — |
|
| 26,250 |
|
January 19, 2021 |
| January 19, 2022 |
|
| 12% |
| $0.04 |
|
| 275,000 |
|
| — |
|
January 27,2021 |
| January 27, 2022 |
|
| 10% |
| $0.10 | (4) |
| 550,000 |
|
| — |
|
|
|
|
|
|
|
|
|
|
| 893,500 |
|
| 6,834,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible notes payable |
|
| 893,500 |
|
| (6,734,227 | ) | |||||||
Less: discount on noncurrent convertible notes payable |
|
| — |
|
| (30,486 | ) | |||||||
Noncurrent convertible notes payable, net of discount |
| $ | — |
| $ | 69,515 |
| |||||||
|
|
|
|
|
|
|
| |||||||
Current portion of convertible notes payable |
| $ | 893,500 |
| $ | 6,734,227 |
| |||||||
Less: discount on current portion of convertible notes payable |
|
| (697,276 | ) |
| (120,602 | ) | |||||||
Current portion of convertible notes payable, net of discount |
| $ | 196,224 |
| $ | 6,613,625 |
| |||||||
F-19
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
__________
* | The indicated notes were in default as of February 28, 2021. Default interest rate 24% |
|
|
X | On December 10, 2020 the Company settled the above notes indicated totaling $1,460,794 and associated accrued interest of $1,593,544 totaling $3,054,338 and derivative liabilities with a fair value of $153,707 in exchange for promissory notes dated December 10, 2020 totaling $3,054,338, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $550,000. A loss on settlement of $396,297 was recorded. This note is secured by a general security interest against all of the Company’s present and after-acquired property. |
|
|
XX | On December 10, 2020 the Company settled the above notes indicated totaling $2,683,357 and associated accrued interest of $1,237,811 totaling $3,921,168 and derivative liabilities with a fair market value of $1,787,235 in exchange for a promissory note dated December 10, 2020 of $3,921,168, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $990,000. Again on settlement of $797,235 was recorded. This note is secured by a general security interest against all of the Company’s present and after-acquired property. |
|
|
XXX | On December 14, 2020 the Company settled the above notes indicated totaling $235,000 and associated accrued interest of $75,375 totaling $310,375 and derivative liabilities with a fair market value of $161,854 in exchange for a promissory note dated December 14, 2020 of $310,375, maturing December 10, 2023 and bearing interest at 12% per annum, a warrant to purchase 25,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $182,500 and 55 shares of Series F Preferred Shares having a fair value of $1,151,166. A loss on settlement of $171,812 was recorded. |
|
|
W | On December 14, 2020 the Company settled the above note of $100,000 and associated accrued interest of $37,589 totaling $137,589 and derivative liabilities with a fair market value of $88,749 in exchange for a promissory note dated December 14, 2020 of $192,625, maturing December 14, 2023 and bearing interest at 12% per annum. A gain on settlement of $33,713 was recorded. |
|
|
WW | On January 1 ,2021 the Company settled the above note of $79,500 and associated accrued interest of $28,925 totaling $108,425 and derivative liabilities with a fair market value of $97,560 in exchange for a promissory note dated January 1, 2021 of $145,000, maturing January 1, 2024 and bearing interest at 12% per annum. A gain on settlement of $60,985 was recorded. This note is secured by a general security interest against all of the Company’s present and after-acquired property. |
|
|
WWW | On January 1 ,2021 the Company settled the above note of $9,200 and associated accrued interest of $6,944 totaling $16,144 and derivative liabilities with a fair market value of $12,555 in exchange for a promissory note dated January 1, 2021 of $25,000, maturing January 1, 2024 and bearing interest at 12% per annum. A gain on settlement of $3,699 was recorded. This note is secured by a general security interest against all of the Company’s present and after-acquired property. |
|
|
Y | On February 25, 2021 the Company settled the above note of $150,000 and $48,493 in accrued interest totaling $198,493 and derivative liabilities with a fair market value of $118,273 for a cash payment of $198,493. A gain on settlement of $118,273 was recorded. |
|
|
YY | On February 25, 2021 the Company settled the above note of $100,000 and $32,526 in accrued interest totaling $132,526 and derivative liabilities with a fair market value of $78,962 for a cash payment of $132,526. A gain on settlement of $78,962 was recorded. |
|
|
YYY | On November 30, 2020 the Company entered into a settlement agreement for the above note of $ $42,584 and accrued interest of $32,416 totaling $75,000 for cash payment of $75,000. The Company paid the settlement on December 4 , 2020. |
|
|
Z | On February 19, 2021 the Company settled the above note of $45,663 and $32,416 in accrued interest totaling $64,794 and derivative liabilities of $22,266 for a cash payment of $64,794. A gain on settlement of $22,266 was recorded. |
|
|
ZZ | On February 25, 2021 the Company settled the above notes totaling $218,477 and $127,948 in accrued interest totaling $346,365 and derivative liabilities with a fair market value of $362,943 for a cash payment of $300,000. A gain on settlement of $409,308 was recorded. |
