AITX registers 43.2M shares for resale | AITX SEC Filing
AITX registers 43.2M shares for resale | AITX SEC Filing
Publish Date: 2026-06-15 17:30:00
Source Domain: www.stocktitan.net
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2026-06-03
iso4217:USD
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AITX:Integer
As
filed with the Securities and Exchange Commission on June 15, 2026
Registration
No. 333-288173
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Post
Effective Form /Amendment Number 1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
(Exact
name of registrant as specified in its charter)
| Nevada | 3714 | 27-2343603 | ||
| (State or jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS 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:
Frederick
M. Lehrer, P. A.
Frederick
M. Lehrer, Esquire
2108
Emil Jahna Road
Clermont,
Florida 34711
(561)
706-7646
Approximate
date of commencement of proposed sale to the public: From time to time after the effectiveness of this registration statement.
If
any 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, 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 post-effective amendment filed pursuant to Rule 462(d) 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. ☐
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. ☐
The
Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant files a further amendment that specifically states that this registration statement will thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration statement becomes effective on such date as the U.S. Securities
and Exchange Commission, acting pursuant to Section 8(a), may determine.
EXPLANATORY
NOTE
This
Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 333-288173) (this “Post-Effective Amendment”)
is being filed by Artificial Intelligence Technology Solutions, Inc. (the “Company”) to update and restate the Registration
Statement with current information, including the information contained in the Company’s Annual Report on Form 10-K for the fiscal
year ended February 28, 2026, filed with the Securities and Exchange Commission (the “SEC”) on June 9, 2026 (the “Form
10-K”), which is incorporated herein by reference.
Background
of the Registration Statement
In
September 2024, the Company and AIV Investments, LLC (“AIV”) entered into a Securities Purchase Agreement (the “September
2024 Purchase Agreement”) pursuant to which AIV agreed to purchase up to $30,000,000 of the Company’s common stock, par value
$0.00001 per share (the “Common Stock”). The September 2024 Purchase Agreement provided for the deferred issuance to AIV
of 1,239,907 shares of Common Stock (the “Deferred Shares”).
On
June 16, 2025, the Company and AIV entered into an Equity Financing Agreement (the “Purchase Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”) (each dated as of June 16, 2025 and memorialized in a Current Report
on Form 8-K filed with the SEC on June 17, 2025), superseding a substantially identical Equity Financing Agreement and Registration Rights
Agreement previously entered into between the Company and GHS Investments, LLC (“GHS”) on June 11, 2025, which were terminated
pursuant to a Termination Agreement between the Company and GHS.
On
June 18, 2025, the Company filed a Registration Statement on Form S-1 (Registration No. 333-288173) (the “Registration Statement”),
which the SEC declared effective on June 25, 2025, registering up to 100,000,000 shares of Common Stock for resale by AIV pursuant to
the Purchase Agreement.
The
Resolution Shares
On
August 7, 2025, the Company and AIV entered into a Resolution Agreement (the “Resolution Agreement”), executed in connection
with the Purchase Agreement, which resolved the deferred issuance of the Deferred Shares contemplated by the September 2024 Purchase
Agreement. Pursuant to the Resolution Agreement, the Company was obligated to deliver to AIV 123,990,716 shares of Common Stock (1,239,907 shares as adjusted
for the Company’s subsequent reverse stock split) (the “Resolution Shares”). The Resolution Shares were not included
in the Registration Statement at the time it was declared effective on June 25, 2025.
The
Company is not filing a resale registration statement on Form S-1 to register the post-split amount of 1,239,907 shares of Common Stock
issued to AIV Investments, LLC (“AIV”) (pre-reverse split amount of 123,990,716 shares) pursuant to the Resolution Agreement
dated August 7, 2025 (the “Resolution Shares”), and is not registering the resale of such shares. In lieu of issuing the
Resolution Shares or conferring registration rights upon them, the Company paid AIV an aggregate of $125,000 through the following wire
transfers: (a) $30,000 on September 18, 2025; (b) $30,000 on October 3, 2025; (c) $30,000 on October 22, 2025; and (d) $35,000 on April
21, 2026. In reliance on these cash disbursements to AIV totaling $125,000, the Company is not registering the resale of the Resolution
Shares — whether by means of this Post-Effective Amendment or a separate resale registration statement — because the Resolution
Shares have been extinguished.
Purpose
of this Post-Effective Amendment
This
Post-Effective Amendment relates to the resale by AIV, as the Selling Stockholder, of up to 43,213,508 shares of Common Stock (the “Remaining
Shares”), representing those shares originally registered under the Registration Statement that have not been sold by AIV as of
the date hereof.
This
Post-Effective Amendment is being filed to update the Registration Statement with current business and financial information, including
the financial statements and other information contained in the Form 10-K. All information in this Post-Effective Amendment supersedes
the corresponding information previously contained in the Registration Statement.
The
Company will not receive any proceeds from the resale of the Remaining Shares by AIV. However, the Company may receive aggregate gross
proceeds of up to the remaining available commitment amount from future sales of Common Stock to AIV pursuant to the Purchase Agreement.
The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission, of which this prospectus is a part, shall have been declared effective.
This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JUNE 15, 2026
43,213,508
Shares of Common Stock
This prospectus relates to the sale by the Selling
Stockholder, AIV Investments, LLC (“AIV”), of Artificial Intelligence Technology Solutions, Inc. (the “Company”)
of up to Forty Three Million Two Hundred Thirteen Thousand and Five Hundred Eight (43,213,508) shares of common stock,
par value $0.00001 per share. We will not receive proceeds from the sale of the shares by the Selling Stockholder.
Our common stock is quoted on the OTC Pink under
the symbol “AITX.” On June 8, 2026 the last reported sales price of our common stock on the OTC Pink was $0.0178
per share.
AIV
is an underwriter within the meaning of the Securities Act of 1933 with respect to the shares being issued pursuant to the
Agreement, as amended (the “Securities Act”), and any broker-dealers or agents that are involved in selling the shares
may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. We will bear all costs, expenses and fees in connection with the
registration of the common stock. The Selling Stockholder will bear all commissions and discounts, if any, attributable to its sales
of our common stock.
Investing
in our securities is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties
described under the heading “Risk Factors” beginning on page 3 of this prospectus before making a decision to purchase our
securities.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire
prospectus and any amendments or supplements carefully before you make your investment decision.
The
date of this prospectus is June 15, 2026
Table
of Contents
| PAGE | |
| PROSPECTUS SUMMARY | 1 |
| ABOUT THE OFFERING | 1 |
| RISK FACTORS | 3 |
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 10 |
| USE OF PROCEEDS | 11 |
| SELLING STOCKHOLDER | 11 |
| PLAN OF DISTRIBUTION | 12 |
| BUSINESS | 13 |
| MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 21 |
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 21 |
| MANAGEMENT | 28 |
| EXECUTIVE COMPENSATION | 30 |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 31 |
| LEGAL MATTERS | 38 |
| EXPERTS | 38 |
| AVAILABLE INFORMATION | 38 |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | F-1 |
You
should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information
from that contained in this prospectus. The Selling Stockholder is offering to sell and seeking offers to buy shares of our common stock
only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation
is unlawful. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under
any circumstances, imply that there has been no change in our affairs since the date of this prospectus.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider
in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including
our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.
Unless
the context otherwise requires, references to “we,” “our,” “us,” “Artificial Intelligence”
or the “Company” in this prospectus mean Artificial Intelligence Technology Solutions, Inc. and its wholly-owned subsidiaries.
Company
Overview
We
apply AI technology to solve enterprise problems that are expensive, repetitive, difficult to staff, and outside of the core competencies
of the client organization. Our main focus is disrupting and capturing a sizable portion of the global security services market,
specifically the human security guard market and the physical security market. RAD solutions are unique in that they start with an AI-driven
autonomous response utilizing cellular optimized communications, while easily connecting to a human operator for a manned response as
needed. We use purpose-built hardware and deliver our services through RAD-developed software and cloud services allowing enterprises
IT groups to focus on their core competencies.
Definitive
Information Statement
On March
30, 2026,
we filed a Schedule 14C Definitive Information Statement to provide notice that our Board of Directors approving the filing of a Certificate
of Amendment to the Company’s Articles of Incorporation to decrease its authorized common stock by fifteen billion
five hundred thousand (15,500,000,000) common stock shares to a total of twelve billion (12,000,000,000) common
stock shares (the “Authorized Share Increase”) and our consenting shareholder executing a written consent authorizing the
Authorized Share Decrease.
About
this Offering
Equity Financing Agreement with AIV
Investments, LLC
On June 16, 2025, we entered into the Equity Financing
Agreement with AIV referred to herein as the “Purchase Agreement”. The Purchase Agreement between the Company and AIV pertains
to the potential sale of up to one hundred million (100,000,000) shares of our common stock as detailed below. The Purchase
Agreement expires on June 11, 2027.
Pursuant to the Purchase Agreement, we have the right,
in our sole discretion, subject to the conditions and limitations contained therein, to direct AIV, by delivery of a purchase
notice (a “Purchase Notice”) to purchase (each, a “Purchase”) over the 24 month term of the Purchase Agreement,
a minimum of $10,000 and up to a maximum of $1,500,000. Puts are further limited to the Investor owning no more than 4.99% of the outstanding
stock of the Company at any given time. Pursuant to the Purchase Agreement, the aggregate value of the Purchase Shares sold to AIV
may not exceed $30,000,000. Each Purchase Notice will set forth the Purchase Price and number of Purchase Shares in accordance with the
terms of the Purchase Agreement. The maximum dollar amount of each Put will not exceed 250% of the average daily trading volume for the
common stock during the 10 consecutive trading days preceding the Put Notice Date.
The
Purchase Price is defined in the Purchase Agreement as 80% of the Market Price. If the average Closing Price for the Common Stock during
the three (3) trading days preceding a Put Notice is equal to or greater than one cent ($.01) per share, the applicable Purchase Price
shall equal eighty five percent (85%) of the Market Price. Following an up-list to the NASDAQ or an equivalent national exchange by the
Company, the Purchase price shall equal 90% of the lowest Volume Weighted Average Price for the Common Stock during the Pricing Period,
subject to a floor of $2.00 per share, below which the Company shall not deliver a Put.
The
Purchase Agreement prohibits AIV from purchasing any shares of common stock if those
shares, when aggregated with all other shares of our common stock then beneficially owned
by AIV would result in AIV having beneficial ownership, at any single point
in time, of more than 4.99% of the then total outstanding shares of our common stock. There
are no trading volume requirements or restrictions under the Purchase Agreement and we will
control the timing and amount of any sales of its common stock to AIV.
We
may not deliver a Purchase Notice to AIV and AIV is not obligated to purchase the Purchase Shares unless each of the following
conditions are satisfied: there is an effective Registration Statement; the Common Stock is listed or quoted for trading on the Principal
Market; we are not in breach of in default of the Purchase Agreement or Registration Rights Agreement; no injunction has been issued
prohibiting the purchase of the or the issuance of the Securities; and the issuance of the Securities does not violate the Principal
Market requirements.
The
Purchase Agreement is for a term of twenty four months but may terminate earlier on the date that AIV has purchased the aggregate
Offering Amount of $30,000,000 of the Purchase Shares that are sold to AIV. We and AIV each have the right to terminate
the Purchase Agreement at any time upon thirty days-notice. The Purchase Agreement will be suspended and remain suspended if any of the
following events occur: if our Common Stock is suspended by the applicable authority, our Common Stock ceases to be quoted; we breach
a representation, warranty, covenant in the Purchase Agreement;, and upon the occurrence of bankruptcy proceedings by or against us.
Subject
to the foregoing, actual sales of Purchase Shares to AIV under the Purchase Agreement will depend on a variety of factors to be
determined by us from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations
by us as to the appropriate sources of funding for our operations.
Prior
Issuances with AIV
Between August 11, 2025 and June 5, 2026, we have issued
a total of 56,786,492 Common Stock Shares to AIV.
RISK
FACTORS
Risks
Related to Our Business
Our
business is at an early stage, and we have not yet generated any profits.
RAD
I, our primary operating subsidiary, was formed in 2016 and made its first sale in 2016. Accordingly, we have 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 we make significant investments in research, development
and product opportunities, we react to developments in our 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.
Our
auditor has expressed substantial doubt about our ability to continue as a going concern.
Our
financial statements of which this prospectus is a part have been prepared on a going concern basis. We may be unable 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.
Our
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 our past financial results as indicators of
future performance. In addition, you should consider 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; |
|
| ● | our ability to develop and introduce new products and the ability of our competitors to do the same; |
|
| ● | our 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. |
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 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.
Our
business growth and expansion and additional products, which 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
we continue to grow, our information technology systems, internal management processes, internal controls and procedures and production
processes may be inadequate 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 implement more complex organizational
and management structures consistent with our growth, 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.
We
depend 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 Messrs. Reinharz and Brenz, we do not have any employment agreements in place with our other officers. If we cannot call
upon Messrs. Reinharz and Mr. Brenz or Mark Folmer or other key management personnel for any reason, our operations and development could
be harmed. We have not yet developed a succession plan. Furthermore, as we grow, we will be required to hire and attract additional qualified
professionals such as accounting, legal, finance, production, service and engineering experts. We may be unable to locate or attract
qualified individuals for such positions, which will affect our ability to grow and expand our business.
Because
our Board of Directors does not currently have an audit committee, compensation committee, nomination 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, nomination 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, we do 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.
We
rely and expect 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 our behalf. We plan 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 mimic our service and methods of operations more
effectively. Any of these events could have a material adverse effect on our business and financial results.
Economic
factors generally may negatively affect our operations.
We
are subject to the general risks of the marketplace where we conduct business. Our results of operations will depend on a number of factors
over which we 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 our business. For these and other reasons, no assurance of profitable
operations can be given.
General
political, social and economic conditions can adversely affect our business.
Demand
for our products and services depends, to a significant degree, on general political, social and economic conditions in our markets.
