Exhibit 4.2
As filed with the Securities and Exchange Commission on September 2, 2021
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-2343603 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
10800 Galaxie Avenue
Ferndale, Michigan 48220
(877) 787-6268
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Steven Reinharz
Chief Executive Officer
10800 Galaxie Avenue
Ferndale, Michigan 48220
(877) 787-6268
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Richard A. Weintraub
Weintraub Law Group PC
10085 Carroll Canyon Road, Suite 230
San Diego, California 92131
(858) 566-7010
_______________________________ ____, 2021
(Approximate date of commencement of proposed sale to the public)
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer | ☐ |
| Non-Accelerated filer ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
|
Title
of Each Class of
Securities to be Registered |
Amount
to be
Registered (1) |
Proposed
Maximum
Offering Price Per Unit (1) |
Proposed
Maximum
Aggregate Offering Price (1) |
Amount
of
Registration Fee |
||||||||||||
| Common Stock, $0.00001 par value | ||||||||||||||||
| Warrants | ||||||||||||||||
| Units (2) | ||||||||||||||||
| Maximum Offering | $ | 30,000,000.00 | $ | 3,273.00 | ||||||||||||
| (1) | Pursuant to Form S-3 General Instruction II.D, information is not required to be included. An indeterminate amount of the securities of each identified class is being registered as may from time to time be offered hereunder at indeterminate prices, along with an indeterminate number of securities that may be issued upon exercise, settlement, exchange or conversion of securities offered or sold hereunder. Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers any additional securities that may be offered or issued in connection with any stock split, stock dividend, or pursuant to anti-dilution provisions of any of the securities. Separate consideration may or may not be received for securities that are issuable upon conversion, exercise, or exchange of other securities. In addition, the total amount to be registered and the proposed maximum aggregate offering price are estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act. | |
| (2) | Each unit will be comprised of one or more shares of common stock and one or more warrants, in any combination, which may or may not be separable from one another. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any jurisdiction where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 2021
PROSPECTUS
$30,000,000
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
Common Stock
Warrants
Units
Artificial Intelligence Technology Solutions Inc., a Nevada corporation (“AITX” or the “Company”), may offer and sell securities from time to time in one or more offerings of up to $30,000,000 in aggregate offering price. This prospectus describes the general terms of these securities and the general manner in which these securities will be offered. We will provide the specific terms of these securities in supplements to this prospectus. The prospectus supplements will also describe the specific manner in which these securities will be offered and may also supplement, update or amend information contained or incorporated by reference in this prospectus. You should carefully read this prospectus, the related prospectus supplement and any related free writing prospectus, as well as the documents incorporated by reference herein and therein, carefully before you invest.
We may offer these securities in amounts, at prices and on terms determined at the time of offering. The securities may be sold directly to you, through agents, or through underwriters and dealers. If agents, underwriters or dealers are used to sell the securities, we will name them and describe their compensation in a prospectus supplement.
Our common stock is currently quoted on the OTC Markets Pink under the symbol “AITX.” On August 30, 2021, the closing price of the common stock as reported was $0.0427 per share.
PLEASE REVIEW “RISK FACTORS” ON PAGES 5 THROUGH 13 BEFORE PURCHASING SHARES OF THE COMMON STOCK OF THE COMPANY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTING IN OUR SECURITIES INVOLVES RISKS. YOU SHOULD REVIEW CAREFULLY THE RISKS AND UNCERTAINTIES DESCRIBED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED FEBRUARY 28, 2021, OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MAY 31, 2021, AND IN OUR PERIODIC AND CURRENT REPORTS THAT WE FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AFTER THE DATE OF THIS PROSPECTUS, WHICH ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR INVESTMENT DECISION.
Our independent registered public accounting firm has included a “going concern” paragraph in the notes to our condensed consolidated financial statements.
The date of this Prospectus is _________ , 2021
| 2 |
TABLE OF CONTENTS
| 3 |
Shelf Registration
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, we may from time to time sell any combination of the securities described in this prospectus in one or more offerings for an aggregate initial offering price of up to $30,000,000. The securities may be shares of common stock, warrants to purchase common stock, and units consisting of common stock and warrants. We may offer these securities in amounts, at prices and on terms determined at the time of offering. The securities may be sold directly to you, through agents, or through underwriters and dealers.
This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide one or more prospectus supplements that will contain specific information about the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should carefully read this prospectus, the accompanying prospectus supplement, the information incorporated by reference into this prospectus, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part. You should also read the information discussed under “Risk Factors,” which describes the risks of investing in our securities.
Neither we, nor any agent, underwriter or dealer have authorized anyone to provide you with any information other than that contained or incorporated by reference in this prospectus or any accompanying prospectus supplement or free writing prospectus to which we have referred you. We and any agent, underwriter or dealer take no responsibility for, and can provide no assurance as to the reliability of, any other information others may give you. This prospectus and any accompanying prospectus supplement do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities described in this prospectus or any accompanying prospectus supplement or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. You should assume that the information appearing in this prospectus, any prospectus supplement, the documents incorporated by reference and any related free writing prospectus is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed materially since those dates.
Background of the Company
On February 17, 2015, On the Move Systems Corp., a Florida corporation, merged into its Nevada affiliate, On the Move Systems Corp., which had been incorporated in Nevada on September 8, 2014 (“OMVS”). In 2016, Steven Reinharz founded Robotic Assistance Devices, Inc. (“RAD I”) and incorporated it in Nevada on July 26, 2016. On August 28, 2017, OMVS acquired from Mr. Reinharz all of the ownership and equity interests in RAD I (the “Acquisition”). Before the Acquisition, OMVS’s business focus was on providing transportation services, while RAD I’s focus was on exploring the on-demand logistics market by developing a network of logistics partnerships. After the Acquisition, OMVS shifted its business focus to align with RAD I’s mission. On August 24, 2018, OMVS changed its name to Artificial Intelligence Technology Solutions Inc. (“AITX” or the “Company”).
Since the Acquisition, AITX’s business focus has been on 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.
AITX’s solutions target the security and facility management markets.
| 4 |
Current Structure of the Company
AITX operates through three subsidiary companies:
Robotic Assistance Devices, Inc. (“RAD I”) is currently the Company’s major operating subsidiary. RAD I holds the dealer and end-user contracts, employs all United States employees, operates the Company’s California and Michigan facilities, and is the primary industry-facing entity of AITX. RAD I owns all intellectual property related to the Company’s products/systems RADSoC™, RAD Mobile SOC™, RADGuard™, and their core operating architecture. In addition, RAD I owns everything related to AITX’s line of stationary devices and the manufacturing of those devices. RAD I also implements and services the devices.
Robotic Assistance Devices Group, Inc. (“RAD G”) is a Company subsidiary that was created for the purposes of conducting expected future sales through a channel that is both incompatible and non-competitive with RAD I’s existing channel. RAD G is focused on the development of advanced software and electronics solutions and is working towards a goal of introducing a solution to the marketplace by the end of 2021. The Company expects that this first RAD G 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 by RAD G are highly confidential and will remain so until the solutions are ready to be launched.
Robotic Assistance Devices Mobile, Inc. (“RAD M”) is a Company subsidiary that was 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 Company’s stationary systems. ROAMEO is manufactured, implemented, and maintained by RAD I. ROAMEO began serial production in August 2021. RAD M expects to continue developing additional mobility solutions that will be marketed through RAD I.
Unless the context indicates otherwise, as used in this prospectus, references to “we,” “us,” “our,” “the Company” and “AITX” refer to Artificial Intelligence Technology Solutions Inc, and its subsidiaries.
Information about the Company
The Company’s principal executive offices and its manufacturing facility are located at 10800 Galaxie Avenue, Ferndale, Michigan 48220, telephone number is (877) 787-6268. Our website is www.aitx.ai. We do not incorporate by reference into this prospectus the information on, or accessible through, our website, and you should not consider it as part of this prospectus. We also maintain offices and a small manufacturing/assembly facility in Irvine, California.
Investing in our securities involves a high degree of risk. You should carefully review the risks and uncertainties described below before deciding whether to purchase any of the securities being registered pursuant to the registration statement of which this prospectus is a part. Each of the risk factors described below could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our securities. The occurrence of any of these risks might cause you to lose all or part of your investment. Moreover, the risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, and results of operations. If any of these risks actually occurs, our business, financial condition and results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
| 5 |
Risks Related to Our Industry and Our Company
Our business is at an early stage, and we have not yet generated any profits.
RAD I, the Company’s primary operating subsidiary, was formed in 2016 and made its first sale in 2016. Accordingly, the Company has a limited operating history upon which to evaluate its performance and prospects. Our current and proposed operations are subject to all the business risks associated with young enterprises. These include likely fluctuations in operating results as the Company makes significant investments in research, development and product opportunities, and reacts to developments in its market, including purchasing patterns of customers, and the entry of competitors into the market. We cannot assure you that we will generate enough revenue to be profitable in the next three years or at all, which could lead to a loss of part or all of an investment in the Company.
Our auditor has expressed substantial doubt about our ability to continue as a going concern.
The financial statements incorporated by reference into the registration statement of which this prospectus is a part have been prepared on a going concern basis. We may not be able to generate profitable operations in the future and/or obtain the necessary financing to meet our obligations and pay liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Our financial results will fluctuate in the future, which makes them difficult to predict.
The Company’s financial results may fluctuate in the future. Additionally, we have a limited operating history with the current scale of our business, which makes it difficult to forecast future results. As a result, you should not rely upon the Company’s past financial results as indicators of future performance. In addition, you should take into account the risks and uncertainties frequently encountered by rapidly growing companies in evolving markets. Our financial results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including, but not limited to the following:
| ● | our ability to maintain and grow our client base; | |
| ● | clients suffering downturns, financial instability or becoming subject to mergers or acquisitions; | |
| ● | the Company’s ability to develop and introduce new products and the ability of our competitors to do the same; | |
| ● | the Company’s ability to maintain gross margins and operating margins; | |
| ● | increases in marketing, sales, service and other operating expenses incurred in expanding our operations and remaining competitive; | |
| ● | changes affecting our suppliers and other third-party service providers; | |
| ● | adverse litigation judgments, settlements, or other litigation-related costs; and | |
| ● | changes in business or macroeconomic conditions, including regulatory changes. |
| 6 |
We have a limited number of deployments and our success depends on an unproven market.
