18. COMMITMENTS AND CONTINGENCIES Litigation Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Companys condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. In February 2016, AITX received notice that it had been sued in the Clark County District Court of Nevada. The plaintiff alleges that AITX obtained certain trade secrets through a third party also named in the suit. AITX believes the suit is without merit and intend to vigorously defend it. An arbitration was conducted on May 9, 2017, Plaintiff filed a Notice of Trial de Novo, seeking a review of the merit dismissal. It is counsels opinion this Trial de Novo is without merit and AITX should prevail. In April 2019 the principals of WeSecure (see Note 8) filed lawsuit in California Superior Court seeking damages for non-payment balance of sale of WeSecure assets totaling $25,000, unpaid consulting fees payable to the two principals through to September 2019 totaling $ $125,924.48, and labor code violations of $ $48,434.40 all totaling $199,358.88 plus attorneys fees and damages. The parties finally settled all claims with a full release for $180,000 in June 2019 payable in 14 monthly instalments as follows: 2019 2020 Total 6/30/19 $ 5,000 1/26/2020 $ 15,000 7/30/19 $ 5,000 2/25/2020 $ 15,000 8/29/19 $ 7,500 3/26/2020 $ 15,000 9/28/19 $ 7,500 4/25/2020 $ 15,000 10/28/19 $ 10,000 5/25/2020 $ 20,000 11/27/19 $ 10,000 6/25/2020 $ 20,000 12/27/19 $ 15,000 7/24/2020 $ 20,000 Total $ 60,000 $ 120,000 $ 180,000 The company has fully accrued the above $180,000. The related legal costs are expensed as incurred. Operating Lease The Company currently maintains an office at 1218-1222 Magnolia Ave, Suite 106 Bldg. H ,Corona, California 92881 pursuant to a month to month lease commencing March 1,2019. The Companys annual rent is $12,000 per year. RAD maintains a mailing address for 31103 Ranch Viejo Road, Suite d2114 for a nominal fee of $ 264/yr. RAD previously had its offices at 23121 La Cadena Suite B/C Laguna Hills, California 92675, pursuant to a five-year term ending March 31, 2022. Its annual rental cost for this facility was approximately $65,000, plus a proportionate share of operating expenses of approximately $35,000 annually. The Company also leased premises in northern California. The lease was for three years, beginning in August 2017, and would expire in August 2020. The Company shared these premises with a former supplier who was the co-lessee. Through agreement with the supplier, the Company was to pay 75% of the lease costs and the supplier was to pay 25%. The Companys share of rent costs was approximately $43,000 annually. On February 1, 2018 the Company entered into an additional lease for premises for a robotic control center. The lease ran from February 1, 2018 to January 31, 2021 for $6,600 annually. At the end of fiscal 2019 the Company terminated all three preceding leases through verbal arrangement with the landlord. Regarding the lease at La Cadena, the Company agreed to a settlement amount to cover unpaid rent , commissions and leasehold improvements paid by the landlord totaling $62,039 to be paid by the Company in 4 monthly instalments of $5,000 commencing August 1, 2019 with the remaining balance to be paid in $10,000 monthly instalments thereafter. The Company recorded the $62,039 as a loss on settlement. No further liability was recorded for both the northern California and robotic control center leases. The Companys leases are accounted for as operating leases. Rent expense is recorded over the lease terms on a straight-line basis. Rent expense was $134,940 for the year ended February 28, 2019 and $$90,582 for the year ended February 28, 2018. At February 28, 2019, the Company had deferred rent of $0 (February 28, 2018-$6,742). At February 28, 2019 there were no Companys future minimum payments. Convertible Notes Payable Certain convertible notes payable carry conditions whereby in the event of ant default of any condition the Company would be subject to certain financial penalties.