Worsening economic and market conditions, downside shocks, or a return to recessionary economic conditions could serve to reduce demand
for our products and services and adversely affect our operating results. In addition, an economic downturn could impact the valuation
and collectability of certain long-term receivables held by us. Additionally, the global economy and financial markets may be adversely
affected by geopolitical events, including the current or anticipated impact of military conflict and related sanctions imposed on Russia
by the United States and other countries due to Russia’s recent invasion of Ukraine.
The
future reoccurrence of the COVID-19 pandemic could adversely affect our business, financial condition and results of operations.
A
future COVID-19 pandemic, including the emergence of variants for which vaccines may not be effective, may 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. |
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 us are not clear, these effects could materially adversely affect
our 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 release our confidential
information. The 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
we engage in some direct sales to potential customers, our primary focus is on leasing its robots to end-users through dealers that market
to firms providing security guard and integrated security services. We believe our 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 we 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 competition and may face additional competition in the future; if we are unable to compete effectively, our business prospects
and operations will be harmed.
RAD
I’s re-entry into the mobile security robotics market presents us 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 we do 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
compared with us. 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.
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 our 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.
Our
common stock shareholders do not have voting control over us due to the rights granted to holders of our Series E Convertible Preferred
Stock.
Steven
Reinharz, our 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
we are a “smaller reporting company,” we may take advantage of certain scaled disclosures available to us, resulting in holders
of our securities receiving less 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 our results of operations and financial prospectus in comparison with other public companies.
To
fund our operations, we may conduct further offerings in the future, in which case our common stock may be diluted.
To
fund our business operations, we anticipate 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 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. Our failure or inability to raise capital when needed or on terms acceptable to
us and our shareholders could have a material adverse effect on our business, financial condition and results of operations and would
also have a negative adverse effect on the price of our common stock.
We
have and may in the future utilize debt financing to fund our operations.
If
we undertake debt financing to fund our 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 us, if at all. Our failure or inability to obtain financing
when needed or on terms acceptable to us and our shareholders could have a material adverse effect on our business, financial condition
and results of operations and would also have a negative adverse effect on the price of our common stock.
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 our management; |
|
| ● | public reaction to our press releases, public announcements and filing with the SEC; |
|
| ● | changes in earnings estimates or recommendations by research analysts who track 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 we 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.
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.
We
do 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. Our dividend policy will be reviewed from time to time
by our Board of Directors in the context of its earnings, financial condition and other relevant factors. Until we pay dividends, which
we 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.
Our
business is at an early stage, and we have not yet generated any profits.
RAD
I, our primary operating subsidiary, was formed and made its first sale in 2016. Accordingly, we have 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 we 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 us.
Due
to his ownership of Series E Preferred Stock, our Chief Executive Officer has voting rights equal to 66-2/3% of the voting rights held
by all of our outstanding capital stock, giving him substantial control over our business and affairs and creating actual or potential
conflicts of interests between his interests and the interests of the shareholders.
Our
Chief Executive Officer holds 3,350,000 shares of Series E Preferred Stock. Because the Series E Preferred Stock has voting rights equal
to 66-2/3% of the voting rights held by all of our outstanding capital stock, he has voting control over any matter to be voted upon
by the shareholders of the Company, allowing him to exercise substantial control over our business and affairs. Moreover, his ownership
of the Series E Preferred Stock creates the potential for conflicts of interest between his interests and the interests of the shareholders
holding junior shares, including those holding common shares.
The
Chief Executive Officer’s ownership of Series F Preferred Stock permits him to convert the Series F Preferred Shares into a multiple
of shares of the then-outstanding common stock. Any such conversion of his Series F Preferred Shares would cause substantial dilution
of the shares of common stock held by our common stock shareholders.
The
Chief Executive Officer owns 2,450 shares of Series F Preferred Stock. The Series F Preferred Stock is convertible at the option of the
holder into a multiple of the then-outstanding shares of common stock. The Chief Executive Officer’s conversion of shares of Series
F Preferred Stock into common stock would substantially dilute the outstanding shares of common stock held by the common stock shareholders.
RISKS RELATED TO THE EQUITY FINANCING AGREEMENT
WITH AIV
Should AIV sell the shares being registered
herein or some lesser material amount pursuant to the Equity Financing Agreement and/or the Securities Purchase Agreement, sales
of our Shares into the open market may cause material decreases in our stock price and decrease the percentage ownership of shares held
by our other shareholders.
The shares of our common stock that are being registered
herein may be sold into the market by AIV, thereby causing dilution of the shares and material stock price declines.
Additionally, the respective percentage ownership held by each of our shareholders will materially decrease as a result of AIV
sale of ten billion shares or a lesser material share amount.
Funding from the Purchase Agreement and the
Securities Purchase Agreement may be limited or insufficient to fund our operations or to implement our strategy.
Under our Purchase Agreement with AIV, upon effectiveness
of the registration statement of which this prospectus is a part, and subject to other conditions, we may direct AIV to purchase up to
100,000,000 shares of our common stock over a 24-month period. Under our Securities Purchase Agreement with AIV, factors may negatively
affect the amount of proceeds we receive, including our share price, discount to market, and other factors relating to our common stock.
There can be no assurance that we will be able to
receive all or any of the total commitment from AIV because the Purchase Agreement contains certain limitations, restrictions, requirements,
conditions and other provisions that could limit our ability to cause AIV to buy common stock from us. For instance, we are prohibited
from issuing a Draw Down Notice if the amount requested in such Draw Down Notice exceeds the Maximum Draw Down Amount, or the sale of
Shares pursuant to the Draw Down Notice would cause us to sell or AIV to purchase an aggregate number of shares of our common stock which
would result in beneficial ownership by AIV of more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Exchange
Act and the rules and regulations thereunder). Moreover, there are limitations with respect to the frequency with which we may provide
Draw Down Notices to AIV under the Purchase Agreement. Also, as discussed above, there must be an effective registration statement covering
the resale of any Shares to be issued pursuant to any draw down under the Purchase Agreement, and the registration statement of which
this prospectus is a part which covers the resale of up to 100,000,000 shares that may be issuable pursuant to draw downs
under the Purchase Agreement.
The extent to which we rely on AIV as a source of
funding will depend on a number of factors, including the amount of working capital needed, the prevailing market price of our common
stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from AIV were
to prove unavailable or prohibitively dilutive, we would need to secure another source of funding. Even if we sell all one hundred
million (100,000,000) shares of common stock under the Purchase Agreement with AIV, we will still need additional capital
to fully implement our current business, operating plans, and development plans.
You
may experience future dilution as a result of this offering or future equity offerings.
We
are registering for resale ten billion shares that we may sell to AIV under the Purchase Agreement, which AIV may sell
in the open market or in private transactions. Sales of our common stock shares under the Purchase Agreement may cause the material declines
in the trading price of our common stock.
The
Selling Stockholder will pay less than the then-prevailing market price for our common stock.
The
common stock to be issued to Selling Stockholder AIV pursuant to the Purchase Agreement will be purchased at a discount to the
closing price of the shares of our common stock during the applicable pricing period. The Selling Stockholder has a financial incentive
to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price
and the market price. If AIV sells the shares, the price of our common stock could decrease. If our stock price decreases, AIV
may have a further incentive to sell the shares of our common stock that it holds. These sales may have a further impact on our stock
price.
We
may use the net proceeds from sales of our common stock to AIV pursuant to the EFA in ways with which you may disagree.
We
intend to use the net proceeds from sales of our common stock to AIV pursuant to the Purchase Agreement for working capital and
general corporate purposes. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the proceeds
from sales of common stock to AIV pursuant to the Purchase Agreement. Accordingly, we will have significant discretion in the
use of the net proceeds of sales of common stock to AIV pursuant to the Purchase Agreement. It is possible that we may allocate
the proceeds differently than investors in this offering desire or that we will fail to maximize our return on these proceeds. We may,
subsequent to this offering, modify our intended use of the proceeds from sales of common stock to AIV pursuant to the Purchase
Agreement to pursue strategic opportunities that may arise, such as potential acquisition opportunities. You will be relying on the judgment
of our management with regard to the use of the net proceeds from the sales of common stock to AIV pursuant to the Purchase Agreement,
and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
Any failure to apply the proceeds from sales of common stock to AIV pursuant to the Purchase Agreement effectively could have
a material adverse effect on our business and cause a decline in the market price of our common stock.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent,
contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements
are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown
that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In
some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,”
“intends,” “estimates”, “plans”, “potential”, “possible”, “probable”,
“believes”, “seeks”, “may”, “will”, “should”, “could” or the
negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that
could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety
by reference to the factors discussed throughout this prospectus.
You
should read this prospectus and the documents that we reference herein and have filed as exhibits to the registration statement, of which
this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we
expect. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus
only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in
any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further,
any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot
assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this prospectus,
and particularly our forward-looking statements, by these cautionary statements.
USE
OF PROCEEDS
We
will not receive any proceeds from the sale of common stock offered by the Selling Stockholder. However, we will receive proceeds from
the sale of our common stock to Selling Stockholder pursuant to the Financing Agreement. The proceeds from our exercise of the Put right
pursuant to the Financing Agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses
or operations or for such other corporate purposes as the Board deems to be in our best interests. As of the date of this prospectus,
we cannot specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for the proceeds
we may receive. Accordingly, we will have broad discretion in the way that we use these proceeds.
SELLING
STOCKHOLDER
This prospectus relates to the resale from time
to time by the selling stockholder identified herein of up to an aggregate of 43,213,508 shares of our common stock.
The
Purchase Shares are being registered to permit public sales of such securities, and the selling stockholder may offer the Purchase Shares
for resale from time to time pursuant to this prospectus. The selling stockholder may also sell, transfer or otherwise dispose of all
or a portion of their Purchase Shares in transactions exempt from the registration requirements of the Securities Act or pursuant to
another effective registration statement covering the sale of such securities.
The
following table sets forth, based on information provided to us by the selling stockholder or known to us, the name of the selling stockholder,
and the number of shares of our common stock beneficially owned by the selling stockholder before and after this offering. The number
of shares owned are those beneficially owned, as determined under the rules of the SEC, and the information is not necessarily indicative
of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares of common stock as to which
a person has sole or shared voting power or investment power and any shares of common stock that the person has the right to acquire
within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic
termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. The selling stockholder is
not a broker-dealer or an affiliate of a broker-dealer. The selling stockholder has not had any material relationship with us or any
of our predecessors or affiliates within the past three years.
We
have assumed all of the Purchase Shares reflected offered hereunder will be sold from time to time in the offering covered by this prospectus.
Because the selling stockholder may offer all or any portions of the Purchase Shares listed in the table below, no estimate can be given
as to the amount of those Purchase Shares covered by this prospectus that will be held by the selling stockholder upon the termination
of the offering.
AIV will
be deemed to be an underwriter within the meaning of the Securities Act with respect to the Purchase Shares. Any profits realized
by the selling stockholder may be deemed to be underwriting commissions.
| Selling Stockholder |
Number of Shares Beneficially Owned Prior to Offering |
Maximum Number of Shares Offered |
Number of Shares owned After Offering |
Percentage of Shares Owned After Offering |
||||||||||||
| AIV Investments, LLC | 0 | * | 0 | * | ||||||||||||
| * |
The |
PLAN
OF DISTRIBUTION
The
selling stockholder may, from time to time, sell any or all of its shares of our common stock on OTC Pink or any other stock exchange,
market officers existing as of the time of such repeal or modification trading facility on which the shares of our common stock are traded,
or in private transactions. These sales may be at fixed prices, prevailing market prices at the time of sale, at varying prices, or at
negotiated prices. The selling stockholder may use any one or more of the following methods when selling shares:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
|
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
| ● | privately negotiated transactions; | |
| ● | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; or |
|
| ● | a combination of any such methods of sale. |
Additionally,
broker-dealers engaged by the selling stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in
excess of a customary brokerage commissions.
AIV
is an underwriter within the meaning of the Securities Act with respect to the Purchase Shares, and any broker-dealers or agents
that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. Any commissions received by such broker-dealers or agents, and any profit on the resale of the shares purchased by them,
may be deemed to be underwriting commissions or discounts under the Securities Act. AIV has informed us that it does not have any written
or oral agreement or understanding, directly or indirectly, with any person to distribute our common stock.
Discounts,
concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the selling stockholder.
The selling stockholder may agree to indemnify any agent, dealer, or broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under the Securities Act.
We
are required to pay certain fees and expenses incurred by us incident to the registration of the shares covered by this prospectus. We
will not receive any proceeds from the resale of any of the shares of our common stock by the selling stockholder. We will receive proceeds
from the sale of our common stock to AIV under the AIV Purchase Agreement. Neither the AIV Purchase Agreement with
AIV nor any rights of the parties under the AIV Purchase Agreement may be assigned or delegated to any other person.
The
Purchase Shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states, the Purchase Shares may not be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Purchase Shares may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M,
prior to the commencement of the distribution. In addition, the selling stockholder will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of
the common stock by the selling stockholder or any other person. We will make copies of this prospectus available to the selling stockholder
BUSINESS
Corporate
History and Organization
Artificial
Intelligence Technology Solutions Inc. (the “Company,” “AITX,” “we,” “our,” or “us”)
was incorporated in the State of Florida on March 25, 2010, under the name On the Move Systems Corp., and reincorporated in the State
of Nevada on February 17, 2015. On August 24, 2018, the Company changed its name to Artificial Intelligence Technology Solutions Inc.
In
2017, the Company acquired all of the ownership and equity interests in Robotic Assistance Devices, Inc. (“RAD”), a Nevada
corporation founded by Steven Reinharz, the Company’s current Chief Executive Officer and Chief Technology Officer (the “Acquisition”).
Prior to the Acquisition, the Company’s operations consisted of an early-stage transportation services business that was disposed
of in connection with the Acquisition. As a result, the Acquisition was accounted for as a reverse recapitalization effected through
a share exchange, with RAD treated as the accounting acquirer. No goodwill or other intangible assets were recorded in connection with
the Acquisition, and the historical operations reflected in our consolidated financial statements are those of RAD.