The market for advanced physical security technology is relatively new and unproven and is subject to a number of risks and uncertainties. In order to grow our business and extend our market position, we will need to place into service additional robots, expand our service offerings, and expand our presence. Our ability to expand the market for our products depends on a number of factors, including the cost, performance and perceived value associated with our products and services. Furthermore, the public’s perception of the use of robots to perform tasks traditionally reserved for humans may negatively affect demand for our products and services. Ultimately, our success will depend largely on our customers’ acceptance that security services can be performed more efficiently and cost effectively through the use of our robots and ancillary services, of which there can be no assurance.
We cannot assure you that we can effectively manage our growth.
The Company expects to continue hiring additional employees. The growth and expansion of our business and products create significant challenges for our management, operational, and financial resources, including managing multiple relationships and interactions with users, distributors, vendors, and other third parties. As the Company continues to grow, our information technology systems, internal management processes, internal controls and procedures and production processes may not be adequate to support our operations. To ensure success, we must continue to improve our operational, financial, and management processes and systems and to effectively expand, train, and manage our employee base. As we continue to grow, and implement more complex organizational and management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our current team’s efficiency and expertise, which could negatively affect our business performance.
Our costs may grow more quickly than our revenues, harming our business and profitability.
We expect our expenses to continue to increase in the future as we expand our product offerings, expand production capabilities and hire additional employees. We expect to continue to incur increasing costs, in particular for working capital to purchase inventory, marketing and product deployments as well as costs associated with customer support in the field. Our expenses may be greater than we anticipate which would have a negative impact on our financial position, assets and ability to invest further in the growth and expansion of our business.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.
The Company currently depends on the continued services and performance of key members of the management team, in particular, founder and Chief Executive Officer, Steven Reinharz, Chief Financial Officer, Anthony Brenz, and RAD I Chief Executive Officer, Mark Folmer. While we currently have employment agreements with Mr. Reinharz and Mr. Brenz, we do not have any employment agreements in place with our other officers. If we cannot call upon Mr. Reinharz, Mr. Brenz or Mr. Folmer or other key management personnel for any reason, our operations and development could be harmed. The Company has not yet developed a succession plan. Furthermore, as the Company grows, it will be required to hire and attract additional qualified professionals such as accounting, legal, finance, production, service and engineering experts. The Company may not be able to locate or attract qualified individuals for such positions, which will affect the Company’s ability to grow and expand its business.
| 7 |
Because the Company’s Board of Directors does not currently have an audit committee, compensation committee or any other form of corporate governance committee, shareholders will have to rely on our only director, who is not independent, to perform these functions.
We do not have an audit committee, compensation committee or any form of corporate governance committees that includes any independent members. Instead, the Board of Directors performs these functions as a whole. As a result, the Company does not receive the independent advice of other persons.
If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished and our business may be adversely affected.
The Company relies and expects to continue to rely on a combination of confidentiality agreements with its employees, consultants, and third parties with whom it has relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect its proprietary rights. As of the date of this report, there are no patents filed on behalf of the Company. The Company plans to file various applications in the United States for protection of certain aspects of its intellectual property. However, third parties may knowingly or unknowingly infringe our proprietary rights, may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we intend to operate in the future. In any or all of these cases, we may be required to expend significant time and expense in order to prevent infringement or to enforce our rights. Although we plan to take measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to those offered through RAD I and compete with our business. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could have a material adverse effect on our business and financial results.
Economic factors generally may negatively affect our operations.
The Company is subject to the general risks of the marketplace in which the Company does business. Moreover, the results of operations of the Company will depend on a number of factors over which the Company will have no control, including changes in general economic or local economic conditions, changes in supply of or demand for similar and/or competing products and services, and changes in tax and governmental regulations that may affect demand for such products and services. Any significant decline in general economic conditions or uncertainties regarding future economic prospects that affect industrial and consumer spending could have a material adverse effect on the Company’s business. For these and other reasons, no assurance of profitable operations can be given.
The currently evolving situation related to the COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations.
The ongoing COVID-19 pandemic, including the emergence of variants for which vaccines may not be effective, may continue to negatively affect our business by causing or contributing to, among other things:
| ● | Higher shipping costs and longer shipping times, especially for shipments from China and Europe; | |
| ● | Limited access to parts needed for our products due to the ongoing issues with global chip supply, which may affect our ability to meet our production goals; | |
| ● | Higher labor costs due to a diminished supply of potential employees and higher employee recruitment and retention costs; and | |
| ● | Disruptions in production due to employees becoming ill from Covid. |
| 8 |
The extent of COVID-19’s effect on our operational and financial performance in the future will depend on future developments, including the duration, spread and intensity of the pandemic, our continued ability to manufacture and distribute our products, any future government actions affecting consumers and the economy generally, changing economic conditions and any resulting inflationary impacts, as well as timing and effectiveness of global vaccines, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Although the potential effects that COVID-19 may continue to have on the Company are not clear, these effects could materially adversely affect the Company’s business, financial condition and results of operations.
Our business is subject to data security risks, including security breaches.
Our products employ technologies that are subject to various data security risks including security breaches and hacking, and we cannot guarantee that our products may not be negatively affected by these risks causing them to suffer damages. We use wireless data carrier providers to transmit data and information of all kinds, and those wireless providers may suffer security breaches that releases confidential information of the Company. Any occurrence of the foregoing may damage our brand and increase our costs. Any of these events or circumstances could materially adversely affect our business, financial condition and results of operations.
Our business success depends on large part on the success of our efforts to lease our products through dealerships.
Although the Company engages in some direct sales to potential customers, the Company’s primary focus is on leasing its robots to end-users through dealers that market to firms providing security guard and integrated security services. The Company believes that the Company’s model based on partnerships with these dealers is valuable and currently has such partnerships with over twenty dealers, with plans to sign on additional dealers. However, there can be no assurance that the Company can successfully secure agreements with dealerships for the use of our products, which could materially impair our sales, financial condition and business prospects.
We currently face some competition and may face additional competition in the future; if we are not able to compete effectively, our business prospects and operations would be harmed.
RAD I’s re-entry into the mobile security robotics market presents the Company with two potential competitors. Knightscope, Inc., states that it has available one outdoor security robot called the ‘K5’ and has another outdoor robotic device under development, the ‘K9’. Cobalt Robotics Inc., offers an indoor robotic device that is designed to perform various security functions. Although either or both of these companies may create direct competition to RAD I’s products, neither of these companies has a mobile robot that performs the breadth of duties that can be performed by ROAMEO.. We are also aware of other companies that are already active in our industry and other companies that are developing physical security technology in the U.S. and abroad that may potentially compete with our technology and services. These, or additional new, competitors may have more resources than does the Company or may be better capitalized, which may give them a significant advantage because they may be able to offer better pricing, survive an economic downturn or reach profitability as compared with the Company. We cannot guarantee that we will be able to compete successfully against existing or emerging competitors. In addition, existing private security firms may also compete on price by lowering their operating costs, developing new business models or providing other incentives. We cannot give any assurance that we can adequately compete with existing or new competitors, and additional attempts to compete could lead us to expend additional funds toward our marketing efforts and further adversely affect our business operations.
| 9 |
Our ability to operate and collect digital information on behalf of our clients is dependent on the privacy laws of jurisdictions in which our machines operate, as well as the corporate policies of our clients, which may limit our ability to fully deploy our technologies in various markets.
Our robots collect, store and analyze certain types of personal or identifying information regarding individuals that interact with the machines. While we maintain stringent data security procedures, the regulatory framework for privacy and security issues is rapidly evolving worldwide and is likely to remain uncertain for the foreseeable future. Federal and state government bodies and agencies have in the past adopted, and may in the future adopt, laws and regulations affecting data privacy, which in turn affect the breadth and type of features that we can offer to our clients. In addition, our clients have separate internal policies, procedures and controls regarding privacy and data security with which we may be required to comply. Because the interpretation and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted or applied in a manner that is inconsistent with our current data management practices or the features of our products. If so, in addition to the possibility of fines, lawsuits and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our clients may limit the use and adoption of, and reduce the overall demand for, our products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and foreign countries. If we are not able to adjust to changing laws and regulations, our business may be harmed.
Our success depends on the growth of our industry, most specifically on the growing adoption and use of physical security technology in general and the adoption and use of our products.
The market for the Company’s products and for physical security technology in general is relatively new and unproven and is subject to many risks and uncertainties. Our ability to gain growing market acceptance and adoption of our products depends on the market’s acceptance of physical security technology in general. If we are unable to increase acceptance of our products, and if the market for physical security technology generally does not develop as we hope, we will not be able to sell our products, which would adversely affect our financial performance.
Risks Related to our Securities
An investment in our securities is extremely speculative, and there can be no assurance of any return on the investment.
An investment in our securities is extremely speculative, and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks, including the risk of losing their entire investment in our securities. For example, the market price of our common stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market and other factors, many of which we have little or no control over. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.
| 10 |
Our common stock shareholders do not have voting control over the Company due to the rights granted to holders of the Company’s Series E Convertible Preferred Stock.
Steven Reinharz, the Company’s President and Chief Executive Officer, is currently the holder of all 3,350,000 shares of our Series E Convertible Preferred Stock. The Series E Convertible Preferred Stock holds 2/3rds of the voting power of all shareholders at any time that corporate action requires a vote of shareholders. As a result, holders of common stock do not have voting control over the Company.
Because the Company is a “smaller reporting company,” we may take advantage of certain scaled disclosures available to us, resulting in holders of our securities receiving less Company information than they would receive from a public company that is not a smaller reporting company.
We are a “smaller reporting company” as defined in the Exchange Act. As a smaller reporting company, we may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or(ii) our annual revenue is less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. To the extent we take advantage of any reduced disclosure obligations, it may make it harder for investors to analyze the Company’s results of operations and financial prospectus in comparison with other public companies.
To fund its operations, the Company may conduct further offerings in the future, in which case our common stock will be diluted.