F-20
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ZZZ | On December 10, 2020 the Company settled the above notes indicated totaling $103,180 and associated accrued interest of $62,425 totaling $165,605 and derivative liabilities of $130,348 in exchange for a promissory note dated December 10, 2020 of $165,605, maturing December 10, 2023 and bearing interest at 12% per annum and a warrant to purchase 80,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $45,652. A loss on settlement of $176,000 was recorded. |
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(1) | The note is convertible beginning six months after the date of issuance. |
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(2) | The notes are convertible at a discount (as indicated) to the average market price and are accounted for and evaluated under ASC 480 as discussed in Note 3. |
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(3) | The conversion price is not subject to adjustment from forward or reverse stock splits. |
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(4) | The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall be equal to $0.10 per share (the “Fixed Conversion Price”); provided, however, that if, the lowest traded price on the date six (6) months from the issue date hereof is below the Fixed Conversion Price, and no default exists, the conversion shall be $0.05 (the “Alternative Fixed Conversion Price”) provided, further, that upon any Event of Default (as defined herein) after the Issue Date, the Conversion Price shall equal the lower of (i) $0.03 (the “Default Fixed Conversion Price”); or (ii) seventy percent (70%) multiplied by the lowest closing price of the Common Stock during the fifteen (15) consecutive Trading Day period immediately preceding the date of the respective event of default (the “Default Conversion Price”); |
During the years ended February 28, 2021 and February 29, 2020, the Company incurred original issue discounts of $77,500 and $1,250, respectively, and debt discounts from derivative liabilities of $143,133 and $26,250, respectively, related to new convertible notes payable. These amounts are included in discounts on convertible notes payable and are being amortized to interest expense over the life of the convertible notes payable. During the years ended February 28, 2021 and February 29, 2020, the Company recognized interest expense related to the amortization of debt discount of $190,197 and $874,187, respectively. The Company recorded penalty interest of $939,705 during the year February 28, 2021 (February 29, 2020-$313,347) that is payable upon maturity if not already converted or settled prior to maturity.
All the notes above are unsecured. As of February 28, 2021, the Company had total accrued interest payable of $49,764, all of which is classified as current. As of February 29, 2020, the Company had total accrued interest payable of $2,922,894, of which $2,778,583 is classified as current and $144,311 is classified as noncurrent. See description below for description of the convertible notes issued during the years ended February 28, 2021 and February 292, 2020.
Convertible notes issued
The Company determined that the embedded conversion features which result in a variable conversion rate, in the convertibles notes described below should be accounted for as derivative liabilities as a result of their variable conversion rates.
During the year ended February 28, 2021, the Company had the following convertible note activity:
● | The Company entered into a convertible note agreement with a lender on January 27, 2021 with a principal amount of $550,000 received cash proceeds of $463,500 with an original issue discount of $50,000 and issuance fees of $36,500. The note has a one year maturity and bears interest at 10%. The note was issued with a warrant to purchase 8,250,000 shares at an exercise price of $0.10 per share with a 3 year term and having a fair value of $1,149,225 using Black-Scholes with assumptions described in note 13 and 5,000,000 common shares having a fair value of 697,000. After allocating these charges to debt and equity according to their respective values , the initial debt balance net of a debt discount was $70,377 and the adjustment to paid in capital was $310,961.The discounts are being amortized over the term of the loan. In addition for the year ended February 28, 2021, the Company recorded a derivative discount on the embedded conversion feature of $82,162, , amortization expense of $12,401 with an unamortized discount of $467,222 at February 28, 2021. |
F-21
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
● | The Company entered into a convertible note agreement with a lender on January 19, 2021 with a principal amount of $275,000 received cash proceeds of $229,150 with an original issue discount of $27,500, and issuance fees of $18,350. The note has a one year maturity and bears interest at 12%. The note was issued with a warrant to purchase 11,000,000 shares at an exercise price of $0.045per share with a 3 year term and having a fair value of $594,0000 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , the initial debt balance net of a debt discount was $40,191 and the adjustment to paid in capital of $127,988. Also, for the year ended February 28, 2021, the Company recorded a derivative discount on the embedded conversion feature of $60,971, amortization expense of $8,255 with an unamortized discount of $226,554 at February 28, 2021. |