Since
the Acquisition, the Company has been engaged in the development, deployment, and commercialization of artificial intelligence and robotic
solutions for security, monitoring, and operational applications. Mr. Reinharz was appointed Chief Executive Officer on March 2, 2021.
As
of the date of this Annual Report on Form 10-K, the Company conducts substantially all of its operations through five (5) wholly owned
subsidiaries: Robotic Assistance Devices, Inc. (“RAD-I”); Robotic Assistance Devices Group, Inc. (“RAD-G”); Robotic
Assistance Devices Mobile, Inc. (“RAD-M”); Robotic Assistance Devices Residential, Inc. (“RAD-R”); and Robotic
Assistance Devices Lanka (PVT) Ltd. (“RAD Lanka”), a Sri Lanka entity holding Port City Colombo status that operates as a
wholly owned subsidiary of RAD-G. The Company anticipates establishing an additional subsidiary, Robotic Assistance Devices Europe (“RAD
Europe”), during fiscal 2027 to support growing business activity in the European Union and to serve as the Company’s cost
center for Genera Data Protection Regulation (GDPR)-compliant services.
Business
Overview
AITX
is a vertically integrated developer and operator of artificial intelligence-driven security and operational automation solutions. The
Company designs, manufactures, deploys, and supports a portfolio of stationary devices, mobile autonomous platforms, and software products
powered by SARA™ (Speaking Autonomous Responsive Agent), our proprietary agentic AI platform. SARA enables our devices to perceive,
decide, communicate, and act autonomously in real time, without continuous human intervention.
Substantially
all of our revenue is generated through recurring monthly subscription contracts, typically with minimum twelve-month initial terms,
under a Solutions-as-a-Service model in which the Company retains ownership of the deployed hardware. The Company also sells units outright
to a limited number of legacy enterprise customers. We expect that, over the deployment life of a subscribed unit, gross margin will
exceed 75%, and that gross margin on outright sales will exceed 50% based on average bill of materials costs over the past two years
and related sales and dealer channel pricing that our market has appeared to accept.
Our
customer base spans logistics, healthcare, commercial real estate, manufacturing, retail, education, government, and residential markets,
and includes one Fortune Top 10 enterprise and several additional Fortune 500 enterprises. As of the date of this report, the Company
has deployed approximately one thousand devices across the United States and Canada, and is in the early stages of European market entry.
Industry
Context and Long-Term Vision
Management
views the physical security industry as being in the early stages of the most significant structural transformation in its history. The
founder, Steve Reinharz, has written and spoken extensively and is a regular speaker about this transformation since company inception
at industry association events hosted by the two industry leading organizations, SIA (Security Industry Organization) and ASIS (American
Society for Industry Security). The industry has historically depended on human guard labor, passive video surveillance, and manually
monitored alarm systems—a model substantially unchanged in its fundamentals for more than fifty years. That model is, in our view,
is undergoing change driven by a variety of factors including increasing challenges with labor and the advent of AI solutions. Guard
labor costs continue to rise faster than commercial security budgets; qualified personnel are increasingly difficult to recruit and retain;
manual monitoring workflows cannot scale to the volume of cameras and sensors now deployed; and the response-time performance of human-mediated
systems is incompatible with the speed at which modern threats develop.
Other
industries—logistics, manufacturing, financial services, agriculture—have already passed through the corresponding transition
from mechanized labor (the Third Industrial Revolution) to autonomous, AI-orchestrated workflows (commonly described as the Fourth Industrial
Revolution, or Industry 4.0). The physical security industry, in management’s view, is now in the first phase of that same transition.
AITX is positioned to be a primary participant in this shift, and a substantial portion of the Company’s strategy, capital allocation,
and product roadmap is oriented around accelerating it.
Internally,
the Company refers to the long-term outcome of this transition as “RAD Town”—a vision in which AITX’s portfolio
operates as an integrated autonomous-security fabric across a campus, community, or jurisdiction. In a fully realized RAD Town deployment,
ROAMEO mobile units conduct outdoor patrol; AVA manages vehicle access at gates and perimeters; TOM handles credentialed pedestrian and
visitor access at building entries; stationary ROSA, RIO, and RAM units provide fixed-position coverage of high-value zones; RADCam protects
residential and small-business endpoints; and SARA orchestrates all of it as a single agentic layer, escalating to human responders only
when necessary. RAD Town is not a single named site or development; it is the design target around which our product roadmap, software
architecture, and partnership strategy are organized.
We
believe that the companies that capture the largest share of the value created by this transition will be those that combine proprietary
hardware, proprietary AI, a broad partner ecosystem, and operational discipline. The Company’s strategy is built on each of these
elements.
Operating
Structure and Sales Channels
The
Company is organized around four operating subsidiaries focused on commercial product sales and one development and licensing subsidiary.
For purposes of management reporting and strategic capital allocation, we view our commercial activity as proceeding along three principal
sales avenues: (i) the stationary product portfolio operated through RAD-I; (ii) the mobile autonomous platform operated through RAD-M;
and (iii) the agentic AI platform and ecosystem partnerships operated through RAD-G. RAD-R operates a residential product line that is
currently a smaller component of consolidated revenue and is discussed separately below.
Management
believes that RAD-I, on a standalone basis (based on direct expenses for only stationary solutions and therefore stripped of any
expense not related to stationary solutions and its development), has achieved a point at which its recurring revenue and gross margin
could support positive cash flow operations today. The Company has elected to continue investing materially in
RAD-M and RAD-G because we believe those investments will produce substantially larger long-term revenue and enterprise value than would
be achievable from RAD-I alone. The Company’s consolidated results therefore continue to reflect the costs of those investments,
specifically in mobile, residential and agentic solutions. This positioning reflects management’s view based on internal segment-level
analysis; the Company does not separately publish audited standalone financial statements for individual subsidiaries.
RAD-I:
Stationary Solutions
Robotic
Assistance Devices, Inc. (“RAD-I”) operates the Company’s stationary product portfolio. RAD-I is the largest revenue
contributor within the consolidated group, and its product line represents the most mature, most deployed, and most operationally proven
elements of our portfolio. RAD-I’s solutions are typically deployed at fixed locations—building entries, gates, perimeters,
parking facilities, and interior chokepoints—and are delivered as recurring subscription services.
RAD-I’s
current product portfolio includes the following solutions, each of which is integrated with the Company’s SARA agentic AI platform:
ROSA™
(Responsive Observation Security Agent)
ROSA
is a compact, self-contained stationary security device combining visual analytics, two-way audio engagement, and AI-driven escalation.
ROSA is the Company’s most widely deployed solution and serves as the foundation for several other products in the portfolio. ROSA
is used for perimeter and entry-point monitoring, loitering and trespass deterrence, firearm detection, and a range of related applications,
and replaces or substantially reduces the need for guard services at protected locations.
RIO™
(ROSA Independent Observatory)
RIO
is a portable, solar-powered security tower comprising one or two ROSA devices mounted atop a solar trailer assembly. RIO is designed
for rapid deployment in environments where permanent infrastructure is impractical, including construction sites, retail parking lots,
healthcare campuses, distribution yards, public events, and temporary high-risk locations. Hundreds of RIO units are actively deployed
across the United States.
AVA™
(Autonomous Verified Access)
AVA
is a vehicle gate access management solution combining license plate recognition, two-way voice interaction, and cloud-based authorization.
AVA is deployed at logistics hubs, gated communities, corporate and industrial campuses, and multi-tenant commercial properties. AVA
is sold both as a standalone subscription and as a component of a broader access platform that includes the Homeowners Association Platform
(“HOAP”), a digital pass and visitor management application used by residential communities.
TOM™
(The Office Manager)
TOM
automates visitor management and front-desk functions at credentialed pedestrian access points. TOM is deployed across corporate campuses,
multi-tenant commercial facilities, government buildings, and educational institutions. One of the world’s largest third-party
logistics providers uses TOM to manage visitor intake across its North American distribution network.
ROSS™
and RAM™ (Camera Augmentation Software and Hardware)
ROSS
is a software platform that adds AI-driven analytics, escalation workflows, and SARA-enabled response to existing third-party IP security
cameras. RAM is a complementary hardware module that adds two-way audio, voice interaction, and ROSA-equivalent SARA functionality to
third-party cameras. ROSS and RAM enable customers to modernize their existing camera infrastructure without full hardware replacement
and provide a low-friction path to broader RAD ecosystem adoption.
Firearm
Detection Analytic
The
Company’s firearm detection analytic identifies visible handguns and long guns in real time and is available across RAD-I devices
and through the ROSS platform. When integrated with SARA, the analytic produces autonomous escalation, voice intervention, administrator
notification, and first-responder outreach within seconds of detection. The analytic received the American Security Today ASTORS award
for Best Metal/Weapons Detection Solution.
Forthcoming
Stationary Solutions
The
Company expects to introduce additional stationary solutions during fiscal year 2027. These products are in active development and are
intended to expand RAD-I’s coverage of indoor environments, specialized vertical markets, and high-volume credentialed-access workflows.
The Company will provide additional disclosure regarding specific forthcoming products through press releases and subsequent periodic
filings as they progress to commercial release.
RAD-M:
Mobile Autonomous Solutions
Robotic
Assistance Devices Mobile, Inc. (“RAD-M”) operates the Company’s mobile autonomous platform business. RAD-M is the
second of the Company’s three primary sales avenues and is the principal area in which the Company has invested development capital
over the past several fiscal years.
ROAMEO™
(Rugged Observation Assistance Mobile Electronic Officer)
ROAMEO
is a fully autonomous, outdoor mobile security vehicle designed to conduct routine patrol operations across corporate campuses, distribution
yards, parking facilities, educational and healthcare campuses, municipal parks, and similar large outdoor environments. ROAMEO operates
without on-site human pilots, relying on the Company’s autonomous navigation stack, on-board sensor suite, cellular and 5G connectivity,
and full integration with the SARA agentic AI platform. ROAMEO is designed to detect, assess, communicate, escalate, and report autonomously,
and to replace or substantially reduce the cost of mobile guard patrols conducted in vehicles or on foot.
Development
Investment and Deployment Status
Management
estimates that the Company has spent approximately $20 million in the cumulative development of the ROAMEO platform across fiscal years
preceding the fiscal year covered by this report. This estimate includes cash research and development expenditures, engineering costs,
allocated executive and indirect labor, and other indirect costs reasonably attributable to the ROAMEO program. The Company does not
separately report segment-level research and development on this basis in its audited consolidated financial statements; the $20 million
figure reflects management’s internal allocation and view and is provided here to give investors a directionally accurate sense
of the scale of investment that has been made.
Following
the additional engineering, manufacturing, and integration work conducted during the fiscal year ended February 28, 2026, the Company
commenced commercial deployment and recurring billing on two ROAMEO units in May 2026. Initial deployments are at two enterprise customer
sites: a major logistics operator (previously disclosed by press release) and a healthcare group. The Company has additional pre-sold
units in its order pipeline and is actively expanding its ROAMEO production capacity to meet demand.
RAD-M
Financial Expectations
Management
has significant expectations for the RAD-M business. Each ROAMEO deployment is structured as a recurring monthly subscription at a substantially
higher monthly price point than the Company’s stationary products, and the addressable market for outdoor autonomous patrol is
large relative to the Company’s current revenue base . Management expects that, based on the current sales pipeline and assuming
successful execution of the ROAMEO production ramp, RAD-M will surpass RAD-I’s monthly recurring revenue contribution at some point
as management believes the mobile business has a higher revenue ceiling than stationary solutions. This is a forward-looking statement;
actual results may differ materially, and the timing and magnitude of RAD-M’s revenue contribution will depend on a range of factors
including production capacity, customer adoption, and the operational performance of deployed units. See “Cautionary Statement
Regarding Forward-Looking Information” at the front of this report.
RAD-G:
Agentic AI and Platform Partnerships
Robotic
Assistance Devices Group, Inc. (“RAD-G”) operates the Company’s agentic AI development and platform business. RAD-G
holds, develops, and commercializes the SARA platform and related AI assets, and is the operating home of the Company’s partnership
and ecosystem strategy. RAD Lanka, the Company’s Sri Lanka subsidiary, operates as a wholly owned subsidiary of RAD-G.
SARA™
(Speaking Autonomous Responsive Agent)
SARA
is the Company’s proprietary agentic AI platform. SARA combines large language model architecture, situational logic, voice interaction,
and autonomous action to enable RAD devices—and, increasingly, third-party devices and platforms—to engage with and respond
to security situations in real time. SARA is embedded in substantially all of the Company’s deployed devices and is the foundational
asset around which RAD-G’s commercial activity is organized.
SARA
received Judges’ Choice and Best in Threat Detection and Response Solutions honors in the Security Industry Association New Product
Showcase at ISC West 2025. In 2026, SARA was again recognized at ISC West in connection with the Company’s integration partnership
with Immix, the leading central station monitoring software platform.
Platform
Partnership Strategy
The
Company’s long-term view is that the value of an agentic AI platform in physical security is determined principally by the breadth
of devices, monitoring platforms, dealers, and end users with which it integrates. RAD-G is therefore organized around expanding the
SARA ecosystem along five categories of relationship:
| ● | Monitoring platforms and central stations. The Company’s integration with Immix, announced and recognized during fiscal 2026, is intended as a model for embedding SARA into the platforms that already sit at the center of the remote video monitoring industry. Management views this category as the highest-leverage opportunity for SARA adoption. |
| ● | Third-party hardware manufacturers. SARA’s commercial value increases with every additional camera, sensor, and access control device it can operate. The Company is actively pursuing licensing and integration arrangements with hardware vendors across the security industry. |
| ● | Dealers and integrators. As of the date of this report, the Company’s authorized dealer network has grown to over one hundred dealers across the United States, Canada, and the European Union. The dealer channel is one of the Company’s primary growth engines, and RAD-G supports the channel with SARA-enabled product positioning and joint sales materials. |
| ● | Enterprise and Fortune 500 end users. The Company’s existing enterprise customer base serves as both a revenue base and a credibility base for SARA adoption. Deepening relationships within existing accounts and converting reference deployments into category-defining case studies is a continuing priority. |
| ● | Insurance, regulatory, and policy stakeholders. As AI-orchestrated security response becomes a more substantial component of the physical security industry, insurance carriers, municipal regulators, and standards bodies will increasingly shape the operating environment. The Company participates in industry policy efforts, including through Mr. Reinharz’s role on the Board of the Security Industry Association and his chairmanship of its Autonomous Working Group. |
RAD-G
Sales Funnel and Expectations
RAD-G,
based on its developing ‘SARA’ solution, has generated substantial industry interest and a relatively substantial
sales funnel. The solution has won two Security Industry Association (SIA) awards and Steve Reinharz has been asked several times to
speak to various groups and industries about it. This, combined with various partner relationships, incoming interest, outbound prospect
generation and other sales activities have created a substantial RAD G sales funnel in management’s view for an early-stage AI
platform business. Management has high expectations for substantial revenue generation in this subsidiary. This is a forward-looking
statement and actual results may differ materially.