To fund its business operations, the Company anticipates continuing to rely on sales of its securities, which may include common stock, preferred stock, convertible debt and/or warrants convertible or exercisable into shares of common stock. Common stock may be issued in return for additional funds or upon conversion or exercise of outstanding convertible debentures or warrants. If additional common stock is issued, the price per share of the common stock could be lower than the price paid by existing holders of common stock, and the percentage interest in the Company of those shareholders will be lower. This result is referred to as “dilution,” which could result in a reduction in the per share value of your shares of common stock. The Company’s failure or inability to raise capital when needed or on terms acceptable to the Company and our shareholders could have a material adverse effect on the Company’s business, financial condition and results of operations and would also have a negative adverse effect on the price of our common stock.
The Company may utilize debt financing to fund its operations.
If the Company undertakes debt financing to fund its operations, the financing may involve significant restrictive covenants. In addition, there can be no assurance that such financing will be available on terms satisfactory to the Company, if at all. The Company’s failure or inability to obtain financing when needed or on terms acceptable to the Company and our shareholders could have a material adverse effect on the Company’s business, financial condition and results of operations and would also have a negative adverse effect on the price of our common stock.
| 11 |
The trading price of our common stock may fluctuate significantly.
Volatility in the trading price of shares of our common stock may prevent shareholders from being able to sell shares of common stock at prices equal to or greater than their purchase price. The trading price of our common stock could fluctuate significantly for various reasons, including
| ● | our operating and financial performance and prospects; | |
| ● | our quarterly or annual earning or those of other companies in the same industry; | |
| ● | sales of our common stock by management of the Company; | |
| ● | public reaction to our press releases, public announcements and filing with the SEC; | |
| ● | changes in earnings estimates or recommendations by research analysts who track the Company’s common stock or the stock of other companies in the same industry; | |
| ● | strategic actions by us or our competitors; | |
| ● | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; | |
| ● | changes in accounting standards, policies, guidance, interpretations or principles; and | |
| ● | changes in general economic conditions in the U.S. and in global economies and financial markets, including changes resulting from war or terrorist incidents. |
In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a substantial impact on the trading price of securities issued by many companies. The changes frequently occur irrespective of the operating performance of the affected companies. As a result, the trading price of our common stock could fluctuate based upon factors that have little or nothing to do with our business.
Because we are a small company with a limited operating history, holders of common stock may find it difficult to sell their stock in the public markets.
The number of persons interested in purchasing our common stock at any given time may be relatively small. This situation is attributable to a number of factors. One factor is that we are a small company that is still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume. Another factor is that, even if the Company came to the attention of these persons, they tend to be risk-averse and would likely be reluctant to follow an unproven company such as ours. Furthermore, many brokerage firms may not be willing to effect transactions in our securities, including our common stock. As a consequence, there may be periods when trading activity in our common stock is minimal or even non-existent, as compared to trading activity in the securities of a seasoned issuer with a large and steady volume of trading activity. We cannot give you any assurance that an active public trading market for our common stock or other securities will develop or be sustained, or that, if developed, the trading levels will be sustained.
Our shares of common stock are subject to the SEC’s “penny stock” rules that limit trading activity in the market, which may make it more difficult for holders of common stock to sell their shares.
Penny stocks are generally defined as equity securities with a price of less than $5.00. Because our common stock trades at less than $5.00 per share, we are subject to the SEC’s penny stock rules that require a broker-dealer to deliver extensive disclosure to its customers before executing trades in penny stocks not otherwise exempt from the rules. The broker-dealer must also provide its customers with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, and provide monthly account statements showing the market value of each penny stock held by the customer. Under the penny stock regulations, unless the broker-dealer is otherwise exempt, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction before the sale. As a general rule, an individual with a net worth over $1,000,000 or an annual income over $200,000 individually or $300,000 together with his or her spouse, is considered an accredited investor. The additional burdens from the penny stock requirements may deter broker-dealers from effecting transactions in our securities, which could limit the liquidity and market price of shares of our common stock. These disclosure requirements may reduce the trading activity of our common stock, which may make it more difficult for shareholders of our common stock to resell their securities.
| 12 |
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Before 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 your ability to buy and sell shares of common stock and may have an adverse effect on the market for our securities.
The Company does not anticipate paying dividends in the future.
We have never declared or paid any cash dividends on our common stock. Our current policy is to retain earnings to reinvest in our business. Therefore, we do not anticipate paying cash dividends in the foreseeable future. The Company’s dividend policy will be reviewed from time to time by the Board of Directors in the context of its earnings, financial condition and other relevant factors. Until the Company pays dividends, which it may never do, the holders of shares of common stock will not receive a return on those shares unless they are able to sell those shares at the desired price, if at all, of which there can be no assurance. In addition, there is no guarantee that our common stock will appreciate in value or even maintain the price at which holders purchased their common stock.
We will continue to incur significant costs to ensure compliance with United States corporate governance and accounting requirements.
We will continue to incur significant costs associated with our public company reporting requirements, including costs associated with applicable corporate governance requirements such as those required by the Sarbanes-Oxley Act of 2002, and with other rules issued or implemented by the SEC. We expect all of these applicable rules and regulations will result in significant legal and financial compliance costs and to make some activities more time consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in this prospectus contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are therefore entitled to the protection of the safe harbor provisions of these laws. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “budget,” “contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,” “forecast,” “guidance,” “indicate,” “intend,” “may,” “might,” “outlook,” “plan,” “possibly,” “potential,” “predict,” “probably,” “pro-forma,” “project,” “seek,” “should,” “target,” “will,” “would,” “will be,” “will continue” or the negative of or other variation on these words or comparable terminology.
| 13 |
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, these forward-looking statements are only predictions and involve a number of risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Management cautions that the forward-looking statements contained in this prospectus and the information incorporated by reference are not guarantees of future performance, and we cannot assume that such statements will be realized or the forward-looking events and circumstances will occur. The risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in our forward-looking statements include, but are not limited to, those set forth in the “Risk Factors” section below.
Some of the factors that could cause actual results to differ from our expectations are:
| ● | the early state of the Company’s development; | |
| ● | the Company’s ability to continue as a going concern; | |
| ● | the Company’s ability to compete in an unproven market; | |
| ● | resistance by potential customers to new technologies; | |
| ● | performance issues with the Company’s products; | |
| ● | uncertainties related to estimates, assumptions and projections relating to unpaid losses and loss adjustment expenses and other accounting policies; | |
| ● | reliance on key personnel; | |
| ● | introduction of competing products by other companies; | |
| ● | inflation and other changes in economic conditions, including changes in the financial markets; | |
| ● | security breaches and other system disruptions; | |
| ● | legislative and regulatory developments, especially in the gathering and use of information about private citizens; | |
| ● | weather conditions and natural disasters (including, but not limited to, the severity and frequency of storms, hurricanes, tornados and hail); and | |
| ● | acts of war and terrorist activities, among other man-made disasters. |
Given these risks and uncertainties, you are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements included or incorporated by reference into this prospectus and in the information incorporated by reference are made only as of the date of this prospectus. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we do not undertake and specifically decline any obligation to update or revise any forward-looking statements in this prospectus after we distribute this prospectus, or publicly announce the results of any revisions to any such statements to reflect future events or developments, whether as a result of any new information, future events or otherwise.
| 14 |
The Company currently has three executive officers:
Steven Reinharz. Mr. Reinharz, 48, founded RAD I in 2016 and continuously employed by RAD I and its affiliated companies since that time. He became the Chief Executive Officer of the Company, Chief Financial Officer and Secretary of the Company on March 2, 2021 when Garett Parsons resigned from those roles. Mr. Reinharz also became a member of the Board of Directors on that date. Mr. Reinharz resigned as Chief Financial Officer of the Company in June 2021 when Anthony Brenz was named to that position, and as Secretary of the Company in August 2021 when Mr. Brenz assumed that position. Mr. Reinharz became the sole member of the Board of Directors on June 22, 2021 upon Mr. Parsons’s resignation as a director. Mr. Reinharz has extensive experience in robotics, security and artificial intelligence and ran his own security systems integration company from 1997 to 2004. He was later part of a team that sold a systems integration company to a global security firm and also held various other security industry roles. Mr. Reinharz is a member of the Security Industry Association (“SIA”) and is a contributor to and speaker at panels held by the SIA-sponsored International Security Conference (ISC) – East and – West conferences and by ASIS International. He is a native of Montreal and Toronto but has lived in Orange County, California since 1995. Mr. Reinharz earned a dual Bachelor of Science degree in Political Science and Commercial Studies.
Anthony Brenz. Mr. Brenz, 60, who had joined RAD I as its Chief Financial Officer in April 2021, became the Chief Financial Officer of the Company in June 2021 and the Secretary of the Company in August 2021. Before joining AITX, Mr. Brenz was the Vice President/Director of Finance for AirBoss Flexible Products Company in Auburn Hills, Michigan from 2018-2020, and the Chief Financial Officer and Vice President of Finance of Thomson Aerospace & Defense in Saginaw, Michigan from 2014-2018. Mr. Brenz, a resident of Michigan, is a Certified Public Accountant and earned a Bachelor of Accountancy degree from Walsh College of Business and Accountancy.
Mark Folmer. Mr. Folmer, 49, became the President of RAD I in July 2021. Mr. Folmer previously served as the Chief Operating Officer of RAD I from March 2021 to July 2021, and as the Vice President, Security of RAD I from July 2021 to March 2021. Before joining RAD I, Mr. Folmer was the Vice President, Security Industry, of TrackTik, a company based in Montreal, Quebec that offers mobile and web -based software designed for the security service industry from 2016-2020. In 2009, Mr. Folmer founded and continues to serve as the principal of FOLMSECUR in Montreal, Quebec, which provides clients in corporate, private and governmental sectors with physical security consulting services. Mr. Folmer, a resident of Montreal, received a Commerce Degree (DEC) from Marianopolis College, in Montreal, Quebec, and a BComm (HR Management and International Business) from Concordia University in Montreal, Quebec.
For further information regarding us and our financial information, you should refer to our filings with the SEC. See “Incorporation of Certain Documents by Reference.”