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● | The Company recorded $939,705 in penalties as increases on various notes, with a corresponding charge to interest. |
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● | Holders of certain convertible notes payable elected to convert a total of $2,420,559 of principal and $1,148,127 accrued interest, into 2,329,798,068 shares of common stock. No gain or loss was recognized on conversions as these conversions occurred within the terms of the agreement that provided for conversion. |
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● | The Company entered into various debt settlement during the year where they settled principal of $556,664 and interest of $260,514 totaling $817,718 for cash payments totaling $770,813. See details on preceding page. |
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● | The Company entered into various debt settlement during the year where they exchanged principal of $4,671,030 and interest of $3,042,613 totaling $7,713,643 in exchange for new promissory notes totaling $7,713 ,643 bearing interest at 12% and with three year maturities. In addition as part of the debt exchange the Company issued 805,000,000 warrants with a 3 year term and an exercise price of $0.002 having a fair value using black-scholes of 1,898,500 and 55 Series F Preferred Stock having a fair value of $1,151,166. Please see details on page F-17. |
During the year ended February 29, 2020, the Company had the following convertible note activity:
● | On September 5, 2019, the Company received $25,000 of proceeds from an investor for a promissory note with a principal amount of $26,250, including an original issue discounts of $1,250 and maturing August 29, 2020. The promissory note is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has an 8% per annum interest rate. |
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● | The Company wrote off a note payable for $32,600 and related interest of $97,139. The note has matured in February 2013, the company cannot contact the lender and the note is legally prescribed. A gain on settlement of debt of $129,739 was recorded The Company determined that certain Texas state legal requirements were met that allow the Company to treat the liability as no longer enforceable against the Company. |
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● | The company recorded default penalties totaling $314,347 as increases to various notes, with a corresponding charge to interest. |
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● | During the year ended February 29, 2020, holders of certain convertible notes payable elected to convert a total of $254,118 of principal, $244,050 accrued interest, and $500 of fees into 395,443 shares of common stock. No gain or loss was recognized on conversions as they occurred within the terms of the agreement that provided for conversion. Immediately prior to the conversion, the Company performed a valuation of the derivative liability attached to the notes and accrued interest converted and determined that the final derivative liability was $440,294. Upon conversion this amount was transferred from derivative liabilities to additional paid-in capital. |
9. RELATED PARTY TRANSACTIONS
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).
F-22
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the years ended February 28, 2021 and February 28, 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.
10. OTHER DEBT – VEHICLE LOANS
In December 2016, RAD entered into a vehicle loan for $47,704 secured by the vehicle. The loan is repayable over 5 years maturing November 9, 2021, and repayable $1,019 per month including interest and principal. In November 2017, RAD entered into another vehicle loan secured by the vehicle for $47,661. The loan is repayable over 5 years, maturing October 24, 2022 and repayable at $923 per month including interest and principal. The principal repayments made were $0 for both the year ended February 28, 2021 and February 29, 2020. Regarding the second vehicle loan, the vehicle was returned at the end of fiscal 2019 and the car was subsequently sold by the lender for proceeds of $21,907 which went to reduce the outstanding balance of the loan. A loss of $3,257 was recorded as well. A balance of $21,578 remains on this vehicle loan at both February 28, 2021 and February 29, 2020. For the first vehicle loan, the vehicle was retired in 2020, the proceeds of the disposal of $18,766 was applied against the balance of the loan with a $5,515 gain on the remaining asset value of $13,251. A balance of $16,944 remains on this vehicle loan at both February 28, 2021 and February 29, 2020. The remaining total balances of the amounts owed on the vehicle loans were $38,522 and $38,522 as of February 28, 2021 and February 29, 2020, respectively, of which all were classified as current.