RAD-R:
Residential Solutions
Robotic
Assistance Devices Residential, Inc. (“RAD-R”) operates the Company’s residential security product business, principally
through the RADCam™ product line. RADCam is an AI-powered, voice-enabled security camera designed for homeowners, property managers,
and small businesses, and is differentiated from typical residential security cameras by its real-time conversational engagement capability,
supported by SARA in an “SOS” configuration.
RAD-R’s
financial performance during fiscal 2026 was substantially below Company’s expectations. The principal cause was the structural
difference between business-to-business (“B2B”) and business-to-consumer (“B2C”) go-to-market economics. The
Company’s core operating expertise, sales channel, and customer acquisition model are built around B2B sale cycles. The B2C residential
market requires a substantially higher level of consumer marketing spend than the Company was prepared to commit during fiscal 2026,
given competing capital priorities. The business generated an immaterial amount to consolidated revenue.
Notwithstanding
the financial result, management continues to view RADCam as a superior product to comparable solutions available in the residential
security camera market. The Company has no immediate plans to discontinue service to existing RADCam subscribers or to remove the product
from sale. RADCam continues to be available for purchase through radcam.ai, Amazon, and other retail outlets.
The
Company has modified the Residential software so that it can be deployed through RAD-I into the small-and-medium business and enterprise
markets and be compatible with RAD’s primary solution RADSoC™.
Sales,
Channels, and Customers
The
Company sells through three principal channels: direct enterprise sales, an authorized dealer network, and online retail (in the case
of RADCam). The direct enterprise sales team is led by a Senior Vice President of Sales with multiple direct reports and is supplemented
by the President of RAD and the Company’s Chief Executive Officer in larger and more strategic accounts. The dealer network, which
has grown to over one hundred authorized dealers across the United States, Canada, and the European Union, addresses small and middle-market
accounts and provides geographic reach that direct enterprise sales cannot economically cover.
The
Company’s end-user base spans a broad cross-section of industries. Sales pipeline and deployment activity during fiscal 2026 was
concentrated in logistics and distribution, healthcare, commercial real estate, manufacturing, retail, education, government, and residential
community markets.
Management
has identified that the conversion rate of qualified sales opportunities to deployed clients—which historically lagged behind expectations—improved
during fiscal 2026, principally as a result of (i) the maturity of the Gen 4 hardware platform, (ii) the broader integration of SARA
across the portfolio, (iii) a growing set of reference deployments and case studies, and (iv) targeted investment in dealer enablement.
The Company continues to focus on this conversion rate as a primary operational metric.
Manufacturing
and Supply Chain
The
Company performs final assembly, system integration, software loading, and quality assurance for its hardware products at its facility
in Ferndale, Michigan. Sub-component manufacturing, including machined metal and plastic components, printed circuit boards, and selected
sub-assemblies, is sourced from a network of domestic and international suppliers. The Company works to, when reasonable, maintain redundant
suppliers for substantially all critical components and has structured its supply chain to mitigate concentration risk.
Hardware
gross margins to date have been produced under small-batch production conditions. Management expects margin expansion over time as production
volumes increase and as the Company captures economies of scale, particularly in connection with the ROAMEO production ramp and additional
stationary product introductions.
Intellectual
Property
All
hardware designs, software, firmware, AI models, and supporting platforms used in the Company’s products are designed, developed,
and owned by the Company and its subsidiaries. RAD-I owns the principal intellectual property associated with the Company’s stationary
product platform, including the RAD Service Organization Control (SoC) command and control software, the RAD Mobile SoC , the RADGuard
application, and the related operating architecture. RAD-G owns the SARA platform and the underlying agentic AI assets. RAD-M owns the
autonomous navigation, fleet management, and ROAMEO-specific platform technology.
The
Company relies on a combination of trade secret protection, confidentiality and invention-assignment agreements with employees and contractors,
copyright, and trademark protection to protect its intellectual property. The Company holds registered trademarks on its principal product
names. The Company does not currently rely materially on patent protection.
Competition
The
Company competes across three distinct but related markets: traditional guard services and manned monitoring; legacy passive security
hardware (cameras, access control devices, alarm systems); and an emerging set of AI-driven security technology companies. Traditional
guard and monitoring service providers compete on price and incumbency but are structurally disadvantaged by labor cost inflation and
labor availability constraints. Legacy hardware vendors compete on installed base and channel breadth but typically lack agentic AI capability
and recurring software economics. AI-native security technology companies, including a small number of autonomous robotics competitors,
compete on technology positioning, but most lack the integrated hardware-plus-software-plus-AI delivery model that the Company has developed.
Management
believes the Company’s principal competitive advantages are: (i) the integration of proprietary hardware, software, and the SARA
agentic AI platform under common ownership and development; (ii) a broad deployed installed base and the operational learning derived
from it; (iii) a recurring-revenue business model that aligns the Company with customer success; (iv) a growing dealer and integration
partner ecosystem; and (v) the demonstrated ability to bring complex hardware products from concept to commercial deployment, as evidenced
by the ROAMEO program.
Human
Capital and Culture
As
of the date of this report, the Company has approximately 135 team members across the United States, Canada, the United Kingdom, and
Asia, including Sri Lanka. The Company’s Sri Lanka operations are conducted through RAD Lanka, which holds Port City Colombo special
economic zone status, providing tax efficiency and access to a cost-effective, educated technical workforce. None of the Company’s
employees are represented by a union, and management considers employee relations to be excellent.
The
Company has built its culture around the principles of emotional intelligence, accountability, and ownership. Self-awareness, composure,
internal motivation, empathy, and social skill are deliberately weighted in the hiring process. Team members are expected to operate
with multidisciplinary capability and to adjust scope and focus as the business requires. This culture is, in management’s view,
a meaningful operational asset: it allows the Company to move faster than competitors of comparable size, to absorb the inevitable setbacks
of a hardware-and-AI development business, and to retain experienced team members through periods of capital constraint.
The
Company’s leadership team includes deep experience in security operations, robotics engineering, software development, artificial
intelligence, sales, and capital markets. Mr. Reinharz serves on the Board of the Security Industry Association and chairs its Autonomous
Working Group, and is a frequent speaker and panelist at industry conferences including ISC West and GSX.
Cybersecurity
and Compliance
The
Company achieved SOC 2 Type 2 status in February 2025 and has maintained SOC 2 Type 2 through annual audits. The Company has also achieved
additional cybersecurity certifications appropriate to its enterprise and government customer base. SOC 2 Type 2 status is a benchmark
standard, and in many cases a procurement requirement, for enterprise and government software and security purchases, and the Company’s
achievement and maintenance of this status reflects management’s ongoing commitment to data protection and operational integrity.
Additional disclosure regarding the Company’s cybersecurity program is provided under Item 1C of this report.
Available
Information
The
Company’s principal corporate website is www.aitx.ai. Information regarding the Company’s subsidiaries and products is also
available at www.radsecurity.com (RAD-I), www.radm.ai (RAD-M), www.radgroup.ai (RAD-G), www.radresidential.ai (RAD-R), and www.radcam.ai
(RADCam consumer information). The Company makes available, free of charge through its website and through the SEC’s EDGAR system
at www.sec.gov, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange
Commission.
References
to the Company’s websites in this report are provided for convenience and information only; the content of those websites is not
incorporated by reference into this report.
Press
Announcements
During
the fiscal year, the Company issued over 100 press releases, the vast majority of them being sales announcements and new authorized dealers
being signed. Public events, conferences, awards and new product announcements were also publicized via press releases. All Company press
releases can be found here: AITX News – AITX – Artificial Intelligence Technology Solutions
Legal
Proceedings
See
Item 3 – Legal Proceedings.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
for Common Stock
Our
common stock trades on the OTC Pink under the symbol “AITX”.
Holders
As of June 8, 2026, there were approximately
43 holders of our common stock, not including shares held in “street name” in brokerage accounts, which are unknown.
Dividends
We
have not declared or paid any cash dividends on its common stock and does not anticipate paying dividends for the foreseeable future.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial
statements and the notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result
of a number of factors, including those set forth under the Risk Factors, Forward-Looking Statements and Business sections in this report.
We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” and similar expressions to identify forward-looking statements.
Overview
AITX
was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’ fiscal year end is February
28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave, Ferndale Michigan, 48220, and our telephone number is 877-767-6268.
Results
of Operations
The
following table shows our results of operations for the years ended February 28, 2026 and February 28, 2025. The historical results presented
below are not necessarily indicative of the results that may be expected for any future period.
| Period | ||||||||||||||||
| Year Ended |
Year Ended |
Change | ||||||||||||||
| February 28, 2026 |
February 28, 2025 |
Dollars | Percentage | |||||||||||||
| Revenues | $ | 7,745,336 | $ | 6,130,886 | $ | 1,614,450 | 26 | % | ||||||||
| Gross profit | 5,533,700 | 3,744,564 | 1,789,136 | 48 | % | |||||||||||
| Operating expenses | 17,477,097 | 17,691,437 | (214,340 | ) | (1 | )% | ||||||||||
| Loss from operations | (11,943,397 | ) | (13,946,873 | ) | 2,003,476 | 14 | % | |||||||||
| Other income (expense), net |
(2,566,854 | ) | (4,988,719 | ) | 2,421,865 | 49 | % | |||||||||
| Net loss | $ | (14,510,251 | ) | $ | (18,935,592 | ) | $ | 4,425,341 | 23 | % | ||||||
The
following table presents revenues from contracts with customers disaggregated by product/service:
| Year Ended |
Year Ended |
Change | ||||||||||||||
| February 28, 2026 |
February 28, 2025 |
Dollars | Percentage | |||||||||||||
| Device rental activities | $ | 6,920,336 | $ | 5,050,255 | $ | 1,870,081 | 37 | % | ||||||||
| Direct sales of goods and services |
825,000 | 1,080,631 | (255,631 | ) | (24 | )% | ||||||||||
| $ | 7,745,336 | $ | 6,130,886 | $ | 1,614,450 | 26 | % | |||||||||
Revenue
Total
revenue for the year ended February 28, 2026, was $7,745,336, which represented an increase of $1,614,450 or 26% compared to total revenue
of $6,130,886 for the year ended February 28, 2025. Rental activities increased by $1,870,081 or 37%, as the Company continues to grow
its product line and customer base. Direct sales were $255,631 or 24% lower than the prior year because most customers chose the Company’s
rental model.
Gross
profit
Total
gross profit for the year ended February 28, 2026 was $5,533,700, which represented an increase of $1,789,136, compared to total gross
profit of $3,744,564 for the year ended February 28, 2025. The increase is a result of the increase in revenues above, and gross profit
% which was 71% for the year ended February 28, 2026 was 61% for the prior year. The gross profit % increased as the increase in higher
margin rental activities in the product mix, and overhead being allocated over a higher sales base.
Operating
expenses
Operating
expenses for the years ended February 28, 2026 and February 28, 2025 comprised of the following:
| Period | Change | |||||||||||||||
|
Year February |
Year February |
Dollars | Percentage | |||||||||||||
| Research and development | $ | 4,128,155 | $ | 3,462,558 | $ | 665,597 | 19 | % | ||||||||
| General and administrative | 12,933,696 | 13,559,009 | (625,313 | ) | (5 | )% | ||||||||||
| Depreciation and amortization | 141,051 | 429,139 | (288,088 | ) | (67 | )% | ||||||||||
| Operating lease cost and rent | 251,883 | 240,731 | 11,152 | 5 | % | |||||||||||
| Loss on disposal of fixed assets |
22,312 | – | 22,312 | – | % | |||||||||||
| Operating expenses | $ | 17,477,097 | $ | 17,691,437 | $ | (214,340 | ) | (1 | )% | |||||||
Our
operating expenses were comprised of general and administrative expenses, research and development, depreciation and amortization, operating
lease and rent and a loss on disposal of fixed assets. General and administrative expenses consisted primarily of professional services,
automobile expenses, advertising, salaries and wages, travel expenses and rent. Our operating expenses during the years ended February
28, 2026 and February 28, 2025 were $17,477,097 and $17,691,437, respectively. The overall $214,340 decrease in operating expenses was
primarily attributable to the following changes in operating expenses:
| ● | Research and development expenses increased by $665,597 as the Company continued to focus on current product development , new software solutions and improvements. |
|
| ● | General and administrative expenses decreased by $625,313 primarily due to the following changes: |
Following
is a summary of account decreases:
| — | For the year ended February 28, 2026 stock based compensation to CEO in equity awards was $1,500,000 with a charge of $315,848 for the Employee Stock Option Plan (ESOP) all totaling $1,815,848 compared with stock based compensation to CEO in equity awards was $$1,500,000 and a charge of $331,685 for the ESOP all totaling $$1,831,685 for the year ended February 28, 2025. This represents an decrease of $15,837 in stock based compensation. The stock based compensation for the CEO is payable in Series G and has been deferred until after a year. |
| — | Wages, salaries and payroll levies for the CEO decreased by $1,388,989 which is explained by a $1,500,000 decrease in discretionary bonus charged, all of which was deferred compensation offset by a $100,000 increase in base salary increased and an $11,011 increase in payroll levies. |
| — | Professional fees decreased by $125,716 due to lower legal fees because of litigation in the prior year that has been resolved with no litigation in the current year. |
These
decreases are partially offset by the following increases:
| — | Wages, salaries and payroll levies for the staff increased by $91,609 due to staff increases (2). |
| — | Commissions increased by $198,781 due to higher revenues. |
| — | Office expense increased by $184,084 due to an increase in computer software purchases. |
| — | Insurance costs increased by $100,670 due to higher general and liability insurance costs. |
| — |
Travel increased by $76,119 due to more overseas travel to explore and find lower cost suppliers. |
| — | RMC costs l increased by $79,102 due to higher revenues. |
| — | Marketing costs increased by $51,449 to promote new products. |
| — | Dues and subscriptions increased by $28,180 for new software subscriptions. |
| — | Bad debts expense increased by $54,723. |
| — | The remaining increases and offsetting decreases were distributed amongst other general and administrative accounts. |
| ● | Operating lease cost and rent increased by $11,152. These are due to new short -term leases in the current year. |
|
| ● | Depreciation and amortization decreased by $288,088 due to a change in allocation , based on experience for revenue earning devices used. |
|
| ● | Loss on disposal of fixed assets was $22,312 in the current year as older equipment was disposed of. |
Other
income (expense)
Other
income (expense) consisted of interest expense and gain on settlement of debt. Other income (expense) during the years ended February
28, 2026 and February 28, 2025, was ($2,566,854) and ($4,988,719), respectively.