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and, accordingly, file periodic reports, proxy statements and other information with the SEC. You can obtain these reports, proxy statements and other information that we file electronically with the SEC on the SEC’s website at www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports that are filed or furnished pursuant to Section 13 of the Exchange Act are available on our website at www.aitx.ai, as soon as reasonably practicable after they are electronically filed with the SEC. The information on our website is not part of this prospectus, except to the extent filed with the SEC and specifically incorporated into this prospectus by reference.
| 15 |
This prospectus is part of a registration statement that we filed with the SEC under the Securities Act. This prospectus does not contain all of the information presented in the registration statement and its exhibits in accordance with SEC rules. Our descriptions in this prospectus of the provisions of documents filed as exhibits to the registration statement or otherwise filed with the SEC are only summaries of the terms of those documents and are not intended to be comprehensive. For a complete description of the content of the documents, you should obtain copies of the full document.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference much of the information we file with the SEC, which means that we can disclose important information to you by referring you to those publicly available documents. The information that we incorporate by reference in this prospectus is considered to be part of this prospectus. Because we are incorporating by reference future filings with the SEC, this prospectus is continually updated and those future filings may modify or supersede some of the information included or incorporated in this prospectus. This means that you must look at all of the SEC filings that we incorporate by reference to determine if any of the statements in this prospectus or in any document previously incorporated by reference have been modified or superseded.
We incorporate by reference the following:
| ● | Our Annual Report on Form 10-K for the year ended February 28, 2021, filed on June 1, 2021; | |
| ● | Our Quarterly Report on Form 10-Q for the quarter ended May 31, 2021, filed on July 14, 2021; and | |
| ● | Our Current Reports on Form 8-K filed June 25, 2021 and August 24, 2021. |
In addition, we also incorporate by reference into this prospectus all documents (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on that form which are related to those items) that are filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (i) on or after the date of the initial filing of the registration statement of which this prospectus forms a part and before the effectiveness of the registration statement and (ii) following the effectiveness of the registration statement until the offering of the securities under the registration statement is terminated or completed. These documents include annual and periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as proxy statements.
You may request, at no cost, a copy of the documents that are incorporated by reference into this prospectus but not delivered with the prospectus, including exhibits that are specifically incorporated by reference into such documents, by writing or calling us at the following address or telephone number: Artificial Intelligence Technology Solutions Inc., Attention: Investor Relations, at 10800 Galaxie Avenue. Ferndale, Michigan 48220, telephone: (877) 787-6268.
The Company will retain broad discretion over the use of the net proceeds from the sale of the securities. We currently intend to use the net proceeds for working capital, capital expenditures and general corporate purposes. We may also use a portion of the net proceeds to invest in or acquire businesses or technologies that we believe are complementary to our own, although we have no current plans, commitments or agreements with respect to any acquisitions as of the date of this prospectus.
| 16 |
DESCRIPTION OF THE COMPANY’S CAPITAL STOCK
The Company’s Articles of Incorporation, as amended, authorizes us to issue up to 5,000,000,000 shares of common stock, $0.00001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share. There is only one class of common stock. There are three classes of preferred stock. See “—Preferred Stock,” below. Our board of directors may establish the rights and preferences of additional series of preferred stock from time to time.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Transhare, Bayside Center 1, 17755 North US Highway 19, Suite 140, Clearwater, Florida 33764, Phone: (303) 662-1112.
Common Stock
Rights of Shareholders
All shares of common stock offered by the Company will be fully paid and nonassessable upon issuance. Holders of our common stock are entitled to one vote per share of common stock on all matters submitted to a vote of shareholders. They do not have cumulative voting rights. Electing a director requires a plurality of the votes cast by shareholders that are entitled to vote in the election. However, it should be noted that the Series E Convertible Preferred Stock has voting rights equal to twice the number of votes of all outstanding shares of capital stock; that is, the holders of Series E Convertible Preferred Stock will always have 2/3rds of the voting power of the Company. Holders of common stock are entitled to receive proportionately any dividends that may be declared by our Board of Directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.
If the Company is liquidated or dissolved, the holders of common stock are entitled to receive a proportionate share of the net assets of the Company that are available for distribution to shareholders after the payment of all debts and other liabilities of the Company and subject to the senior rights of the holders of Series F Convertible Preferred Stock and Series G Preferred Stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. See “—Preferred Stock” below.
Nevada Law
Nevada law contains provisions that govern an “acquisition of controlling interest” in a Nevada corporation. The control share provisions generally provide that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested shareholders of the corporation elects to restore those voting rights in whole or in part. However, the Company’s securities are not subject to these control share provisions because the Company’s articles of incorporation, as permitted by Nevada law, specifically exempt the Company from the control share provisions.
In addition, Nevada law contains a provision that prevents an “ “interested stockholder” and a resident domestic Nevada corporation from entering into a business “combination,” unless certain conditions are met. Nevertheless, the Company’s articles of incorporation, as permitted by Nevada law, specifically exempt the Company from these “interested stockholder” provisions.
| 17 |
Preferred Stock
The Company currently has three series of preferred stock, none of which have voting rights on any matters other than those directly affecting the respective series:
Series E Convertible Preferred Stock: There are 3,350,000 shares of Series E Convertible Preferred Stock (“Series E Preferred Shares”) authorized, issued and outstanding. Despite its title, the Series E Preferred Shares have no conversion rights. Moreover, they have no dividend rights, no preemptive rights, no redemption rights, and no liquidation rights. As noted above, the Series E Preferred Shares hold voting rights equal to twice the number of votes of all outstanding shares of capital stock; that is, the holders of Series E Preferred Shares will always have 2/3rds of the voting power of the Company. The Series E Preferred Shares vote together with the common stock and not as a separate class. All of the Series E Preferred Shares are held by Steven Reinharz.
The Series E Preferred Shares must unanimously approve any changes to increase the authorized number of shares or the rights, preferences, and privileges of the Series E Preferred Shares. In addition, the Series E Preferred Shares must unanimously approve the following actions by the Company:
| ● | alteration of or change to the rights, preferences or privileges of any capital stock of the Company that would adversely affect the Series E Preferred Shares; | |
| ● | create or designate any series or class of shares; | |
| ● | issue any shares of any series of preferred stock; | |
| ● | increase the authorized number of shares of any series or class of the Company’s stock; | |
| ● | amend, repeal or modify the Bylaws of the Company; | |
| ● | sell or otherwise dispose of any of the assets of the Company not in the ordinary course of business; | |
| ● | elect members of the Board of Directors; | |
| ● | incur debt not in the ordinary course of business; or | |
| ● | effect or undergo any change of control of the Company. |
Series F Convertible Preferred Stock: There are 4,350 shares of Series F Convertible Preferred Stock (“Series F Preferred Shares”) authorized, of which 2,532 Shares are issued and outstanding. The Series F Preferred Shares have no dividend rights, no preemptive rights, and, unless and until they are converted into common stock, no voting rights (other than as to changes to any class or series of the Company’s capital stock that could adversely affect the Series F Preferred Shares or as required by Nevada law). The Series F Preferred Shares have liquidation rights senior to those of the common stock, the Series E Preferred Shares and Series G Preferred Shares. Steven Reinharz owns 2,450 Series F Preferred Shares, and the remaining 82 Series F Preferred Shares are held by two other persons who are not employed by the Company. The Company has also issued a “Warrant to Purchase Stock,” which gave the holder of the Warrant the right to purchase 367 Series F Preferred Shares at any time. After prior exercises, the holder currently holds the right to purchase 329 Series F Preferred Shares.
After August 23, 2023, each holder of Series F Preferred Shares has the right to convert all, but not less than all, of the holder’s Series F Preferred Shares into shares of common stock that would be a multiple of the number of then-outstanding shares of common stock. At that time, there would be a substantial dilution of our common stock.
| 18 |
Series G Preferred Stock: There are 100,000 shares of Series G Preferred Stock (“Series G Preferred Shares”) authorized but no shares have been issued. The Series G Preferred Shares have no dividend rights, no voting rights, and no preemptive rights. The Series G shares have liquidation rights senior to those of the common stock but junior to those of the Series F Preferred Shares. At any time, the Company may, at its option, redeem any or all of the outstanding Series G Preferred Shares at $1,000 per share.
We may issue warrants to purchase common stock. We may offer warrants separately or together with one or more additional warrants or common stock, as described in the related prospectus supplement. If we issue warrants as part of a unit, the accompanying prospectus supplement will specify whether those warrants may be separated from the common stock in the unit before the expiration date of the warrants. The terms of any warrants offered under a prospectus supplement may differ from the terms described below. We urge you to read the related prospectus supplement and any related free writing prospectus as well as the complete warrant agreements and warranty certificates that contain the terms of the warrants. Each related prospectus supplement will describe the terms of any warrants being offered, including but not limited to the following:
| ● | the specific designation and total number of warrants and the offering price at which the warrants will be issued; | |
| ● | the date on which the right to exercise the warrants will begin and will end, or if the warrants are not continuously exercisable, the specific dates or periods in which you may exercise the warrants; | |
| ● | whether the warrants will be sold separately or with common stock as parts of units; | |
| ● | if the warrants are issued as part of a unit, the date, if any, on which the common stock will be separately transferable; | |
| ● | a description of the common stock purchasable upon exercise of the warrants; | |
| ● | the number of shares of common stock purchasable upon exercise of a warrant and the price at which those shares may be purchased; | |
| ● | if applicable, the minimum or maximum amount of warrants that may be exercised at any one time; | |
| ● | any redemption or call provisions of the warrants; | |
| ● | if any, the anti-dilution provisions of, and other provisions for changes to or adjustment in the exercise price of, the warrants; | |
| ● | information with respect to book-entry procedures, if any; | |
| ● | the identity of the warrant agent for the warrants; | |
| ● | any additional terms of the warrants, including terms, procedures and limitations relating to the exchange or exercise of the warrants; and | |
| ● | any applicable material U.S. federal income tax consequences. | |
| It should be noted that holders of warrants will not be entitled to: | ||
| ● | vote, consent or receive dividends; | |
| ● | receive notice of shareholders with respect to any meeting of shareholders on any matter; and | |
| ● | exercise any rights as shareholders of the Company. |
| 19 |
We may issue units consisting of common stock and warrants as described in the related prospectus supplement. We may issue units in one or more series, which will be described in the related prospectus supplement. The following description, together with the additional information included in any related prospectus supplement, summarizes the general features of the units that we may offer under this prospectus. You should read any prospectus supplement and any free writing prospectus that we may authorize to be provided to you related to the series of units being offered, as well as the complete unit agreements that contain the terms of the units. Specific unit agreements will contain additional important terms and provisions. We will file the form of each unit agreement relating to units offered under this prospectus as an exhibit to the registration statement of which this prospectus is a part or will incorporate the form of unit agreement by reference from another report that we file with the SEC. Each related prospectus supplement will describe the terms of any units being offered, including but not limited to the following:
| ● | the designation and the terms of the units and of the securities constituting the units, including whether and under what circumstances the securities comprising the units may be traded separately; | |
| ● | the identity of any unit agent for the units, if applicable, and of any other depositaries, execution or paying agents, transfer agents, registrars or other agents; | |
| ● | any additional terms of the units; | |
| ● | any additional terms of the governing unit agreement, if applicable; | |
| ● | any additional provisions for the issuance, payment, settlement, transfer or exchange of the units or common stock; and | |
| ● | any applicable material U.S. federal income tax consequences. |
We may sell securities directly to purchasers, through underwriters, dealers or agents, or through a combination of these methods of sale. We may directly solicit offers to purchase securities, or agents may be designated to solicit such offers. In the prospectus supplement relating to such offering, we will name any agent that could be viewed as an underwriter under the Securities Act, and describe any commissions that we must pay. Any such agent will be acting on a best efforts basis for the period of its appointment or, if indicated in the related prospectus supplement, on a firm commitment basis.