11. LOANS PAYABLE
Loans payable at February 28, 2021 consisted of the following:
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| Annual |
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Date |
| Maturity |
| Description |
| Principal |
| Interest Rate |
| |
June 11, 2018 |
| June 11, 2019 |
| Promissory note | (3) | $ | 48,000 |
| 25% | * |
August 10, 2018 |
| September 1, 2018 |
| Promissory note |
|
| 10,000 |
| 25% | * |
August 16, 2018 |
| August 16, 2019 |
| Promissory note | (1) |
| 12,624 |
| 25% | * |
August 16, 2018 |
| October 1, 2018 |
| Promissory note |
|
| 10,000 |
| 25% | * |
August 23, 2018 |
| October 20, 2018 |
| Promissory note | (21) |
| — |
| 20% |
|
October 11, 2018 |
| October 11, 2019 |
| Promissory note | (7) |
| 17,000 |
| 20% | * |
August 5, 2019 |
| March 11, 2020 |
| Factoring Agreement | (4) |
| — | (4) |
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November 12, 2019 |
| August 11, 2020 |
| Factoring Agreement | (10) |
| — | (10) |
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December 20, 2019 |
| March 5, 2020 |
| Factoring Agreement | (14) |
| — |
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October 17,2019 |
| April 29, 2020 |
| Factoring Agreement | (11) |
| — | (11) |
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September 27, 2019 |
| April 4, 2020 |
| Factoring Agreement | (12) |
| — | (12) |
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January 31, 2019 |
| June 30, 2019 |
| Promissory note | (2) |
| 78,432 |
| 15% | * |
January 24, 2019 |
| January 24, 2021 |
| Loan | (8) |
| 168,658 |
| 11% |
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May 9, 2019 |
| June 30, 2019 |
| Promissory note | (5) |
| 7,850 |
| 15% | * |
May 31, 2019 |
| June 30, 2019 |
| Promissory note | (6) |
| 86,567 |
| 15% | * |
June 26, 2019 |
| June 26, 2020 |
| Promissory note | (9) |
| 79,104 |
| 15% | * |
September 24, 2019 |
| June 24 2020 |
| Promissory note | (13) |
| 12,000 |
| 15% | * |
January 30, 2020 |
| January 30, 2021 |
| Promissory note | (15) |
| 11,000 |
| 15% | * |
February 27, 2020 |
| February 27, 2021 |
| Promissory note | (16) |
| 5,000 |
| 15% | * |
April 16, 2020 |
| April 16, 2021 |
| Promissory note | (17) |
| 13,000 |
| 15% |
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May 12, 2020 |
| May 12, 2021 |
| Promissory note | (18) |
| 43,500 |
| 15% |
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May 22, 2020 |
| May 22, 2021 |
| Promissory note | (19) |
| 85,000 |
| 15% |
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June 2, 2020 |
| June 2, 2021 |
| Promissory note | (23) |
| 62,000 |
| 15% |
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June 9, 2020 |
| June 9, 2021 |
| Promissory note | (24) |
| 31,000 |
| 15% |
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June 12, 2020 |
| June 12, 2021 |
| Promissory note | (25) |
| 50,000 |
| 15% |
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June 16, 2020 |
| June 16, 2021 |
| Promissory note | (26) |
| 42,000 |
| 15% |
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April 3, 2020 |
| April 3, 2021 |
| Promissory note | (20) |
| 27,697 |
| 20% |
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August 13, 2020 |
| August 13, 2021 |
| Promissory note | (22) |
| 44,183 |
| 20% |
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September 8, 2020 |
| September 8, 2021 |
| Promissory note | (27) |
| 7,380 |
| 20% |
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September 15, 2020 |
| September 15, 2022 |
| Promissory note | (28) |
| 300,000 |
| 10% |
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October 6, 2020 |
| March 6, 2023 |
| Promissory note | (29) |
| 150,000 |
| 12% |
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November 12, 2020 |
| November 12, 2023 |
| Promissory note | (30) |
| 110,000 |
| 12% |
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November 23, 2020 |
| October 23, 2022 |
| Promissory note | (31) |
| 65,000 |
| 15.5% |
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November 23, 2020 |
| November 23, 2023 |
| Promissory note | (32) |
| 300,000 |
| 15% |
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F-23
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
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| Annual |
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Date |
| Maturity |
| Description |
| Principal |
| Interest Rate |
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December 10, 2020 |
| December 10, 2023 |
| Promissory note | (33) |
| 82,500 |
| 12% |
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December 10, 2020 |
| December 10, 2023 |
| Promissory note | (34) |
| 3,921,168 |
| 12% |
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December 10, 2020 |
| December 10, 2023 |
| Promissory note | (35) |
| 3,054,338 |
| 12% |
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December 10, 2020 |
| December 10, 2023 |
| Promissory note | (36) |
| 165,605 |
| 12% |
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December 14, 2020 |
| December 14, 2023 |
| Promissory note | (37) |
| 310,375 |
| 12% |
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December 14, 2020 |
| December 14, 2023 |
| Promissory note | (38) |
| 192,625 |
| 12% |
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December 30, 2020 |
| December 30, 2023 |
| Promissory note | (39) |
| 350,000 |
| 12% |
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December 31, 2021 |
| December 31, 2024 |
| Promissory note | (40) |
| 25,000 |
| 12% |
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December 31, 2021 |
| December 31, 2024 |
| Promissory note | (41) |
| 145,000 |
| 12% |
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January 14, 2021 |
| January 14, 2024 |
| Promissory note | (42) |
| 550,000 |
| 12% |
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February 22, 2021 |
| February 22, 2022 |
| Promissory note | (43) |
| 1,650,000 |
| 12% |
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| $ | 12,323,606 |
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Less current portion of loans payable |
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| (944,614 | ) |
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Less discount on loans payable |
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| (2,510,994 | ) |
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Loans payable |
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| $ | 8,867,998 |