The
change in other income (expense) was due to the following:
| ● | Interest expense increased by $544,558 due to the following : Amortization of debt discounts increased by $264,835, and for the year ended February 28, 2026 was $536,070 compared with $271,235 for the year ended February 28, 2025. This increase was due to the amortization of new note discounts.. Interest expense was $4,147,535 for the year ended February 28, 2026, compared with $4,188,866 for the year ended February 28, 2025. This $41,331 decrease was due to the settlement of a $3.7 million loan which offset new interest on new loans. Deferred variable payment obligation (DVPO) expense was $1,260,469 for the year ended February 28, 2026, compared with $996,881 for the year ended February 28, 2025. This $263,588 increase was a result of the increase in revenues. |
|
| ● | Gain on settlement of debt increased by $2,999,423 to a gain on settlement of a $3.7 million loan offset by a loss on settlement of accrued interest during the current year. |
The
Company’s loss from operations for the year ended February 28, 2026 was $11,943,397 which represented a decrease in loss of $2,003,476
compared to a loss of $13,946,873 for the year ended February 28, 2025. The higher revenues and gross profit in 2026 along with the decrease
in operating expenses contributed to this change. Note that the Company had a net loss of $14,510,251 for the year ended February 28,
2026, as compared to net loss of $18,935,592 for the year ended February 28, 2025. This $4,425,341 change is mostly attributable to the lower loss from operations and gain on settlement of debt.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a
going concern.
For
the year ended February 28, 2026, the Company had negative cash flow from operating activities of $9,344,534. As of February 28, 2026
the Company has an accumulated deficit of $171,121,742 and negative working capital of $17,017,745. Management does not anticipate having
positive cash flow from operations in the near future. These factors raise substantial doubt about the Company’s ability to continue
as a going concern for the twelve months following the issuance of these financial statements.
The
Company does not have the resources at this time to repay all its credit and debt obligations, make any payments in the form of dividends
to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
At the same time management points to its successful history with maintaining Company operations and reminds all with reasonable confidence
this will continue. Management has plans to address the Company’s financial situation as follows:
Management
is committed to raise either non-dilutive funds or minimally dilutive funds. There is no assurance that these funds will be able to be
raised nor can we provide assurance that these possible raises may not have dilutive effects. In May 2026, the Company entered into an
equity financing agreement whereby an investor will purchase up to $10,000,000 of the Company’s common stock at a discount over
a two-year period. There remains approximately $10 million left to issue under this arrangement. Management believes that it has the
necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,through equity proceeds,
and issuing debt.
Capital
Resources
The
following table summarizes total current assets, liabilities and working capital for the period indicated:
| February 28, 2026 |
February 28, 2025 |
|||||||
| Current assets | $ | 2,935,003 | $ | 5,028,543 | ||||
| Current liabilities | 19,952,748 | 7,576,681 | ||||||
| Working capital | $ | (17,017,745 | ) | $ | (2,548,138 | ) | ||
As
of February 28, 2026 and February 28, 2025, we had a cash balance of $109,043 and $865,975, respectively.
Summary
of Cash Flows
|
Year February |
Year February |
|||||||
| Net cash used in operating activities | $ | (9,344,534 | ) | $ | (12,196,388 | ) | ||
| Net cash provided by (used in) investing activities |
$ | (12,861 | ) | $ | (79,965 | ) | ||
| Net cash provided by financing activities | $ | 8,600,463 | $ | 13,036,402 | ||||
Net
cash used in operating activities for the year ended February 28, 2026 was $9,344,534, which included a net loss of $14,510,251, non-cash
activity such as the gain on settlement of debt of $3,434,685, amortization of debt discount of $536,078, penalty added to the face value
of loan of $24,510, stock based compensation of $1,815,848, reduction in right of use asset $141,217, accretion of lease liability $103,956,
increase in related party accrued payroll and interest $132,268, inventory recovery of ($290,000), loss on disposal of revenue earning
devices and fixed assets of $93,249, bad debts expense $138,405, depreciation and amortization of $2,122,730 and change in operating
assets and liabilities of $3,782,141.
Net
cash provided by (used in) investing activities.
Net
cash used in investing activities for the year ended February 28, 2026 was $12,861. This consisted of the purchase of fixed assets of
($10,863), purchase of trademarks of ($1,998).
Net
cash provided by (used in) financing activities.
Net
cash provided by financing activities was $8,600,463 for the year ended February 28, 2026. This consisted of share proceeds net of issuance
costs of $5,219,853, and proceeds from loans payable $4.808,171 offset by repayments of loans payable of $1,302,561 and redemption of
Series C Preferred Shares of ($125,000).
Off-Balance
Sheet Arrangements
We
do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore,
we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity,
market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
Significant
Accounting Policies
Use
of Estimates
In
order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must
make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent
assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates
and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements
are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions
used to value equity instruments used in debt settlements, amendments and extensions.
Revenue
Earning Devices
Revenue
earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The
Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may
warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a
combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures
impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective
assets which range from three to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs
which do not improve or extend asset lives are expensed currently.
| Computer equipment | 3 years | |||
| Furniture and fixtures | 3 years | |||
| Office equipment | 4 years | |||
| Warehouse equipment | 5 years | |||
| Demo Devices | 4 years | |||
| Vehicles | 3 years | |||
| Leasehold improvements | 5 years, the life of the lease |
The
Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying
amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss, if any, is recognized in income.
Research
and Development
Research
and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless
they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited
to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.
If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned.
At February 28, 2026 and February 28, 2025, the Company had no deferred development costs.
Sales
of Future Revenues
The
Company has entered into transactions, as more fully described in footnote 11, in which it has received funding from investors in exchange
for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage
of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance
debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement
constitutes a sale of future revenues or debt:
| ● | Does the agreement purport, in substance, to be a sale |
|
| ● | Does the Company have continuing involvement in the generation of cash flows due the investor |
|
| ● | Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets |
|
| ● | Is the investors rate of return implicitly limited by the terms of the agreement |
|
| ● | Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return |
|
| ● | Does the investor have recourse relating to payments due |
In
the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue
method. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method.
As of the date of these financial statements, the Company has determined that all such agreements are debt.
Revenue
Recognition
ASU
2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and
industry specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange
for those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted
in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the
amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance
obligation.
Distinguishing
Liabilities from Equity
The
Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable
and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The
Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument,
other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of
its equity shares.
Once
the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial
instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”).
The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the
Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Our
CEO and Chairman holds sufficient shares of the Company’s voting stock that give sufficient voting rights under the articles of
incorporation and bylaws of the Company such that the CEO and Chairman can at any time unilaterally vote to increase the number of authorized
shares of common stock of the Company without the need to call a general meeting of common shareholders of the Company
Initial
Measurement
The
Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value,
or cash received.
Subsequent
Measurement – Financial Instruments Classified as Liabilities
The
Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes
in fair value of its financial instruments classified as liabilities are recorded as other income (expenses).
Fair
Value of Financial Instruments
ASC
Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value
in accordance with generally accepted accounting principles.
ASC
Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1)
market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs).
The
fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under ASC Topic 820 are described as follows:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. |
|
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|
| ● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured
on a Recurring Basis
The
following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the
fair value hierarchy within which those measurements fell:
| Amount at |
Fair Value Measurement Using |
|||||||||||||||
| Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
| February 28, 2026 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment at cost |
$ | 100,000 | $ | 50,000 | $ | — | $ | 50,000 | ||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares |
$ | 5,500,000 | $ | — | $ | — | $ | 5,500,000 | ||||||||
| February 28, 2025 | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares |
$ | 4,000,000 | $ | — | $ | — | $ | 4,000,000 | ||||||||
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances,
accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
Earnings
(Loss) per Share
Basic
earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential
common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.
In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from
the exercise of stock options and/or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.
Basic
loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share
is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to
include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments.
Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in
nature with regards to earnings per share.
MANAGEMENT
Directors
and Executive Officers
The following table sets forth the names,
positions and ages of our directors and executive officers as of the date of this report. Our directors serve for
one year and until their successors are elected and qualified. Our officers are elected by the board of directors to a
term of one year and serve until their successor is duly elected and qualified, or until they are removed from office. The board
of directors has no nominating, auditing or compensation committees.
| Name | Age | Position | ||
| Steven Reinharz (1) |
50 | Chief Executive Officer, Secretary and Director (2) |
||
| Anthony Brenz |
64 | Chief Financial Officer |
| (1) | Director as of March 2, 2021 |
| (2) | All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. |
Biographical
information concerning our director and executive officers listed above is set forth below.
Steven
Reinharz. RAD was founded by Mr. Reinharz in July of 2016, and he has been continuously employed by RAD and its affiliated companies
since that time. He is the holder of a majority of our capital stock. Mr. Reinharz has served as a member of the Board of Directors since
March 2, 2021 and as our Chief Executive Officer, Chief Financial Officer, and Secretary of the Company since March 2, 2021 and resigned
as our Chief Financial Officer as of April 26, 2021 upon Anthony Brenz’s appointment as our Chief Financial Officer. As our Chief
Executive Officer and President of RAD, Mr. Reinharz leverages his extensive knowledge and interest in robotics and artificial intelligence
to design and develop robotic solutions that increase business efficiency and deliver immediate and impressive cost savings. Mr. Reinharz
is an active voice in both the security and artificial intelligence industries. He started and ran his own security integration company
from the age of 24 to 31, becoming one of California’s leading system integrators. Mr. Reinharz later was part of a team that successfully
sold an integrator to a global security firm for $42 million and has held various other security industry roles. Mr. Reinharz speaks
and contributes to panels at ISC East and West, and ASIS. Mr. Reinharz is a leading member of several industry association committees,
mostly through the Security Industry Association. Mr. Reinharz has called Orange County, California home since 1995, having grown up
in Montreal and Toronto. He earned a dual Bachelor of Science degree in Political Science and Commercial Studies.
Anthony
Brenz was appointed as our Chief Financial Officer on April 26, 2021. He is an accomplished senior financial and operational
executive for over 20 years of experience in finance and operations, including corporate strategy, procurement and supply chain, human
resources, and customer service. From April 2018 to December 2020, Anthony Brenz was the Vice President/Director Finance of AirBoss Flexible
Products Company. From September 2014 to April 2018, he was the Chief Financial Officer/Vice President of Finance of Thomson Aerospace
and Defense (a Parker Meggitt Company). From August 2012 to September 2014, he was the Vice President/Director of Finance of M B Aerospace
US Holdings, Inc. Anthony Brenz received a Bachelor of Accountancy from Walsh College in Troy Michigan in 1989 and has been licensed
as a Certified Public Accountant in Michigan since 1989.
There
are no family relationships between any of the executive officers and directors.
Board
Committees and Director Independence
Mr.
Reinharz serves as director, and we do not have a separately designated audit committee, compensation committee or nominating and corporate
governance committee. The functions of those committees are being undertaken by our directors. Since we do not have any independent directors
and have only two directors, our directors believes that the establishment of committees of the Board would not provide any benefits
to our company and could be considered more form than substance.
We
currently have an employee director, Mr. Reinharz, but no independent directors, as such term is defined in the listing standards of
The NASDAQ Stock Market, and we do not anticipate appointing additional directors in the near future.
Our
directors are not “audit committee financial experts” within the meaning of Item 401(e) of Regulation S-K. As with most small,
early stage companies, until such time that the Company further develops its business, achieves a stronger revenue base
and has sufficient working capital to purchase directors and officer’s insurance, the Company does not have any immediate prospects
to attract independent directors. When the Company is able to expand our Board of Directors to include one or more independent
directors, the Company intends to establish an Audit Committee of our Board of Directors. It is our intention that one or more
of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange
that has requirements that a majority of our Board members be independent, and the Company is not currently otherwise subject to any
law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor
are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
Procedures
for Nominating Directors
There
have been no material changes to the procedures by which security holders may recommend nominees to the Board since the most recently
completed fiscal quarter. We do not have a policy regarding the consideration of any director candidates that may be recommended by our
stockholders, including the minimum qualifications for director candidates, nor has our sole director established a process for identifying
and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates
by our stockholders, including the procedures to be followed. Our sole director has not considered or adopted any of these policies,
as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative
size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation
in the near future.
While
there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board
will participate in the consideration of director nominees.
Director
Qualifications
Mr.
Steve Reinharz is our sole director and was appointed
on March 2, 2021. He is the founder of our operating company, Robotoc Assistance Devices, Inc.