Each prospectus supplement will describe the method of distribution of the securities and any applicable restrictions. The securities may be distributed from time to time in one or more transactions at a fixed price, at a price that may be changed from time to time, at the market price prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices.
The prospectus supplement with respect to the securities of a particular series will describe the terms of the offering of the securities, including the public offering price and the proceeds we will receive from the sale; the name of any selling agent or underwriters; any discounts or commissions to be allowed or re-allowed or paid to any agent, underwriter, or dealers; any discounts or commissions to be allowed or re-allowed or paid to any agent or underwriters; and all other items constituting underwriting or selling compensation.
| 20 |
If the Company uses any underwriters or agents are utilized in the sale of the securities in respect of which this prospectus is delivered, they will acquire the securities for their own account and may resell the securities from time to time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. We will set forth in the prospectus supplement relating to such offering the names of the underwriters or agents and the terms of the related agreement with them.
We may sell securities directly or through dealers or agents we designate from time to time. We will name any dealer or agent involved in the offering and sale of securities, and we will describe any commissions we will pay the dealer or agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the prospectus supplement.
We may provide agents and underwriters with indemnification against civil liabilities related to this offering, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course of business.
We will disclose in the related prospectus supplement for an offering if any persons participating in the offering, in order to facilitate the offering of the offered securities, may engage in transactions that stabilize, maintain or otherwise affect the price of the securities.
We may engage in at the market offerings into an existing trading market in accordance with Rule 415(a)(4) under the Securities Act. In addition, we may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the related prospectus supplement so indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the related prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third party in these sale transactions will be an underwriter and will be named in the related prospectus supplement (or a post-effective amendment). In addition, we may otherwise lend or pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus and a related prospectus supplement. The financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
The specific terms of any lock-up provisions in respect of any given offering will be described in the related prospectus supplement.
Any common stock offered under this prospectus will be listed on the Over-the-Counter (OTC) Market Pink Sheets under the symbol “AITX,” but any other securities may or may not be listed on a national securities exchange.
Certain legal matters in connection with the offering and the validity of the securities offered by this prospectus will be passed upon by Weintraub Law Group PC, San Diego, California.
| 21 |
The consolidated financial statements of Artificial Intelligence Technology Solutions Inc., a Nevada corporation (the “Company”), as of February 28, 2021 and February 29, 2020, and for the two years then ended have been incorporated by reference into this prospectus from the Company’s Annual Report on Form 10-K upon the report of L J Soldinger Associates, LLC, independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing. The report thereon contains an explanatory paragraph which describes the conditions that raise substantial doubt about the ability of the Company to continue as a going concern and are contained in Footnote 2 to the consolidated financial statements.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the provisions of the Company’s charter documents or bylaws, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
| 22 |
$30,000,000
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS
Common Stock
Warrants
Units
Prospectus
Dated _________________ , 2021
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 14. | Other Expenses of Issuance and Distribution |
The following is an estimate of the fees and expenses, other than underwriting discounts or commissions, payable by the Registrant in connection with the issuance and distribution of the securities being registered. All the amounts shown are estimates except for the registration fee. All of the expenses below will be paid by the Registrant.
| SEC registration fee | $ | 3,273.00 | ||
| Transfer agent’s fees and expenses | $ | ___________ | (1) | |
| Legal fees and expenses | $ | ___________ | (1) | |
| Accounting fees and expenses | $ | ___________ | (1) | |
| Printing fees and expenses | $ | ___________ | (1) | |
| Miscellaneous fees and expenses | $ | ___________ | (1) |
(1) These fees are calculated based on the securities offered and the number of issuances and, accordingly, cannot be estimated at this time.
| Item 15. | Indemnification of Directors and Officers. |
The Registrant’s Bylaws provide the following:
Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of the proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Nevada Revised Statutes, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that the amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or amounts paid in settlement) reasonably incurred or suffered by the indemnitee in connection therewith and the indemnification shall continue as to an indemnitee who has ceased to be a director, officer or employee and shall inure to the benefit of the indemnitee’s heirs, testators, intestates, executors and administrators;
Provided, however, that the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and with respect to a criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful;
Provided further, however, that no indemnification shall be made in the case of an action, suit or proceeding by or in the right of the Corporation in relation to matters as to which it shall be adjudged in the action, suit or proceeding that the director, officer, employee or agent is liable to the Corporation, unless a court having jurisdiction shall determine that, despite the adjudication, the person is fairly and reasonably entitled to indemnification; and
| II-1 |
Provided further, however, that, except as provided in section 6.4 of the Nevada Revised Statutes with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part of the proceeding) initiated by the indemnitee only if the proceeding (or part of the proceeding) initiated by the indemnitee was authorized or ratified by the Board of Directors of the Corporation.
| Item 16. | Exhibits |
EXHIBIT INDEX
| * | Filed herewith |
| ** | To be filed by an amendment to this registration statement or as an exhibit to a report filed pursuant to Section 13(a) or 15(d) of the Exchange Act. |
| II-2 |
| Item 17. | Undertakings. |
The undersigned Registrant hereby undertakes:
| 1. | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (as amended, the “Securities Act”); | ||
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | ||
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that the undertakings set forth in paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) that are incorporated by reference in this registration statement or are contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement.
| 2. | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| 3. | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| 4. | That, for the purpose of determining liability under the Securities Act to any purchaser: |
| (i) | Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| II-3 |
| (ii) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
| 5. | That, for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; | ||
| (ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; | ||
| (iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and | ||
| (iv) | any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. |
| 6. | That, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| II-4 |
| 7. | That, for purposes of determining any liability under the Securities Act, |
| (i) | the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | ||
| (ii) | each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| II-5 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Ferndale, State of Michigan, on September 2, 2021.
| ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. | ||
| By: | /s/ Steven Reinharz | |
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated below as of September 2, 2021
| Signature | Title | |
| /s/ Steven Reinharz | Chief Executive Officer | |
| Steven Reinharz | (Principal Executive Officer) | |
| (Sole Director) | ||
| /s/ Anthony Brenz | Chief Financial Officer | |
| Anthony Brenz | (Principal Financial Officer) | |
| (Principal Accounting Officer) |
| II-6 |
Exhibit 4.1
AMENDED AND RESTATED
BYLAWS
OF
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS, INC.
A Nevada Corporation
(Adopted August 25, 2021)
TABLE OF CONTENTS
| Page | ||
| Article I OFFICES | 1 | |
| 1.1. | Registered Office | 1 |
| 1.2. | Other Offices | 1 |
| Article II MEETINGS OF STOCKHOLDERS | 1 | |
| 2.1. | Annual Meetings | 1 |
| 2.2. | Special Meetings | 1 |
| 2.3. | Notice of Meetings | 1 |
| 2.4. | Remote Communication | 2 |
| 2.5. | Quorum | 2 |
| 2.6. | Organization | 2 |
| 2.7. | Conduct of Meeting | 2 |
| 2.8. | Adjournment | 3 |
| 2.9. | Voting | 3 |
| 2.10. | Required Vote | 3 |
| 2.11. | Proxy Representation | 4 |
| 2.12. | Inspection | 4 |
| 2.13. | List of Stockholders | 4 |
| 2.14. | Stockholders’ Consent in Lieu of Meeting | 5 |
| Article III BOARD OF DIRECTORS | 5 | |
| 3.1. | General Powers | 5 |
| 3.2. | Number and Term of Office | 5 |
| 3.3. | Resignation, Removal and Vacancies. | 5 |
| 3.4. | Meetings. | 6 |
| 3.5. | Directors’ Consent in Lieu of Meeting | 7 |
| 3.6. | Remote Meeting | 7 |
| 3.7. | Chairman | 7 |
| 3.8. | Committees | 7 |
| 3.9. | Compensation | 7 |
| Article IV OFFICERS | 8 | |
| 4.1. | Executive Officers | 8 |
| 4.2. | Other Officers | 8 |
| 4.3. | Resignation and Removal | 8 |
| 4.4. | Vacancies | 8 |
| 4.5. | The Chief Executive Officer | 8 |
| 4.6. | The President | 8 |
| 4.7. | Vice Presidents | 8 |
| 4.8. | Secretary | 9 |
| 4.9. | Treasurer | 9 |
| -i- |
| 4.10. | Assistant Treasurers and Assistant Secretaries | 9 |
| 4.11. | Deposits and Checks | 9 |
| 4.12. | Contracts and Other Documents | 9 |
| 4.13. | Compensation | 9 |
| 4.14. | Ownership of Stock of Another Corporation | 10 |
| 4.15. | Delegation of Duties | 10 |
| Article V STOCK | 10 | |
| 5.1. | Certificates of Stock | 10 |
| 5.2. | Record | 10 |
| 5.3. | Transfer of Stock | 10 |
| 5.4. | Addresses of Stockholders | 10 |
| 5.5. | Lost, Destroyed and Mutilated Certificates | 11 |
| 5.6. | Regulations | 11 |
| 5.7. | Dividends | 11 |
| 5.8. | Fixing Date for Determination of Stockholders of Record. | 11 |
| 5.9. | Registered Stockholders | 12 |
| Article VI EXCULPATION AND INDEMNIFICATION | 12 | |
| 6.1. | Exculpation | 12 |
| 6.2. | Right to Indemnification | 13 |
| 6.3. | Right to Advancement of Expenses | 13 |
| 6.4. | Right of Indemnitee to Bring Suit | 13 |
| 6.5. | Non-Exclusivity of Rights | 14 |
| 6.6. | Indemnification of Employees and Agents of the Corporation | 14 |
| 6.7. | Nature of Rights | 14 |
| 6.8. | Settlement of Claims | 14 |
| 6.9. | Subrogation | 14 |
| 6.10. | Procedures for Submission of Claims | 14 |
| 6.11. | Insurance | 14 |
| Article VII MISCELLANEOUS | 15 | |
| 7.1. | Amendment | 15 |
| 7.2. | Electronic Transmission | 15 |
| 7.3. | Corporate Seal | 15 |
| 7.4. | Fiscal Year | 15 |
| 7.5. | Notice. | 15 |
| 7.6. | Section Heading | 15 |
| 7.7. | Inconsistent Provisions, Changes in Nevada Law | 15 |
| -ii- |
BYLAWS
OF
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
A Nevada Corporation
Article I
OFFICES
1.1. Registered Office. The registered office of Artificial Intelligence Technology Solutions, Inc. (the “Corporation”) shall be as designated in the Articles of Incorporation of the Corporation (the “Articles”) or as the board of directors of the Corporation (the “Board”) may determine from time to time.