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Current portion of loans payable |
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| $ | 944,614 |
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Less discount on loans payable |
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| — |
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Current portion of loans payable, net of discount |
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| $ | 944,614 |
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__________
* | Note is in default. No notice has been given by the note holder. |
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(1) | Repayable in 12 monthly instalments of $2,376 commencing September 16 ,2018 and secured by revenue earning devices having a net book value of at least $25,000. Only $12,376 has been repaid by the Company and no notices have been received. Accrued interest of approximately $4,500 has been recorded as of February 28, 2021. |
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(2) | The note may be pre-payable at any time. The note balance includes 33% original issue discount of $25,882. |
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(3) | Repayable in 12 monthly instalments of $4,562 commencing August 11 ,2018 and secured by revenue earning devices having a net book value of at least $48,000. No repayments have been made by the Company and no notices have been received. |
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(4) | Total loan $79,750, repayable $475 per business day including fees and interest of $25,170. Original cash proceeds of $31,353 and $23,227 carried from previous loan less repayment of $58,500, including payments of $21,275 made during the year ended February 28, 2021. The Company settled loan in full and recorded a gain on settlement of $5,750. The Company has pledged a security interest on all accounts receivable and bank accounts of the Company. Obligation under personal guaranty of the controlling shareholder of the Company. |
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(5) | The note may be pre-payable at any time. The note balance includes 33% original issue discount of $2,590. |
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(6) | The note may be pre-payable at any time. The note balance includes 33% original issue discount of $28,567. |
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(7) | $6,000 repaid during the year ended February 29,2020 |
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(8) | $223,000 Canadian loan. Interest payable every calendar quarter commencing June30, 2019, if unpaid accrued interest to be paid at maturity. An additional interest amount calculated as 4% of RAD revenues from SCOT rentals for the fiscal years 2020 and 2021 shall be payable March 31, 2020 and March 31, 2021, respectively. Secured by a general security charging all of RAD’s present and after-acquired property in favor of the lender on a first priority basis subject to the following: the lender’s security in this respect shall be postponeable to security in favor of institutional financing obtained by RAD. |
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(9) | The note may be pre-payable at any time. The note balance includes 33% original issue discount of $26,104. |
F-24
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(10) | Total loan of $243,639, repayable $1,509 per week including fees and interest of $60,042. Original cash proceeds of $7,877, repayment of loans totaling $15,732, partial repayment of fees of $5,566 all totaling $29,175, additional advances of $88,772 with remaining $65,551 to be advanced to the company over the remaining 18 weeks. The total advances were later amended to $202,030 including A fees reduction of $25,877. The Company has repaid a total of $202,030, the loan has been fully repaid. The Company has pledged a security interest on all accounts receivable and bank accounts of the Company. Obligation under personal guaranty of the controlling shareholder of the Company. |
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(11) | Total loan of $71,000, repayable $710 per business day including fees and interest of $21,000. Original proceeds of $50,000. Loan fully repaid at August 31, 2020. |
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(12) | Total loan of $59,960, repayable $590 per business day including fees and interest of $19,960. Original proceeds of $40,000 less repayments of $59,960, the loan has been fully repaid. The Company has pledged a security interest on all accounts receivable and bank accounts of the Company. Obligation under personal guaranty of the controlling shareholder of the Company. |
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(13) | The note may be pre-payable at any time. The note balance includes an original issue discount of $3,000. |
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(14) | Total loan of $12,400, repayable $1,240 per week including fees and interest of $2,400. Original cash proceeds of $10,000, repayments of $12,400, the loan has been fully repaid. The Company has pledged a security interest on all accounts receivable and bank accounts of the Company. Obligation under personal guaranty of the controlling shareholder of the Company. |
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(15) | The note may be pre-payable at any time. The note balance includes an original issue discount of $2,450. |
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(16) | The note may be pre-payable at any time. The note balance includes an original issue discount of $1,200. |
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(17) | The note may be pre-payable at any time. The note balance includes an original issue discount of $3,850. |
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(18) | The note may be pre-payable at any time. The note balance includes an original issue discount of $8,000. |
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(19) | The note may be pre-payable at any time. The note balance includes an original issue discount of $15,000. |
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(20) | $ 40,000 CDN loan, both principal and interest are due at maturity, if unpaid there is a 10% penalty on unpaid balance. By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share. |