Code
of Ethics and Business Conduct
We
have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics
is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable
disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability
for adherence to the provisions of the code of ethics.
Director
Compensation
We reimburse our directors for all reasonable
ordinary and necessary business-related expenses, but we did not pay any other director’s fees or any other cash compensation for
services rendered as a director during the years ended February 28, 2026 and February 28, 2025 to any of the individuals
serving on our Board during that period.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered
class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers,
directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports
they file. Based on our review of the copies of such forms received by us, or written representations that no other reports were required,
and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed
all required Forms 3, 4, and 5.
EXECUTIVE
COMPENSATION
The
following table summarizes all compensation recorded by us in the past two fiscal years for Mr. Reinharz, our President and Chief Executive
Officer, Anthony Brenz, our Chief Financial Officer and Garret Parsons our former President, Chief Executive Officer and Chief Financial
Officer.
The
following table summarizes all compensation recorded by us in the past two fiscal years for Mr. Reinharz, our President and Chief Executive
Officer, Anthony Brenz, our Chief Financial Officer and Garret Parsons our former President, Chief Executive Officer and Chief Financial
Officer.
2026
AND 2025 SUMMARY COMPENSATION TABLE
| Name and Principal Position |
Fiscal Year |
Salary or Fees ($) |
Bonus ($) |
Stock Awards(2) ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Non-Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||||||||||||
| Steven Reinharz | 2026 | 420,000 | — | 1,500,000 | — | — | 1,000,000 | — | 2,920,000 | |||||||||||||||||||||||||||
| Chief Executive Officer, Chief Financial Officer, Secretary (1) | 2025 | 320,000 | 836,167 | 1,500,000 | — | — | 1,663,833 | — | 4,320,000 | |||||||||||||||||||||||||||
| Anthony Brenz | 2026 | 211,865 | — | — | — | — | — | 1,200 | 213,055 | |||||||||||||||||||||||||||
| Chief Financial Officer (1) | 2025 | 200,408 | 1,000 | — | 17,975 | — | — | 1,200 | 208,988 | |||||||||||||||||||||||||||
| (1) | Steven Reinharz was appointed Chief Executive Officer, Chief Financial Officer and Secretary on March 2, 2021.Mr.Reinharz ceased being Chief Financial Officer on June 24, 2021 and on that date appointed Anthony Brenz as Chief Financial Officer |
| (2) | Stock awards are payable in Series G and are included in long term liabilities as they will not be paid out in the current year. |
Employment
Agreements
On
April 9, 2021 Mr. Reinharz entered into an employment agreement with the Company in connection with his service as Chief Executive Officer.
The agreement began on April 9, 2021 and has a three-year term, renewable thereafter on an annual basis if neither party files a notice
of termination 90 days prior to the term renewal date. The agreement provides for compensation of $240,000 base salary (to be reviewed
annually by the Board of Directors) and bonuses to be granted at the discretion of the Board of Directors. The salary for the fiscal
year ended February 28, 2026 was $420,000.
Outstanding
Equity Awards at 2026 Fiscal Year-End
The
following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for Mr.
Brenz, our sole executive officers outstanding as of February 28, 2026:
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity (#) |
Option ($) |
Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||
| Anthony Brenz | 0 | 0 | 45,000 | $ | 2.00 | Sept. 1, 2027 | 45,000 | $ | 12,825 | 0 | 0 | |||||||||||||||||||||||
| Anthony Brenz | 0 | 0 | 100,000 | $ | 2.00 | Sept. 1, 2028 | 100,000 | $ | 28,500 | 0 | 0 | |||||||||||||||||||||||
On
April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved
and adopted the 2021 Incentive Stock Plan (the “2021 Plan”). On August 11, 2022 the Company amended the 2021 Plan increasing
the maximum number of shares applicable to the 2021 Plan from 50,000 to 1,000,000. On August 14,2023 the Company further
amended the plan increasing the maximum shares to 2,000,000.
The
purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors,
executives, selected Employees and Consultants, and reward participants for making major contributions to the success of the
Company. The 2021 Plan authorizes the granting of stock options, restricted stock, restricted stock units, stock appreciation rights
and stock awards. A total of two million (2,000,000) shares of common stock may be issued under the 2021 Plan.
All awards under the 2021 Plan, whether vested or unvested, are subject to the terms of any recoupment, clawback or similar policy of
the Company in effect from time to time, as well as any similar provisions of applicable law, which could in certain circumstances require
repayment or forfeiture of awards or any shares of stock or other cash or property received with respect to the awards, including any
value received from a disposition of the shares acquired upon payment of the awards. The 2021 Plan will be administered by the Board
or any Committee authorized by the Board, if applicable, which will have the sole authority to, among other things: construe and interpret
the 2021 Plan; make rules and regulations relating to the administration of the 2021 Plan; select participants; and establish the terms
and conditions of awards, all in accordance with the terms of the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031,
unless sooner terminated by the Board. Termination will not affect awards then outstanding.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At June 8 2026, we had 387,232,589
shares of Common Stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our Common
Stock as of June 8, 2026, and reflects:
| ● | each of our executive officers; |
|
| ● | each of our directors; |
|
| ● | all of our directors and executive officers as a group; and |
|
| ● | each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock. |
Information on beneficial ownership
of securities is based upon a record list of our stockholders and we have determined beneficial ownership in accordance with the rules
of the SEC. We believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting
and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property
laws, except as otherwise provided below.
| Amount and Nature of |
Percent of | |||||||
| Name |
Beneficial |
Common |
||||||
| Named Executive Officers and Directors: | ||||||||
| Steven Reinharz (3) | 1,302,460,588 | 77.08 | % | |||||
| Anthony Brenz | 0 | 0 | ||||||
| Mark Folmer | 0 | 0 | ||||||
| All executive officers and directors as a group (3 persons) | 1,302,460,588 | 77.08 | % | |||||
| 5% Shareholders: | ||||||||
| Steven Reinharz | 1,302,460,588 | 77.08 | % | |||||
| (1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable or exercisable within 60 days of the date of this table. In determining the percent of common stock owned by a person or entity as of the date of this Report, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on as of June 8, 2026 387,232,589 shares, and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares. |
| (2) |
Based |
| (3) | Steve Reinharz is a director and the Company’s Chief Executive Officer, Chief Financial Officer and Secretary as well as the CEO of RAD and is the holder of (i) 3,350,000 shares of our Series E Preferred Stock and, (ii) 2,450 shares of our Series F Convertible Preferred Stock. If Mr. Reinharz converted the 2,450 shares of the Company’s Series F Convertible Preferred Stock, he would receive 1,302,460,588 shares of the Company’s common stock, which is included in the chart above as if such conversion has occurred. Further, the outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, the holders of Series E preferred stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
Except
as set out below, since the beginning of our last two fiscal years, there have been no transactions, or currently proposed transactions,
in which he was or is to be a participant and the amount involved exceeds $120,000, and in which any of the following people had or will
have a direct or indirect material interest:
| ● | Any of our directors or executive officers; |
| ● | Any immediate family member of our directors or executive officers; and |
| ● | Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; |
Related
Party Transactions
For the years ended February 28, 2026,
and February 28, 2025, the Company had net (advances) repayments of ($132,268) and ($71,927), respectively, to its loan payable-related
party. At February 28, 2026, the loan payable-related party was $461,633 and $329,365 at February 28, 2025. As of February 28, 2026,
included in the balance due to the related party is $285,638 of deferred salary all of which bears interest at 12%. As of February 28,
2025, included in the balance due to the related party is $190,013 of deferred salary all of which bears interest at 12%. The accrued
interest included at February 28, 2026, was $79,268 (February 28, 2025- $51,575).
During the year ended February 28,
2026, the Company had a net repayment of $390,744 in deferred compensation for the CEO. This would bring his annual bonus for the year
ended February 28, 2026, to $1.0 million. For the fiscal year ended February 28, 2025, the Company paid out $1,390,744 to the CEO. During
the year ended February 28, 2025, the Company a net accrual of $1,663,833 in deferred compensation for the CEO. This would bring his
annual bonus for the year ended February 28, 2025, to $2.5 million. For the fiscal year ended February 28, 2025, the Company paid out
$836,167 to the CEO. This was all in accordance with a December 2023 board action allowing for $1 million of discretionary compensation.
During the years ended February 28,
2026, and February 28, 2025, the Company accrued 1,500 Series G shares to be issued totaling $1,500,000 and 1,500 Series G preferred
shares to be issued totaling $1,500,000, respectively, both per Company resolution. The Series G preferred shares are redeemable at $1,000
per share and will be issued by the Company at the appropriate time. The balance of Incentive Compensation Plan Payable at February 28,
2026, was $5,500,000 and the balance February 28, 2025, was $4,000,000.
During the years ended February 28,
2026, and February 28, 2025, the Company was charged $2,576,111 and $2,541,180, respectively in consulting fees for research and development
to a company partially owned by a principal shareholder included in research and development expenses. The principal shareholder received
no compensation from this partially owned research and development company and the fees were spent on core development projects. As at
February 28, 2026, and February 28, 2025, the balance due to this company was $160,557 and $76,532, respectively.
Principal Accounting Fees and Services
On
October 31, 2019, our Board of Directors approved and ratified the engagement (“Engagement”) of LJ Soldinger & Associates
LLC (“LJ Soldinger”) as our new independent registered public accounting firm.
The
following table shows the fees that were billed for the audit and other services provided by LJ Soldinger for the fiscal years ended
February 28, 2026 and February 28, 2025.
| 2026 | ||||
| Audit Fees | $ |
256,700 |
||
| Audit-Related Fees |
— |
|||
| Tax Fees |
— |
|||
| All Other Fees |
— |
|||
| Total | $ |
256,700 |
||
| 2025 | ||||
| Audit Fees | $ | 240,100 | ||
| Audit-Related Fees | — | |||
| Tax Fees | — | |||
| All Other Fees | — | |||
| Total | $ | 240,100 | ||
Audit
Fees – This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly
Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with
engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result
of, the audit or the review of interim financial statements.
Audit-Related
Fees – This category consists of assurance and related services by the independent registered public accounting firm that are reasonably
related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”
The services for the fees disclosed under this category would include consultation regarding correspondence with the SEC, other accounting
consulting and other audit services.
Tax
Fees – This category consists of professional services rendered by our independent registered public accounting firm for tax compliance
and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All
Other Fees – This category consists of fees for other miscellaneous items.
As
part of its responsibility for oversight of the independent registered public accountants, the Board has established a pre-approval policy
for engaging audit and permitted non-audit services provided by our independent registered public accountants. In accordance with this
policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically
described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board. All of
the services provided by LJ Soldinger described above were approved by our Board.
Our
principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
Indemnification
and Limitation on Liability of Directors
Our
Articles of Incorporation limit the liability of our directors to the fullest extent permitted by Nevada law. Nothing contained in the
provisions will be construed to deprive any director of his right to all defenses ordinarily available to the director nor will anything
herein be construed to deprive any director of any right he may have for contribution from any other director or other person.
At
present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification
will be required or permitted. As far as indemnification for liabilities arising under the Securities Act may be permitted to
our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Committees
of the Board
We
do not currently have a standing audit, nominating, or compensation committee of the Board of Directors, or any committee performing
similar functions. Our Board of Directors performs the functions of nominating and compensation committees
Meetings
of the Board
During its fiscal year ended February
28, 2026, the Board, consisting of one member did not hold meetings but corporate action approvals were all approved via Unanimous
Board Resolutions.
Code
of Business Conduct and Ethics
We
have adopted a written code of business conduct and ethics (the “Code of Ethics”). The Code of Ethics is intended to document
the principles of conduct and ethics to be followed by all of our directors, officers and employees, including our principal executive
officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. Its purpose
is to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest.
Indemnification
and Limitation on Liability of Directors
Our
Articles of Incorporation limit the liability of our directors to the fullest extent permitted by Nevada law. Nothing contained in the
provisions will be construed to deprive any director of his right to all defenses ordinarily available to the director nor will anything
herein be construed to deprive any director of any right he may have for contribution from any other director or other person.
At
present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification
will be required or permitted. As far as indemnification for liabilities arising under the Securities Act may be permitted to
our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
DESCRIPTION
OF OUR CAPITAL STOCK
Our
Articles of Incorporation, as amended, authorizes us to issue up to twelve billion (12,000,000,000) shares of common stock,
$0.00001 par value per share, and twenty million (20,000,000) shares of preferred stock, $0.001 par value per share. There is only one
class of common stock. There are four 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 our common stock that we offer 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 our voting power. 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
we are liquidated or dissolved, the holders of common stock are entitled to receive a proportionate share of our net assets that are
available for distribution to shareholders after the payment of all our debts and other liabilities 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, our securities are not subject to
these control share provisions because our articles of incorporation, as permitted by Nevada law, specifically exempt us 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, our articles of
incorporation, as permitted by Nevada law, specifically exempt us from these “interested stockholder” provisions.
Preferred
Stock
The
Company is authorized to issue up to 20,000,000 shares of $0.001 par value preferred stock. The board of directors is authorized to designate
any series of preferred stock up to the total authorized number of shares.