1.2. Other Offices. The Corporation may, in addition to its registered office in the State of Nevada, have other offices and places of business, both within and without the State of Nevada, as the Board may from time to time determine, or as the business and affairs of the Corporation may require.
Article II
MEETINGS OF STOCKHOLDERS
2.1. Annual Meetings. Meetings of stockholders may be held at the place, either within or without the State of Nevada, and at the time and date as the Board will determine. The Board may, in its sole discretion, determine that the meeting will not be held at any place, but may instead be held by means of remote communication as described in Section 2.4 of these Bylaws in accordance with Section 78.320(4) of the Nevada Revised Statutes (the “NRS”). Stockholders may act by written consent to elect directors, provided, however, that if the consent is less than unanimous, the action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could have been elected at an annual meeting held at the effective time of the action are vacant and are filled by the action.
2.2. Special Meetings. Special meetings of the stockholders, unless otherwise prescribed by statute, may be called by resolution of the Board, the Chairman of the Board, if any, the Chief Executive Officer, or the President, and will be called by the Chief Executive Officer, President or Secretary upon the written request of holders of at least a majority of outstanding stock entitled to vote at the meeting. Notice of each special meeting will be given in accordance with Section 2.3 of these Bylaws. Unless otherwise permitted by law, business transaction at any special meeting of stockholders will be limited to the purpose stated in the notice.
2.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice or electronic transmission, in the manner provided in Sections 78.370, 78.150 of the NRS, of notice of the meeting, which will state the place, if any, date, and time of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at the meeting, and, in the case of a special meeting, the purposes for which the meeting is called, will be mailed to or transmitted electronically to each stockholder of record entitled to vote thereat. Except as otherwise provided by law, the Articles, or these Bylaws, the notice will be given not less than ten (10) days nor more than sixty (60) days before the date of any the meeting. If mailed, notice to Stockholders will be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at the stockholder’s address as it appears on the records of the Corporation.
| -1- |
2.4. Remote Communication. For the purposes of these Bylaws, if authorized by the Board in its sole discretion, and subject to the guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, (a) participate in a meeting of stockholders; and (b) be deemed present in person and vote at a meeting of stockholders whether the meeting is to be held at a designated place or solely by means of remote communication, provided, however, that, (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide the stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with the proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of the vote or other action shall be maintained by the Corporation.
2.5. Quorum. At each meeting of the stockholders, except where otherwise provided by law, the Articles or these Bylaws, the holders of a majority of the issued and outstanding stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. When a quorum is once present to organize a meeting, the quorum is not broken by the subsequent withdrawal of any stockholders. In the absence of a quorum, the stockholders so present may, by a majority in voting power of those stockholders, adjourn the meeting from time to time in the manner provided in Section 2.8 of these Bylaws, until stockholders holding the requisite amount of stock to constitute a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called.
2.6. Organization. Unless otherwise determined by the Board, at each meeting of the stockholders, the Chairman of the Board, if one is elected, or, in his or her absence or disability, the President, will preside at all meeting of the stockholders. The Secretary of the Corporation will act as secretary at all meetings of the stockholders. In the absence or disability of the Secretary, the Chairman of the Board or the President will appoint a person to act as secretary at the meetings.
2.7. Conduct of Meeting. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting will be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution those rules and regulations for the conduct of the meeting of stockholders as it will deem appropriate. Except to the extent inconsistent with the rules and regulations as adopted by the Board, the person presiding over any meeting of Stockholders will have the right and authority to convene and to adjourn the meeting, to prescribe the rules, regulations, and procedures and to do all such acts as, in the judgment of the presiding person, are appropriate for the proper conduct of the meeting. These rules, regulations, or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include the following: (a) the establishment of an agenda or order of business for the meeting, (b) rules and procedures for maintaining order at the meeting and the safety of those present, (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting will determine, (d) restrictions on entry to the meeting after the time fixed for the commencement of the meeeting, and (e) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, will, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the presiding person should so determine, the presiding person will so declare to the meeting and any such matter or business not properly brought before the meeting will not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders will not be required to be held in accordance with the rules of parliamentary procedure.
| -2- |
2.8. Adjournment. At any meeting of stockholders of the Corporation, whether or not a quorum is present, a majority in voting power of the stockholders entitled to vote thereat, present in person or represented by proxy, will have the power to adjourn the meeting from time to time without notice. Any business may be transacted at the adjourned meeting that might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.
2.9. Voting. Except as otherwise provided by law, the Articles, or these Bylaws, at each meeting of the stockholders, every stockholder of the Corporation shall be entitled to one vote in person or by proxy for each share of capital stock of the Corporation held by the stockholder and registered in his or her name on the books of the Corporation on the date fixed pursuant to Section 5.8 of these Bylaws as the record date for the determination of stockholders entitled to vote at the meeting. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. A person whose stock is pledged shall be entitled to vote, unless, in the transfer by the pledgor on the books of the Corporation, he or she has expressly empowered the pledgee to vote thereon, in which case only the pledgee or his or her proxy may represent the stock and vote thereon. If shares or other securities having voting power stand in the record of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary shall be given written notice to the contrary and furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:
| (a) | if only one votes, his or her act binds all; | |
| (b) | if more than one votes, the act of the majority so voting binds all; and | |
| (c) | if more than one votes, but the vote is evenly split on any particular matter, the shares shall be voted in the manner provided by law. |
If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purposes of this Section 2.9 shall be a majority or even-split in interest. The Corporation shall not vote directly or indirectly any share of its own capital stock.
2.10. Required Vote. All elections of directors will be determined by a majority of the votes cast, and except as otherwise required by law, the Articles or these Bylaws, all other matters will be determined by a majority of the votes cast. Unless determined by the Chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. Upon a demand by any such stockholder for a vote by ballot upon any question, the vote by ballot shall be taken. On a vote by ballot, each ballot shall state the number of shares voted and shall be (i) signed by the stockholder voting, or by his or her proxy, if there be such proxy, or (ii) submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxyholder.
| -3- |
2.11. Proxy Representation. Any vote of stock may be given by the stockholder entitled thereto in person or by his or her proxy appointed by an instrument in writing or by electronic transmission, subscribed by the stockholder or by his or her attorney thereunto authorized, delivered to the secretary of the meeting; provided, however, that no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. A proxy will be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.
2.12. Inspection. The chairman of the meeting may at any time appoint one or more inspectors to serve at any meeting of the stockholders. Any inspector may be removed, and a new inspector or inspectors appointed, by the Board at any time. The inspectors shall decide upon the qualifications of voters, accept and count votes, declare the results of the vote, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the question, respectively. The inspectors need not be stockholders of the Corporation, and any director and/or officer of the Corporation may be an inspector on any question other than a vote for or against his or her election to any position with the Corporation or on any other matter in which he or she may be directly interested. Before acting as provided in this section, each inspector shall subscribe an oath faithfully to execute the duties of an inspector with strict impartiality and according to the best of his or her ability.
2.13. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The list shall be open to the examination of any stockholder, for any purpose germane to any such meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to the list is provided with the notice of the meeting, or (b) during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a place other than the principal place of business, then the list shall be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to gain access to the list shall be provided with the notice of the meeting.
| -4- |
2.14. Stockholders’ Consent in Lieu of Meeting. Unless otherwise restricted by law, the Articles, or these Bylaws, any action required by the NRS to be taken at any annual or special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, will be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and will be delivered to the Corporation by delivery to its registered office in Nevada, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office will be made by hand or by certified or registered mail, return receipt requested.
(a) Every written consent will bear the date of signature of each stockholder who signs the consent and no written consent will be effective to take the corporate action referred to in the written consent unless, within sixty (60) days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in the first paragraph of this Section 2.14. A telegram, cablegram, or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, will be deemed to be written, signed, and dated for the purposes of these Bylaws to the extent permitted by law. Any such consent will be delivered in accordance with Section 78.320 of the NRS. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent will be given to those stockholders who have not consented in writing or electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date of the meeting had been the date that written consents signed by a sufficient number of stockholders to take the action were delivered to the Corporation as provided by law.
(b) Any copy, facsimile, or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that the copy, facsimile, or other reproduction will be a complete reproduction of the entire original writing.
Article III
BOARD OF DIRECTORS
3.1. General Powers. The business, property and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Articles, or these Bylaws directed or required to be exercised or done by the stockholders.
3.2. Number and Term of Office. The number of directors shall initially be one (1) and thereafter as determined from time to time by resolution of the Board. The Board will be elected by the stockholders at their annual meeting. Each director shall be elected to serve until his or her successor is elected and qualified, or until his or her earlier death or resignation or removal in the manner hereinafter provided. Directors need not be stockholders of the Corporation.