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(21) | Principal repayable in one year. Interest repayable in 10 monthly instalments of $460 commencing January 11 ,2019 and secured by revenue earning devices having a net book value of at least $186,000. $25,000 repaid during the year. Repaid in full. |
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(22) | $ 60,000 CDN loan, principal is due at maturity, interest is payable commencing the third month after the loan over the remaining 10 months. If principal or interest unpaid there is a 10% penalty on unpaid balance. By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share. |
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(23) | The note may be pre-payable at any time. The note balance includes an original issue discount of $12,000. |
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(24) | The note may be pre-payable at any time. The note balance includes an original issue discount of $6,000. |
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(25) | The note may be pre-payable at any time. The note balance includes an original issue discount of $10,000. |
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(26) | The note may be pre-payable at any time. The note balance includes an original issue discount of $7,000. |
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(27) | $ 10,000 CDN loan, principal is due at maturity, interest is payable monthly commencing the third month after the loan over the remaining 10 months. If principal or interest unpaid there is a 10% penalty on unpaid balance. By consent of all parties, lender may convert balance into Class F shares at $6,739 USD per share. |
F-25
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(28) | The note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Interest payable monthly, principal due at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. |
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(29) | Principal and interest repayable in 28 monthly instalments commencing December 6, 2020, the first 6 months at $2,000 per month, the remaining 22 payments at $ 8,500 per month. Secured by revenue earning devices. |
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(30) | The note may be pre-payable at any time. The note balance includes an original issue discount of $10,000 and was issued with a warrant to purchase 70,000,000 shares at an exercise price of $0.00165 per share, with a 3 year term and having a relative fair value of $41,176 using Black-Scholes with assumptions described in Note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $41,176 with a corresponding adjustment to paid in capital. For the year ended February 28, 2021, the Company recorded amortization expense of $2,511 with an unamortized discount of $38,665 at February 28 ,2021. |
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(31) | Principal and interest repayable in 21 monthly instalments commencing December 6, 2020 of $4,060 commencing February 21, 2021. Secured by revenue earning devices. |
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(32) | The note may be pre-payable at any time. The note balance includes an original issue discount of $25,000 and was issued with a warrant to purchase 230,000,000 shares at an exercise price of $0.00165 per share with a 3 year term and having a relative fair value of $125,814 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $125,814 with a corresponding adjustment to paid in capital for the relative value of the warrant. For the year ended February 28, 2021, the Company recorded amortization expense of $6,437 with an unamortized discount of $119,377 at February 28 ,2021. |
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(33) | The note may be pre-payable at any time. The note balance includes an original issue discount of 7,500 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.002 per share with a 3 year term and having a relative fair value of $54,545 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $54,545 with a corresponding adjustment to paid in capital for the relative value of the warrant. For the year ended February 28, 2021, the Company recorded amortization expense of $1,694 with an unamortized discount of $52,851 at February 28, 2021. |
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(34) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $2,683,357 in convertible notes and associated accrued interest of $1,237,811 totaling $3,921,168 was exchanged for this promissory note of $3,921,168, and a warrant to purchase 450,000,000 shares at an exercise price of $.002 per share and a three year maturity having a relative fair value of $990,000 using Black-Scholes with assumptions described in Note 13. This note is secured by a general security charging all of the Company’s present and after-acquired property. |
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(35) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $1,460,794 in convertible notes and associated accrued interest of $1,593,544 totaling $3,054,338 was exchanged for this promissory note of $3,054,338, and a warrant to purchase 250,000,000 shares at an exercise price of $.002 per share and a three year maturity having a relative fair value of $550,000 using Black-Scholes with assumptions described in Note 13. This note is secured by a general security charging all of the Company’s present and after-acquired property. |
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(36) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $103,180 in convertible notes and associated accrued interest of $62,425 totaling $165,605 was exchanged for this promissory note of $165,605, and a warrant to purchase 80,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $176,000 using Black-Scholes with assumptions described in Note 13. |
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(37) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $235,000 in convertible notes and associated accrued interest of $75,375 totaling $310,375 was exchanged for this promissory note of $310,375, and a warrant to purchase 25,000,000 shares at an exercise price of $.002 per share and a three year maturity having a fair value of $182,500 using Black-Scholes with assumptions described in Note 13. |
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(38) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $100,000 in convertible notes and associated accrued interest of $37,589 totaling $137,589 was exchanged for this promissory note of $192,625. |
F-26