We
have five series of preferred stock, none of which have voting rights on any matters other than those directly affecting the respective
series:
Series B Convertible, Redeemable Preferred
Stock
The board of directors has designated 5,000 shares
of Series B Convertible, Redeemable Preferred Stock with a par value of $0.001 per share. As of February 28, 2026, there
are no shares of Series B Preferred Stock outstanding. The Series B Convertible Preferred Stock are redeemable at $1,200 per share, rank
in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights on a converted basis and
receives quarterly dividends of 8%. Each holder may, at any time and from time to time convert all, but not less than all, of their shares
of Series B Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares of common stock determined by
dividing the redemption value by the Conversion Price. The Conversion price is equal to the lower of (1) a fixed price equaling the closing
bid price of the Common Stock on the trading day immediately preceding the date of the acquisition of the shares and (2) the lowest traded
price of the Common Stock during the ten (10) calendar days immediately preceding, but not including, the Conversion Date. Following
an event of default,” as defined in the Purchase Agreement, the Conversion price shall equal the lower of: (a) the then applicable
Conversion Price; or (b) a price per share equaling eighty five percent (85%) of the lowest traded price for the Company’s common
stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion Date. Each share of Preferred Stock
shall be entitled to receive, and the Corporation shall pay, cumulative dividends of eight percent (8%) per annum, payable quarterly,
beginning on the Original Issuance Date and ending on the date that such share of Preferred Share has been converted or redeemed. Dividends
may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any dividends that are not paid a shall continue
to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14% per annum or the lesser rate permitted by applicable
law which shall accrue and compound daily from the dividend payment date through and including the date of actual payment in full. On
the thirtieth day following the issue date of this Preferred Stock the Company shall have the obligation to redeem one-third of the Preferred
Stock outstanding for a redemption price equal to the redemption value of each such share of Preferred Stock, plus any accrued but unpaid
dividends, plus all other amounts due to the Holder including, but not limited to Late Fees, liquidated damages and the legal fees and
expenses of the Holder’s counsel. On the sixtieth (60th) calendar day following the date Preferred Stock is issued,
the Corporation shall have the obligation to redeem one-half of the Preferred Stock then outstanding for the redemption price. On the
ninetieth (90th) calendar day following the date Preferred Stock is issued, the Corporation shall have the obligation to redeem
all of the Preferred Stock then outstanding for the redemption price. From the date of issuance until the date no shares of Series B
Preferred Stock are issued and outstanding, unless Holders of at least 75% in Stated Value of the then outstanding shares of Preferred
Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly
or indirectly: (a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness
for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits therefrom; (b) other than Permitted Liens, enter into, create,
incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom; (c) amend its charter documents, including, without limitation, its articles
of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder; (d) repay, repurchase or offer
to repay, repurchase or otherwise acquire of any shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than
as to the Conversion Shares as permitted or required under the Transaction Documents: (e) pay cash dividends or distributions on Junior
Securities of the Corporation; f) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed
in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or(g)
enter into any agreement with respect to any of the foregoing.
Series
C Convertible, Redeemable Preferred Stock
The
board of directors has designated 1,000 shares of Series C Convertible, Redeemable Preferred Stock with a par value of $0.001 per share.
As of February 28, 2026 there are 417 shares of Series C Preferred Stock outstanding. The Series C Convertible Preferred
Stock are redeemable at $1,200 per share, rank in priority to common stock and common stock equivalents upon liquidation of the Company,
have voting rights on a converted basis and receives quarterly dividends of 12%. Each holder may, after 180 days after issuance, at any
time and from time to time convert all, but not less than all, of their shares of Series C Convertible, Redeemable Preferred Stock into
a number of fully paid and nonassessable shares of common stock determined by dividing the redemption value by the Conversion Price.
The Conversion price is equal to the lower of (1) a fixed price equaling the closing bid price of the Common Stock on the trading day
immediately preceding the date of the acquisition of the shares and (2) the lowest traded price of the Common Stock during the ten (10)
calendar days immediately preceding, but not including, the Conversion Date. Following an event of default,” as defined in the
Purchase Agreement, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price per share
equaling eighty five percent (90%) of the lowest traded price for the Company’s common stock during the fifteen (10) Trading Days
immediately preceding, but not including, the Conversion Date. Each share of Preferred Stock shall be entitled to receive, and the Corporation
shall pay, cumulative dividends of twelve percent (12%) per annum, payable quarterly, beginning on the Original Issuance Date and ending
on the date that such share of Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Preferred
Stock at the discretion of the Company. Any dividends that are not paid a shall continue to accrue and shall entail a late fee, which
must be paid in cash, at the rate of 14% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily
from the dividend payment date through and including the date of actual payment in full. On the one hundred eightieth day following the
issue date of this Preferred Stock the Company shall have the obligation to redeem all outstanding Series Preferred Shares for one hundred
nine and one half percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts due to the Holder
pursuant to the Certificate of Designation and/or any Transaction Documents (“Redemption Date”). Prior to the Redemption
Date, the Company at its discretion and on three (3) Trading Days’ written notice, may redeem all outstanding Preferred Shares
for one hundred nine and one half percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts
due to the Holder pursuant to the Certificate of Designation and/or any Transaction Documents.
From
the date of issuance until the date no shares of Series C Preferred Stock are issued and outstanding, unless Holders of at least 75%
in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall
not, and shall not permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create,
incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee,
on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits
therefrom; (b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect
to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend
its charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely
affects any rights of the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common
Stock, Common Stock Equivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction
Documents: (e) pay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate
of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made
on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than
a quorum otherwise required for board approval); or(g) enter into any agreement with respect to any of the foregoing
Series
E Preferred Stock
There
are 4,350,000 shares of Series E Convertible Preferred Stock (“Series E Preferred Shares”) authorized, and 3,350,000
issued and outstanding. 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 our voting power. 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:
| ● | alteration of or change to the rights, preferences or privileges of any of our capital stock 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 our stock; |
| ● | amend, repeal or modify our bylaws |
| ● | sell or otherwise dispose of any of our assets 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 our control. |
Series
F Convertible Preferred Stock
There
are 10,000 shares of Series F Convertible Preferred Stock (“Series F Preferred Shares”) authorized, of which 2,513
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 our 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. Each holder may, at any time and from time
to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number of fully paid and nonassessable
shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company on the date
of conversion by three and 45 100ths (3.45) on a pro rata basis. So long as any shares of Series F Convertible Preferred Stock are outstanding,
the Company shall not, without first obtaining the approval of the majority of the holders: (a) alter or change the rights, preferences
or privileges of any capital stock of the Company so as to affect adversely the Series F convertible preferred stock; (b) create any
Senior Securities; (c) create any pari passu Securities; (d) do any act or thing not authorized or contemplated by the Certificate of
Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time to time amended, (or
otherwise suffer to exist any such taxation as a result thereof).
Steven
Reinharz owns 2,450 Series F Preferred Shares, and the remaining 63 Series F Preferred Shares are held by two other persons who
are not employed by us We have also issued a “Warrant to Purchase Stock,” which gave the holder of the Warrant the right
to purchase 929 Series F Preferred Shares at any time. After prior exercises, the holder currently holds the right to purchase
329 Series F Preferred Shares.
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,
we may, at our option, redeem any or all of the outstanding Series G Preferred Shares at $1,000 per share.
DESCRIPTION
OF WARRANTS
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. |
Dividend
Policy
To
date we have never declared a dividend for our common stock. We currently intend to retain future earnings, if any, to finance the expansion
of our business and for general corporate purposes. We cannot assure you that we will distribute any cash in the future. Our cash distribution
policy is within the discretion of our Board and will depend upon various factors, including our results of operations, financial condition,
capital requirements and investment opportunities.
LEGAL
MATTERS
Certain
legal matters with respect to the validity of the securities being offered by this prospectus will be passed upon Frederick M. Lehrer,
P. A.
EXPERTS
The
audited consolidated financial statements for AITX, as of February 28, 2026 and 2025 and for the years then ended included
in this prospectus and elsewhere in the registration statement have been so included in reliance upon the report, which contains an explanatory
paragraph describing the conditions which raise substantial doubt about the ability of the Company to continue as a going concern, of
L J Soldinger Associates, LLC, independent registered public accounting firm, upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE
INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered
by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information set
forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and
regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement,
including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents
of any contract or any other document are not necessarily complete.
We
file reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information
statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov.
You may also request a copy of those filings, excluding exhibits, from us at no cost. These requests should be addressed to us at: 10800
Galaxie Avenue, Ferndale, Michigan 48220. Our website address is www.aitx.ai. The information on, or accessible through, our website
is not part of, and is not incorporated into, this prospectus supplement or the accompanying prospectus and should not be considered
part of this prospectus.
Disclosure
of Commission Position of Indemnification for Securities Act Liabilities
Nevada
Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers.
The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not
opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to
believe his/her conduct was unlawful. Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer
affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such
officer or director did not meet the standards.
As
far as indemnification for liabilities arising under
the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise,
we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Our
Amended Bylaws provides that the Company shall indemnify its directors and officers from and against any liability arising out of their
service as a director or officer of the Corporation or any subsidiary or affiliate of which they serve as an officer or director at the
request of the Corporation to the fullest extent not prohibited by NRS Chapter 78.
ARTIFICIAL INTELLIGENCE
TECHNOLOGY SOLUTIONS INC.
(FORMERLY ON THE MOVE SYSTEMS CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm | F-2 |
| Consolidated Balance Sheets |
F-3 |
| Consolidated Statements of Operations |
F-4 |
| Consolidated Statements of Stockholders’ Deficit |
F-5 |
| Consolidated Statements of Cash Flows |
F-7 |
| Notes to the Consolidated Financial Statements |
F-8 |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Artificial Intelligence Technology Solutions, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Artificial Intelligence Technology Solutions, Inc. and its subsidiaries
(the “Company”) as of February 28, 2026 and February 28, 2025, and the related consolidated statements of operations, stockholders’
deficit, and cash flows for each of the years in the two-year period ended February 28, 2026, and the related notes (collectively referred
to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of February 28, 2026, and February 28, 2025, and the results of its operations and its cash flows for each of the years
in the two-year period ended February 28, 2026, in conformity with accounting principles generally accepted in the United States of America.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company had negative cash flow from operating activities of approximately $9.3 million, an accumulated
deficit of approximately $171.1 million and negative working capital of approximately $17.0 million as of and for the year ended February
28, 2026, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
| /s/ L J Soldinger Associates, LLC |
|
| We have served as the Company’s auditor since 2019. |
|
| Deer Park, Illinois |
|
| PCAOB ID: 318 |
|
| June 8, 2026 |
|
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED
BALANCE SHEETS
|
February 2026 |
February 2025 |
|||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 109,043 | $ | 865,975 | ||||
| Accounts receivable, net | 1,004,201 | 1,367,331 | ||||||
| Share proceeds receivable | 418,669 | |||||||
| Device parts inventory, net |
1,318,742 | 1,583,726 | ||||||
| Prepaid expenses and deposits |
503,017 | 792,842 | ||||||
| Total current assets | 2,935,003 | 5,028,543 | ||||||
| Operating lease asset | 931,814 | 1,010,545 | ||||||
| Revenue earning devices, net of accumulated depreciation of $3,257,668 and $2,292,172, respectively |
5,097,627 | 4,539,180 | ||||||
| Fixed assets, net of accumulated depreciation of $540,426 and $491,186, respectively |
183,185 | 258,328 | ||||||
| Trademarks | 35,319 | 33,321 | ||||||
| Investment at cost | 100,000 | 100,000 | ||||||
| Security deposit |
19,280 | 15,880 | ||||||
| Total assets |
$ | 9,302,228 | $ | 10,985,797 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses |
$ | 3,007,270 | $ | 2,121,871 | ||||
| Customer deposits | 147,326 | 91,578 | ||||||
| Current operating lease liability |
243,690 | 197,349 | ||||||
| Current portion of deferred variable payment obligation |
3,161,727 | 1,901,258 | ||||||
| Loan payable – related party |
461,633 | 329,365 | ||||||
| Deferred compensation for CEO |
1,811,856 | 2,202,600 | ||||||
| Current portion of loans payable, net of discount of $635,774 and $0 |
8,848,140 | 519,105 | ||||||
| Current portion of accrued interest payable |
2,271,106 | 213,555 | ||||||
| Total current liabilities | 19,952,748 | 7,576,681 | ||||||
| Non-current operating lease liability |
676,694 | 810,513 | ||||||
| Loans payable, net of discount of $0 and $360,163, respectively |
24,188,380 | 31,922,078 | ||||||
| Deferred variable payment obligation |
2,525,000 | 2,525,000 | ||||||
| Incentive compensation plan payable |
5,500,000 | 4,000,000 | ||||||
| Accrued interest payable |
9,122,552 | 13,680,453 | ||||||
| Total liabilities |
61,965,374 | 60,514,725 | ||||||
| Series B Convertible, Redeemable Preferred Stock. $ par value; 8% cumulative dividend payable quarterly,$1,200 stated value, shares authorized, shares issued and outstanding at February 28, 2026 and February 28, 2025, respectively |