3.3. Resignation, Removal and Vacancies.
(a) Resignation. Any director may resign at any time by delivering notice in writing or by electronic transmission to the Board, the Chairman of the Board, the Chief Executive Officer, the President or the Secretary of the Corporation. The resignation shall take effect at the time specified in the resignation or, if the time be not specified, upon receipt of the resignation. Unless otherwise specified in the resignation, the acceptance of the resignation shall not be necessary to make it effective.
| -5- |
(b) Removal. Any director or the entire Board may be removed, with or without cause, at any time by the affirmative vote of the holders of a majority of the shares then entitled to vote for the election of directors at any annual or special meeting of the stockholders called for that purpose or by written consent of the stockholders as permitted by law.
(c) Newly Created Directorships and Vacancies. Unless otherwise provided by law or in the Articles, any newly created directorships or any vacancy occurring on the Board for any reason may be filled by a majority of the remaining members of the Board, although the majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders. Each director so elected will hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified.
3.4. Meetings.
(a) Annual Meetings. As soon as practicable after each annual meeting of stockholders, the Board shall meet for the purpose of organization and the transaction of other business.
(b) Other Meetings. Other meetings of the Board shall be held at the times and places as the Board shall from time to time determine.
(c) Special Meetings. Special meetings of the Board shall be held whenever called by any director at the time and place, within or without the State of Nevada, as the director shall designate in the notice of the special meeting.
(d) Notice of Meetings. Except as provided by law, notice of regular meetings need not be given. Notice shall be given to each director of each special meeting, including the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of the meeting. Notice of each meeting of the Board shall be given, either personally or as hereinafter provided, to each director at least twenty-four (24) hours before the date on which the meeting is to be held if the notice is delivered personally or by means of telephone, e-mail or other electronic transmission. A waiver of notice in writing or by electronic transmission, signed by the person entitled thereto, whether before or after the time of the meeting stated in the waiver of notice, shall be deemed equivalent to notice.
(e) Place of Meetings. The Board may hold its meetings at the place or places within or outside the State of Nevada as the Board may from time to time determine, or as shall be designated in the respective notices or waivers of notice of meeting.
(f) Quorum and Manner of Acting. A majority of the total number of directors will constitute a quorum for the transaction of business at the meeting. The vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law or these Bylaws. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn the meeting from time to time until a quorum shall be present. Notice of the adjourned meeting need not be given if the time and place of the adjourned meeting are announced at the meeting so adjourned.
(g) Organization. At each meeting of the Board, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence: (i) the Chairman; (ii) the President (if a director); or (iii) any other director designated by a majority of the directors present. The Secretary or, in the case of his or her absence, an Assistant Secretary, if an Assistant Secretary has been appointed and is present, or any person whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep the minutes of the meeting.
| -6- |
3.5. Directors’ Consent in Lieu of Meeting. Unless otherwise restricted by the Articles, any action required or permitted to be taken at any meeting of the Board may be taken without a meeting, without prior notice and without a vote, if each of the directors consents thereto in writing or by electronic transmission. Any such consent in writing shall be inserted in the minutes of the proceedings of the Board. The filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.6. Remote Meeting. Unless otherwise restricted by the Articles, any one or more members of the Board may participate in a meeting of the Board by means of conference telephone or other communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at the meeting. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
3.7. Chairman. The Board may, in its discretion, choose a Chairman of the Board from among the directors on the Board who will preside at all meetings of the stockholders and of the Board. The Chairman will have the other powers and will perform the other duties as shall be designated by the Board. The Chairman shall serve until a successor is chosen and qualified, but may be removed at any time by the affirmative vote of a majority of the Board.
3.8. Committees. The Board may, by resolution, designate one or more committees, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not he, she, or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board establishing the committee, will have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it, but no such committee will have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the NRS to be submitted to stockholders for approval, or (b) adopting, amending, or repealing any bylaw of the Corporation. All committees of the Board will keep minutes of their meetings and will report their proceedings to the Board when requested or required by the Board.
3.9. Compensation. The Board will have the authority to fix the compensation of directors for their services. In addition, as determined by the Board, directors may be reimbursed by the Corporation for their expenses, if any, in the performance of their duties as directors. A director may also serve the Corporation in other capacities and receive compensation therefor.
| -7- |
Article IV
OFFICERS
4.1. Executive Officers. The officers of the Corporation will be elected by the Board and will be a President and a Secretary. The Board may also elect a Chief Executive Officer, one or more Vice Presidents, including any Executive Vice President, any Senior Vice President, or any Assistant Vice Presidents, a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers, and the other officers and agents as the Board may deem desirable. Any two or more offices may be held by the same person. No officer or agent need be a stockholder, a director, a resident of the State of Nevada, or a citizen of the United States.
4.2. Other Officers. The Corporation may have the other officers, agents and employees as the Board may deem advisable, who will hold their office for the terms and will exercise and perform such powers and duties as will be determined from time to time by the Board.
4.3. Resignation and Removal. Any officer may resign at any time by giving written notice to the Board, the Chief Executive Officer, the President, or the Secretary. The resignation shall take effect at the time specified in the resignation or, if the time be not specified, at the time it is accepted by action of the Board. Except as aforesaid, the acceptance of the resignation shall not be necessary to make it effective. All officers and agents elected or appointed by the Board shall be subject to removal at any time by the Board with or without cause.
4.4. Vacancies. The Board will have power to fill vacancies occurring in any office.
4.5. The Chief Executive Officer. The Chief Executive Officer, if there is one, shall have general supervision of the affairs of the Corporation, subject to the policies and direction of the Board, and shall appoint, supervise and direct all of the officers and employees of the Corporation but may delegate in his or her discretion any of his or her powers to any officer or the other executives as he or she may designate. The Chief Executive Officer may execute, on behalf of the Corporation, contracts and agreements (i) in the ordinary course of the Corporation’s business, or (ii) the execution of which has been authorized by the Board. In the absence of the Chairman or during any disability on the part of the Chairman to act, the Chief Executive Officer shall preside at all meetings of the stockholders and the Board, and shall perform the other duties as the Board may bestow upon him or her.
4.6. The President. The President, if there is no Chief Executive Officer, shall be the chief executive officer of the Corporation and shall have the powers described above attributable to the Chief Executive Officer. If the Corporation has a Chief Executive Officer, the President, subject to the control of the Chief Executive Officer or the Board as determined by the Board, shall have general and active management and control of the business and affairs of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. The President shall from time to time make the reports of the affairs of the Corporation as the Board may require and shall perform the other duties as the Board may from time to time determine. Except as the Board will otherwise authorize, the President will execute bonds, mortgages, and other contracts on behalf of the Corporation, and will cause the seal to be affixed to any instrument requiring it and, when so affixed, the seal will be attested by the signature of the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer.
4.7. Vice Presidents. Each Vice President, if any is elected, of whom one or more may be designated an Executive Vice President or a Senior Vice President, will have the powers and will perform the duties as will be assigned to him or her by the Chief Executive Officer, President or the Board.
| -8- |
4.8. Secretary. The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of the stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose. He or she may give, or cause to be given, notice of all meetings of the stockholders and of the Board, and shall perform the other duties as may be prescribed by the Board, the Chief Executive Officer, or the President, under whose supervision he or she shall act. He or she shall keep in safe custody the seal of the Corporation and affix the same to any duly authorized instrument requiring it and, when so affixed, it shall be attested by his or her signature or by the signature of the Treasurer or, if appointed, an Assistant Secretary or an Assistant Treasurer. He or she shall keep in safe custody the certificate books and stockholder records and the other books and records as the Board may direct, and shall perform all other duties incident to the office of Secretary and the other duties as from time to time may be assigned to him or her by the Board, the Chief Executive Officer, or the President.
4.9. Treasurer. The Treasurer shall have the care and custody of the corporate funds and other valuable effects, including securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in the depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for the disbursements, shall render to the Chief Executive Officer, President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation and shall perform all other duties incident to the office of Treasurer and the other duties as from time to time may be assigned to him or her by the Board, the Chief Executive Officer, or the President.
4.10. Assistant Treasurers and Assistant Secretaries. Each Assistant Treasurer and each Assistant Secretary, if any is elected, will be vested with all the powers and will perform all the duties of the Treasurer and Secretary, respectively, in the absence or disability of the officer, unless or until the Board will otherwise determine. In addition, Assistant Treasurers and Assistant Secretaries will have the powers and will perform the duties as will be assigned to them by the Board, the Chief Executive Officer or the President.
4.11. Deposits and Checks. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or Treasurer, or any other officer of the Corporation to whom power in this respect shall have been given by the Board, shall select. All checks or other orders for the payment of money will be signed by the Chief Executive Officer, President, or the Treasurer or the other person or agent as may from time to time be authorized and with the countersignature, if any, as may be required by the Board.
4.12. Contracts and Other Documents. The Chief Executive Officer, President, or Treasurer, or such other officer or officers or agent or agents as may from time to time be authorized by the Board or any other committee given specific authority by the Board during the intervals between the meetings of the Board, will have power to sign and execute on behalf of the Corporation deeds, conveyances, and contracts, and any and all other documents requiring execution by the Corporation.
4.13. Compensation. The compensation of the officers of the Corporation will be fixed from time to time by the Board (subject to any employment agreements that may then be in effect between the Corporation and the relevant officer). None of the officers will be prevented from receiving such compensation by reason of the fact that he or she is also a director of the Corporation. Nothing contained in this section will preclude any officer from serving the Corporation, or any subsidiary, in any other capacity and receiving such compensation by reason of the fact that he or she is also a director of the Corporation.
| -9- |
4.14. Ownership of Stock of Another Corporation. The Board shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation, and to vote or consent with respect to such stock or securities. The designated officers may instruct the person or persons so appointed as to the manner of exercising the powers and rights, and the designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, the written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its powers and rights.
4.15. Delegation of Duties. In the absence, disability, or refusal of any officer to exercise and perform his or her duties, the Board may delegate to another officer the powers or duties.