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(39) | The note may be pre-payable at any time. The note balance includes an original issue discount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3 year term and having a relative fair value of $271,250 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the year ended February 28, 2021, the Company recorded amortization expense of $4,003 and with an unamortized discount of $67,517 at February 28 ,2021. |
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(40) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $9,200 in convertible notes and associated accrued interest of $6,944 totaling $16,144 was exchanged for this promissory note of $25,000.. This note is secured by a general security charging all of the Company’s present and after-acquired property. |
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(41) | This promissory note was issued as part of a debt settlement as disclosed in Note 8 whereby $79,500 in convertible notes and associated accrued interest of $28,925 totaling $108,425was exchanged for this promissory note of $145,000. This note is secured by a general security charging all of the Company’s present and after-acquired property. |
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(42) | The note may be pre-payable at any time. The note balance includes an original issue discount of $50,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3 year term and having a relative fair value of $380,174 using Black-Scholes with assumptions described in note 13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $380,174 with a corresponding adjustment to paid in capital. For the year ended February 28, 2021, the Company recorded amortization expense of $5,887 with an unamortized discount of $37,287 at February 28, 2021. |
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(43) | The note may be pre-payable at any time. The note balance includes an original issue discount of $150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.135 per share with a 3 year term and having a relative fair value of $1,342,857 using Black-Scholes with assumptions described in note 13. The discount and warrant are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values , a debt discount of $1,342,857 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. For the year ended February 28, 2021, the Company recorded amortization expense of $1,260 and with an unamortized discount of $341,597 at February 28, 2021. |
12. DERIVATIVE LIABILITES
As of February 28, 2021, and February 29, 2020 the Company revalued the fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible notes payable and determined that it had a total derivative liability of $444,466 and $6,890,688, respectively.
The Company estimated the fair value of the derivative liabilities using the multinomial lattice model using the following key assumptions during the year ended February 28, 2021:
Strike price | $0.2899 - $0.0013 |
Fair value of Company common stock | $0.138 - $0.0013 |
Dividend yield | 0.00% |
Expected volatility | 355.10% - 196.50% |
Risk free interest rate | 0.09% - 0.15% |
Expected term (years) | 0.25 - 1.00 |
The Company estimated the fair value of the derivative liabilities using the multinomial lattice model using the following key assumptions during the year ended February 29, 2020:
Strike price | $1.40 - $1.00 |
Fair value of Company common stock | $86,500 - $0.0001 |
Dividend yield | 0.00% |
Expected volatility | 590.10% - 396.40% |
Risk free interest rate | 1.05% - 2.63% |
Expected term (years) | 0.04 - 3.33 |
F-27
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the years ended February 28, 2021, and February 29, 2020 the Company released $2,387,687 and $440,294, respectively, of the Company’s derivative liability to equity due to the conversions of principal and interest on the associated notes.
The changes in the derivative liabilities (Level 3 financial instruments) measured at fair value on a recurring basis for the year ended February 28, 2021 were as follows:
Balance as of February 29, 2020 | $ | 6,890,688 |
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|
Release of derivative liability on conversion of convertible notes payable |
| (2,837,687 | ) |
Debt discount due to derivative liabilities |
| 143,133 |
|
Adjustment to derivative liability due to debt settlement |
| (2,987,643 | ) |
Change in fair value of derivative liabilities |
| (764,025 | ) |
Balance as of February 28, 2021 | $ | 444,466 |
|
The changes in the derivative liabilities (Level 3 financial instruments) measured at fair value on a recurring basis for the year ended February 29, 2020 were as follows:
Balance as of February 28, 2019 | $ | 6,170,139 |
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|
Release of derivative liability on conversion of convertible notes payable |
| (440,294 | ) |
Debt discount due to derivative liabilities |
| 26,250 |
|
Derivative liability in excess of face value upon issuance of debt recorded to interest expense |
| 172,242 |
|
Adjustment to derivative liability due to debt settlement |
| (164,768 | ) |
Change in fair value of derivative liabilities |
| 1,127,119 |
|
Balance as of February 29, 2020 | $ | 6,890,688 |
|
13. STOCKHOLDERS’ DEFICIT
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 holder of Series E Preferred Stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
Series F Convertible Preferred Stock
The board of directors has designated 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 2,799 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).
F-28
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. STOCKHOLDERS’ DEFICIT
Summary of Preferred Stock Activity
During the year ended February 28, 2021 the Company had the following preferred stock activity:
| - | On July 22, 2020 the board of directors passed a resolution whereby the sole director agreed to return for cancellation, 816 of his 1000 Series F preferred shares to the Company. |
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| - | On December 1, 2020 the company issued 110 Series F shares having a fair value of $362,084 to a consultant for services previously rendered which was recorded as professional fees with a corresponding adjustment to accrued liabilities. |
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| - | On December 14, 2020, as part of a debt settlement described in Note 8 , the company issued 55 Series F preferred shares to a lender at a fair value of $1,151,166. |
During the year ended February 29, 2020 there was no preferred stock activity.