Article V
STOCK
5.1. Certificates of Stock. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number and class or series of shares owned by him or her in the Corporation, which shall be in the form as shall be prescribed by the Board. Certificates shall be numbered and issued in consecutive order and shall be signed by, or in the name of, the Corporation by the Chief Executive Officer, President or any Vice President, and by the Treasurer (or an Assistant Treasurer, if appointed) or the Secretary (or an Assistant Secretary, if appointed). In case any officer or officers who shall have signed any such certificate or certificates shall cease to be an officer or officers of the Corporation, whether because of death, resignation or otherwise, before the certificate or certificates shall have been delivered by the Corporation, the certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed the certificate had not ceased to be such officer or officers of the Corporation. Any or all of the signatures on the certificate may be a facsimile. The Board will have the power to appoint one or more transfer agents and/or registrars for the transfer or registration of certificates of stock of any class, and may require stock certificates to be countersigned or registered by one or more of the transfer agents and/or registrars.
5.2. Record. A record in one or more counterparts shall be kept of the name of the person, firm or corporation owning the shares represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date of the certificate, and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name shares of stock stand on the stock record of the Corporation shall be deemed the owner of those shares of stock for all purposes regarding the Corporation.
5.3. Transfer of Stock. Shares of stock of the Corporation will be transferable upon its books by the holders of the shares of stock, in person or by their duly authorized attorneys or legal representatives, upon surrender and delivery to the Corporation of the certificate representing the shares and a duly executed instrument authorizing transfer of the shares, if certificated, or delivery of a duly executed instrument authorizing transfer of the shares, if uncertificated, to the person in charge of the stock and transfer books and ledgers. If certificated, the certificates will be cancelled and new certificates will thereupon be issued. A record will be made of each transfer. Whenever any transfer of shares will be made for collateral security, and not absolutely, it will be so expressed in the entry of the transfer if, when the certificates are presented, both the transferor and transferee request the Corporation to do so. The Board will have power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of certificates for shares of stock of the Corporation.
| -10- |
5.4. Addresses of Stockholders. Each stockholder shall designate to the Secretary the addresses at which notices of meetings and all other corporate notices may be served or delivered to him or her by mail or by electronic transmission, and, if any stockholder shall fail to designate the address, corporate notices may be served upon him or her by mail directed to him or her at his or her post-office address, if any, as the same appears on the share record books of the Corporation or at his or her last known post-office address.
5.5. Lost, Destroyed and Mutilated Certificates. The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board may, in its discretion, cause to be issued to him or her a new certificate or certificates for the shares, upon the surrender of the mutilated certificates or, in the case of loss or destruction of the certificate, upon satisfactory proof of the loss or destruction, and the Board may, in its discretion, require the owner of the lost or destroyed certificate or his or her legal representative to give the Corporation a bond in the sum and with the surety or sureties as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate.
5.6. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for stock of the Corporation.
5.7. Dividends. Subject to the provisions of the Certificate, the Board may at any regular or special meeting, declare dividends upon the stock of the Corporation either (a) out of its surplus, as defined in and computed in accordance with Section 78.215 of the NRS, or (b) in case there will be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Before the declaration of any dividend, the Board may set apart, out of any funds of the Corporation available for dividends, the sum or sums as from time to time in its discretion may be deemed proper for working capital or as a reserve fund to meet contingencies or for such other purposes as will be deemed conducive to the interests of the Corporation.
5.8. Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment of the meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall be not more than sixty (60) nor less than ten (10) days before the date of the meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
| -11- |
(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall be not more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by the NRS, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by the Board is required by the NRS, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking the prior action.
(c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to the action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
5.9. Registered Stockholders. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of the share or shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Except as otherwise required by law, the Corporation will not be bound to recognize any equitable or other claim to or interest in the share or shares on the part of any other person, whether or not it will have express or other notice of the claim.
Article VI
EXCULPATION AND INDEMNIFICATION
6.1. Exculpation. As provided in the Articles, to the fullest extent permitted by the NRS as the same exists or may hereafter be amended, a director of this Corporation shall not be personally liable to the Corporation or its stockholders for breach of fiduciary duty as a director.
| -12- |
6.2. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of the proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the NRS, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that the amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or amounts paid in settlement) reasonably incurred or suffered by the indemnitee in connection therewith and the indemnification shall continue as to an indemnitee who has ceased to be a director, officer or employee and shall inure to the benefit of the indemnitee’s heirs, testators, intestates, executors and administrators; provided, however, that the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and with respect to a criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; provided further, however, that no indemnification shall be made in the case of an action, suit or proceeding by or in the right of the Corporation in relation to matters as to which it shall be adjudged in the action, suit or proceeding that the director, officer, employee or agent is liable to the Corporation, unless a court having jurisdiction shall determine that, despite the adjudication, the person is fairly and reasonably entitled to indemnification; provided further, however, that, except as provided in Section 6.4 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part of the proceeding) initiated by the indemnitee only if the proceeding (or part of the proceeding) initiated by the indemnitee was authorized or ratified by the Board.
6.3. Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 6.2, an indemnitee will, to the fullest extent not prohibited by law, also have the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending any such proceeding in advance of its final disposition (an “advancement of expenses”), provided, however, that, if the NRS requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by the indemnitee, including service to an employee benefit plan) will be made only upon delivery to the Corporation of an undertaking (an “undertaking”), by or on behalf of the indemnitee, to repay all amounts so advanced if it will ultimately be determined by final judicial decision from which there is no further right to appeal (a “final adjudication”) that the indemnitee is not entitled to be indemnified for such expenses under this Article VI or otherwise.
6.4. Right of Indemnitee to Bring Suit. If a claim under Section 6.2 or 6.3 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of any undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending the suit. In (a) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in the NRS. Neither the failure of the Corporation (including the Board, independent legal counsel, or the stockholders) to have made a determination prior to the commencement of the suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the NRS, nor an actual determination by the Corporation (including the Board, independent legal counsel, or the stockholders) that the indemnitee has not met the applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to the suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to the advancement of expenses, under this Article VI or otherwise shall be on the Corporation.
| -13- |
6.5. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Articles, agreement, vote of stockholders, or these Bylaws or otherwise.
6.6. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
6.7. Nature of Rights. The rights conferred upon indemnitees in this Article VI will be contract rights and the rights will continue as to an indemnitee who has ceased to be a director, officer, or trustee and will inure to the benefit of the indemnitee’s heirs, executors, and administrators. Any amendment, alteration, or repeal of this Article VI that adversely affects any right of an indemnitee or its successors will be prospective only and will not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to the amendment, alteration, or repeal.
6.8. Settlement of Claims. The Corporation will not be liable to indemnify any indemnitee under this Article VI for any amounts paid in settlement of any action or claim effected without the Corporation’s written consent, which consent will not be unreasonably withheld, or for any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of the action.
6.9. Subrogation. In the event of payment under this Article VI, the Corporation will be subrogated to the extent of the payment to all of the rights of recovery of the indemnitee, who will execute all papers required and will do everything that may be necessary to secure the rights, including the execution of the documents necessary to enable the Corporation effectively to bring suit to enforce the rights.
6.10. Procedures for Submission of Claims. The Board may establish reasonable procedures for the submission of claims for indemnification pursuant to this Article VI, determination of the entitlement of any person thereto and review of any such determination. The procedures will be set forth in an appendix to these Bylaws and will be deemed for all purposes to be a part of these Bylaws.
6.11. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or any person who is or was serving at the request of the Corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify the person against the expense, liability or loss under the NRS.
| -14- |
Article VII
MISCELLANEOUS
7.1. Amendment. These Bylaws may be adopted, amended or repealed by the vote of the holders of a majority of the shares then entitled to vote or by the stockholders’ written consent or by the vote of the Board or by the directors’ written consent in accordance with the terms of these Bylaws.
7.2. Electronic Transmission. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient of the communication, and that may be directly reproduced in paper form by such a recipient through an automated process.
7.3. Corporate Seal. The Board may provide a corporate seal, which shall bear the full name of the Corporation, the year of incorporation of the Corporation and the words and figures “Corporate Seal - Nevada”. If and when so directed by the Board or a committee of the Board, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
7.4. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year and end on the last calendar day of December of the same year, unless otherwise determined by the Board.
7.5. Notice.
(a) A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, will be deemed equivalent to the notice required to be given to the person. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting will constitute waiver of notice except attendance for the sole purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
(b) Whenever by law, the Articles, or these Bylaws notice is required to be given to any stockholder, director, or committee member and no provision is made as to how the notice shall be given, it shall be construed to mean that notice may be given, in writing, either (i) in person, receipt acknowledged; (ii) by certified mail, return receipt requested; or (iii) by Federal Express, UPS, Airborne Express, or other national carrier, receipt acknowledged. Any notice required or permitted to be given hereunder (other than personal notice) shall be addressed to such stockholder, director, or committee member at his or her address as it appears on the books of the Corporation or, in the case of a stockholder, on the stock transfer records of the Corporation or at such other place as the stockholder, director, or committee member is known to be at the time notice is mailed or transmitted. Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the notice is deposited in the United States mail, postage prepaid. Any notice required or permitted to be given by telegram, telex, cable, telecopy or facsimile or electronic transmission, or similar means, shall be deemed to be delivered and given at the time transmitted.
7.6. Section Heading. Section headings in these Bylaws are for convenience of reference only and will not be given any substantive effect in limiting or otherwise construing any provision of these Bylaws.
7.7. Inconsistent Provisions, Changes in Nevada Law. If any provision of these Bylaws is or becomes inconsistent with any provision of the Articles, the NRS or any other applicable law, the provision of these Bylaws will not be given any effect to the extent of the inconsistency but will otherwise be given full force and effect. If any of the provisions of the NRS referred to above are modified or superseded, the references to those provisions is to be interpreted to refer to the provisions as so modified or superseded.
| -15- |
Exhibit 4.2
Exhibit 5.1
Exhibit 14.1
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-3 of our report, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, dated May 28, 2021, relating to the consolidated financial statements of Artificial Intelligence Technology Solutions, Inc. as of February 28, 2021 and February 29, 2020 and for the years then ended. We also consent to the reference to us under the heading “Experts” in the Registration Statement of Artificial Intelligence Technology Solutions, Inc. on Form S-3.
/s/ L J Soldinger Associates, LLC
Deer Park, Illinois
September 2, 2021