During the year ended February 28, 2019, the Company received $174,070 for the sale of 65 Series F preferred shares. As of the reporting date, these shares have not been issued and are included in preferred stock to be issued on the balance sheet.
Summary of Common Stock Activity
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 (see Note 13). Certain instruments issued prior to the reverse split that exercise into shares of our common stock are now shown in fractional units due to the effect of the reverse split. If exercised, the Company is required to issue whole shares under its articles of incorporation.
During the year ended February 28, 2021 the Company had the following common stock activity:
| - | The Company issued 2,329,798,068 shares of its common stock for the conversion of debt and related interest and fees totaling $3,568,686 including $2,420,559 of principal and $1,148,127 of interest, and additionally $20,500 in fees in connection with debt converted during the period, as well as the release of the related derivative liability. |
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| - | In connection with a note issuance in January 2021, the Company issued 5,000,000 shares of common stock |
During the year ended February 29, 2020 the Company had the following common stock activity:
| - | On April 23, 2019 the Board of Directors approved an increase in authorized share capital to 5,000,000,000 shares of common stock and to change the par value of the common stock to $0.00001 per share. This became effective on June 20, 2019. The share capital has been retrospectively adjusted accordingly to reflect this change in par value. |
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| - | The Company has 2,946 shares issuable due to partial shares as a result of the March 27,2020 reverse split that will be issued in April 2020. |
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| - | The Company issued 395,443 shares of its common stock for the conversion of debt and related interest and fees totaling $498,668 including $254,118 for of principal, $245,050 interest, $500 in fees in connection with debt converted during the period, as well as the release of the related derivative liability. |
F-29
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summary of Warrant Activity
|
| Number of |
| Weighted Average |
| Weighted Average |
Outstanding at March 1, 2019* |
| 142,859,043 |
| $0.0035 |
| 2.81 |
Issued |
| — |
| — |
| — |
Exercised |
| — |
| — |
| — |
Forfeited and cancelled |
| 0.45 |
| 5 |
| — |
Outstanding at February 29, 2020 |
| 142,859,043 |
| $0.0035 |
| 1.81 |
Issued |
| 1,424,521,449 |
| 0.002 |
| 3.00 |
Exercised |
| (947,857,000) |
| 0.002 |
| 3.00 |
Forfeited and cancelled |
| — |
| — |
| — |
Outstanding at February 28, 2021 |
| 619,523,492 |
| $0.0295 |
| 2.81 |
__________
* Included in this amount were warrants issued on March 15, 2018 to a lender (as part of a loan agreement) to purchase 333,333 shares at a share price of $0.15 with a three-year term. These were the original transaction amounts before any reverse splits. After the 100: 1 reverse split on August 24,2019 and 10,000:1 reverse split on March 27, 2020 the Company reported these warrants after adjusting for the split as warrants to purchase 0.33 shares at $150,000 which is their value shown at February 209, 2020. This was an error as there was an anti-dilution provision in the warrant agreement whereby the exercise price and warrants get reset to their original value based on the lowest trading price. We therefor adjusted these warrants in the current period to their value of warrants to purchase 142,857,000 at $0.00035.
For the years ended February 28, 2021 and February 29, 2020, the Company recorded a total of $362,084 and $0, respectively on stock-based payments for warrants with a corresponding adjustment to additional paid-in capital.
14. COMMITMENTS AND CONTINGENCIES
Litigation
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
In March 2021, the Company settled with former landlords for $30,000. The Company had accrued $62,552 at February 28, 2021.
In April 2019 the principals of WeSecure (see Note 9) filed lawsuit in California Superior Court seeking damages for non-payment balance of sale of WeSecure assets 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 instalments as follows:
2019 |
| 2020 |
| Total |
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6/30/19 | $ | 5,000 |
| 1/26/2020 | $ | 15,000 |
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7/30/19 | $ | 5,000 |
| 2/25/2020 | $ | 15,000 |
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8/29/19 | $ | 7,500 |
| 3/26/2020 | $ | 15,000 |
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9/28/19 | $ | 7,500 |
| 4/25/2020 | $ | 15,000 |
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10/28/19 | $ | 10,000 |
| 5/25/2020 | $ | 20,000 |
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11/27/19 | $ | 10,000 |
| 6/25/2020 | $ | 20,000 |
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12/27/19 | $ | 15,000 |
| 7/24/2020 | $ | 20,000 |
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