||||||||
| Series C Convertible, Redeemable Preferred Stock. $ par value; $1,200 stated value, redeemable at 109.5%, 12% dividend, shares authorized, and shares issued and outstanding at February 28, 2026 and February 28, 2025, respectively |
547,941 | 402,084 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred Stock, undesignated; shares authorized; shares issued and outstanding at February 28, 2026 and February 28, 2025, respectively |
||||||||
| Series G Redeemable Preferred Stock. $ par value; shares authorized, shares issued and outstanding at February 28, 2026 and February 28, 2025, respectively |
||||||||
| Series E Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively |
3,350 | 3,350 | ||||||
| Series F Convertible Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively |
2,513 | 2,513 | ||||||
| Common Stock, $ par value; shares authorized and shares issued, issuable and outstanding, respectively |
2,679 | 1,441 | ||||||
| Additional paid-in capital | 117,803,027 | 106,459,528 | ||||||
| Preferred stock to be issued | 99,086 | 99,086 | ||||||
| Accumulated deficit |
(171,121,742 | ) | (156,496,930 | ) | ||||
| Total stockholders’ deficit |
(53,211,087 | ) | (49,931,012 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 9,302,228 | $ | 10,985,797 | ||||
The
accompanying notes are an integral part of these consolidated financial statements.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
| Year Ended February 28, 2026 |
Year Ended February 28, 2025 |
|||||||
| Revenues | $ | 7,745,336 | $ | 6,130,886 | ||||
| Cost of goods sold | 159,020 | 1,334,824 | ||||||
| Depreciation and Amortization | 1,981,679 | 1,051,498 | ||||||
| Loss on disposal of revenue earning devices |
70,937 | |||||||
| Total Cost of Goods Sold |
2,211,636 | 2,386,322 | ||||||
| Gross Profit | 5,533,700 | 3,744,564 | ||||||
| Operating expenses: | ||||||||
| Research and development (note 9) |
4,128,155 | 3,462,558 | ||||||
| General and administrative | 12,933,696 | 13,559,009 | ||||||
| Depreciation and amortization | 141,051 | 429,139 | ||||||
| Loss on disposal of fixed assets |
22,312 | |||||||
| Operating lease cost and rent |
251,883 | 240,731 | ||||||
| Total operating expenses |
17,477,097 | 17,691,437 | ||||||
| Loss from operations | (11,943,397 | ) | (13,946,873 | ) | ||||
| Other income (expense), net: |
||||||||
| Interest expense | (6,001,539 | ) | (5,456,981 | ) | ||||
| Gain on settlement of debt |
3,434,685 | 468,262 | ||||||
| Total other income (expense), net |
(2,566,854 | ) | (4,988,719 | ) | ||||
| Net Loss |
$ | (14,510,251 | ) | $ | (18,935,592 | ) | ||
| Net loss per share – basic | $ | (0.07 | ) | $ | (0.16 | ) | ||
| Net loss per share – diluted | $ | (0.07 | ) | $ | (0.16 | ) | ||
| Weighted average common share outstanding – basic and diluted |
||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED FEBRUARY 28, 2026 AND FEBRUARY 28, 2025
| Temporary Equity |
Shareholder’s Deficit |
|||||||||||||||||||||||||||||||||||||||||||
| Series B & C |
Series E | Series F | Additional | Total | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock |
Preferred Stock |
Preferred Stock |
Common Stock |
Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance at February 29, 2024 | 3,350,000 | $ | 3,350 | 2,533 | $ | 101,619 | 92,387,510 | $ | 924 | $ | 92,656,977 | $ | (132,962,427 | ) | $ | (40,199,557 | ) | |||||||||||||||||||||||||||
| Cumulative Effect Adjustment RFV discount per adoption of ASU 2020-06 at March 1, 2024 |
— | — | — | — | (4,175,535 | ) | (4,175,535 | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of shares, net of $701,565 issuance costs |
— | — | — | 49,796,369 | 498 | 13,120,181 | 13,120,679 | |||||||||||||||||||||||||||||||||||||
| Debt exchanged for common stock |
— | — | — | 1,940,659 | 19 | 561,981 | 562,000 | |||||||||||||||||||||||||||||||||||||
| Series F Preferred Shares exchanged for debt |
— | — | (20 | ) | (20 | ) | — | (65,793 | ) | (334,187 | ) | (400,000 | ) | |||||||||||||||||||||||||||||||
| Issuance of Series B Preferred Shares |
300 | 360,000 | — | — | — | (82,000 | ) | (82,000 | ) | |||||||||||||||||||||||||||||||||||
| Series B Preferred Shares issued as commitment fee |
20 | 24,000 | — | — | — | (24,000 | ) | (24,000 | ) | |||||||||||||||||||||||||||||||||||
| Series B Preferred shares issued as dividend |
4 | 5,188 | — | — | — | (5,188 | ) | (5,188 | ) | |||||||||||||||||||||||||||||||||||
| Redemption of Series B Preferred shares |
(324 | ) | (389,188 | ) | — | — | — | 89,189 | (89,189 | ) | ||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Shares |
306 | 402,084 | — | — | — | (123,504 | ) | (123,504 | ) | |||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | 331,685 | 331,685 | ||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | (18,935,592 | ) | (18,935,592 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at February 28, 2025 |
306 | $ | 402,084 | 3,350,000 | $ | 3,350 | 2,513 | $ | 101,599 | 144,124,538 | $ | 1,441 | $ | 106,459,528 | $ | (156,496,930 | ) | $ | (49,931,012 | ) | ||||||||||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT
| Temporary Equity |
Shareholder’s Deficit |
|||||||||||||||||||||||||||||||||||||||||||
| Series B & C |
Series E |
Series F |
Additional | Total | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock |
Preferred Stock |
Preferred Stock |
Common Stock |
Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance at February 28, 2025 |
306 | 402,084 | 3,350,000 | $ | 3,350 | 2,513 | $ | 101,599 | 144,124,538 | $ | 1,441 | $ | 106,459,528 | $ | (156,496,930 | ) | $ | (49,931,012 | ) | |||||||||||||||||||||||||
| Issuance of shares, net of $364,161 issuance costs |
— | — | — | 50,403,802 | 504 | 4,800,680 | 4,801,184 | |||||||||||||||||||||||||||||||||||||
| Debt exchanged for common stock |
— | — | — | 71,350,000 | 714 | 6,383,286 | 6,384,000 | |||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred shares |
(85 | ) | (111,690 | ) | — | — | 1,994,464 | 20 | 196,360 | (84,690 | ) | 111,690 | ||||||||||||||||||||||||||||||||
| Cash redemption of Series C shares |
(95 | ) | (125,000 | ) | — | — | — | 29,871 | (29,871 | ) | ||||||||||||||||||||||||||||||||||
| Series C Preferred shares issued as dividend |
44 | 58,100 | — | — | — | (58,100 | ) | (58,100 | ) | |||||||||||||||||||||||||||||||||||
| Penalty on failure to redeem Series C Preferred shares |
114 | 149,307 | — | — | — | (149,307 | ) | (149,307 | ) | |||||||||||||||||||||||||||||||||||
| Penalty on failure to convert Series C Preferred shares |
133 | 175,140 | — | — | — | (175,140 | ) | (175,140 | ) | |||||||||||||||||||||||||||||||||||
| Stock based compensation |
— | — | — | — | 315,849 | 315,849 | ||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | (14,510,251 | ) | (14,510,251 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at February 28, 2026 |
417 | $ | 547,941 | 3,350,000 | $ | 3,350 | 2,513 | $ | 101,599 | 267,872,804 | $ | 2,679 | $ | 117,803,027 | $ | (171,121,742 | ) | $ | (53,211,087 | ) | ||||||||||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| Year Ended February 28, 2026 |
Year Ended February 28, 2025 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss | $ | (14,510,251 | ) | $ | (18,935,592 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization | 2,122,730 | 1,480,636 | ||||||
| Inventory provision (recovery) | (290,000 | ) | (494,000 | ) | ||||
| Bad debts expense | 138,405 | 83,682 | ||||||
| Reduction of right of use asset |
141,217 | 119,151 | ||||||
| Accretion of lease liability | 103,956 | 118,502 | ||||||
| Stock based compensation | 1,815,848 | 1,831,685 | ||||||
| Amortization of debt discounts | 536,078 | 271,234 | ||||||
| Penalty added to face value of the loan |
24,510 | |||||||
| Gain on settlement of debt | (3,434,685 | ) | (468,262 | ) | ||||
| Loss on disposal of revenue earning devices and fixed assets |
93,249 | |||||||
| Increase in related party accrued payroll and interest |
132,268 | 71,927 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable | 224,725 | (694,929 | ) | |||||
| Prepaid expenses | 294,264 | (160,393 | ) | |||||
| Deposit on right of use asset |
(13,187 | ) | ||||||
| Security deposit on operating lease |
(3,400 | ) | ||||||
| Device parts inventory | (2,133,437 | ) | (2,464,468 | ) | ||||
| Accounts payable and accrued expenses |
879,021 | 505,068 | ||||||
| Deferred compensation for CEO |
(390,744 | ) | 1,663,833 | |||||
| Customer deposits | 55,748 | 17,876 | ||||||
| Operating lease liability payments |
(238,792 | ) | (225,413 | ) | ||||
| Current portion of deferred variable payment obligations for Payments |
1,260,469 | 996,881 | ||||||
| Accrued interest payable |
3,847,474 | 4,086,194 | ||||||
| Net cash used in operating activities |
(9,344,534 | ) | (12,196,388 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchase of fixed assets | (10,863 | ) | (23,724 | ) | ||||
| Purchase of trademarks | (1,998 | ) | (6,241 | ) | ||||
| Purchase of investment (convertible note receivable) |
(50,000 | ) | ||||||
| Net cash used in investing activities |
(12,861 | ) | (79,965 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Share proceeds net of issuance costs |
5,219,853 | 12,702,010 | ||||||
| Proceeds on issuance of Series B Preferred Shares |
278,000 | |||||||
| Redemption of Series B or Series C Preferred Shares |
(125,000 | ) | (389,188 | ) | ||||
| Proceeds on issuance of Series C Preferred Shares |
278,580 | |||||||
| Proceeds from loans payable | 4,808,171 | 350,000 | ||||||
| Repayment of loans payable |
(1,302,561 | ) | (183,000 | ) | ||||
| Net cash provided by financing activities |
8,600,463 | 13,036,402 | ||||||
| Net change in cash | (756,932 | ) | 760,049 | |||||
| Cash, beginning of period | 865,975 | 105,926 | ||||||
| Cash, end of period | $ | 109,043 | $ | 865,975 | ||||
| Supplemental disclosure of cash and non-cash transactions: |
||||||||
| Cash paid for interest |
$ | 188,993 | $ | 94,517 | ||||
| Cash paid for income taxes |
$ | $ | ||||||
| Noncash investing and financing activities: | ||||||||
| Cumulative Effect Adjustment RFV discount per adoption of ASU 2020-06 at March 1, 2024 |
$ | $ | 4,175,535 | |||||
| Right of use asset for lease liability |
$ | 53,739 | $ | |||||
| Transfer from device parts inventory to fixed assets |
$ | 2,688,421 | $ | 3,506,341 | ||||
| Series C penalty shares issued |
$ | 324,447 | ||||||
| Discount applied to face value of loans |
$ | 811,689 | $ | |||||
| Exchange of Series F Preferred Shares for loans payable |
$ | $ | 400,000 | |||||
| Exchange of loans payable and accrued interest for common shares |
$ | 6,484,000 | $ | 562,000 | ||||
| Convertible note receivable exchanged for investment at cost |
$ | $ | 50,000 | |||||
| Dividend on Series B or Series C Preferred Shares paid in Series B or Series C Preferred Shares |
$ | 58,100 | $ | 5,188 | ||||
The
accompanying notes are an integral part of these consolidated financial statements.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
GENERAL INFORMATION AND GOING CONCERN
Artificial
Intelligence Technology Solutions Inc. (formerly known as On the Move Systems Corp.) (“AITX” or the “Company”)
was incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence
Technology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).
Robotic
Assistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a LLC. On July 25, 2017, Robotic
Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc. through the issuance of common shares to
its sole shareholder.
On
August 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity
interest in RAD for shares of AITX Series E Preferred Stock and shares of Series F Convertible Preferred Stock. AITX’s
prior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics
partnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, in which AITX purchased all of
the outstanding shares of capital stock of RAD. As a result, AITX’s business going forward will consist of one segment activity
which is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.
The
Acquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since
substantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill
or other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders
control the Company after the Acquisition, even though AITX was the legal acquirer. As a result, the assets and liabilities and the historical
operations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.
GOING
CONCERN
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a
going concern.
For
the year ended February 28, 2026, the Company had negative cash flow from operating activities of $9,344,534. As of February 28, 2026
the Company has an accumulated deficit of $171,121,742 and negative working capital of $17,017,745. Management does not anticipate having
positive cash flow from operations in the near future. These factors raise substantial doubt about the Company’s ability to continue
as a going concern for the twelve months following the issuance of these financial statements.
The
Company does not have the resources at this time to repay all its credit and debt obligations, make any payments in the form of dividends
to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
At the same time management points to its successful history with maintaining Company operations and reminds all with reasonable confidence
this will continue. Management has plans to address the Company’s financial situation as follows:
Management
is committed to raise funds either through convertible debt or equity financing.. There is no assurance that these funds will be able
to be raised nor can we provide assurance that these possible raises may not have dilutive effects. In May 2026, the Company entered
into an equity financing agreement whereby an investor will purchase up to $10,000,000 of the Company’s common stock at a discount
over a three-year period. There remains approximately $10 million left to issue under this arrangement. Management believes that it has
the necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,through equity
proceeds, and issuing debt.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.
ACCOUNTING POLICIES
Basis
of Presentation and Consolidation
The
accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States
(“GAAP”) and in conformity with the instructions on Form 10-K of Regulation S-X and the related rules and regulations of
the Securities and Exchange Commission (“SEC”). The audited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group, Inc, Robotic Assistance
Devices Mobile, Inc., Robotic Assistance Devices Residential, Inc. All significant intercompany accounts and transactions have been eliminated
in consolidation.
Use
of Estimates
In
order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management
must make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent
assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates
and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements
are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions
used to value equity instruments used in debt settlements, amendments and extensions.
Reclassifications
Certain
amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period
presentation. These reclassifications have not changed the results of operations of prior periods.
Concentrations
of Loans Payable
At
February 28, 2026 there were $33,672,294 loans payable, $32,178,506 or 96% of these loans to companies controlled by one individual.
At February 28, 2025 there were $32,801,345 loans payable, $28,581,506 or 87% of these loans to companies controlled by one individual..
Cash
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash
equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with
high-quality, U.S. financial institutions which, at times, may exceed federally insured limits, and, to date has not experienced losses
on any of its balances.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounts
Receivable
Accounts
receivable are comprised of balances due from customers, net of estimated allowances for credit losses. In determining collectability,
historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There
was an allowance of $170,000 and $140,000 provided as of February 28, 2026 and February 28, 2025, respectively. For the year ended February
28, 2026, two customer account for 31% of total accounts receivable . For the year ended February 28, 2025, one customer accounts for
52% of total accounts receivable.
Device
Parts Inventory
Device
parts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a
valuation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company
uses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending
on use, the Company will transfer the parts to the corresponding asset or expense if used in research and development. A charge to income
is taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted.
At February 28, 2026 and at February 28, 2025 there was a valuation reserve of $175,000 and $465,000, respectively.
Revenue
Earning Devices
Revenue
earning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The
Company continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may
warrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a
combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures
impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective
assets which range from three to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs
which do not improve or extend asset lives are expensed currently.
| Computer equipment |
3 years |
|
| Furniture and fixtures |
3 years |
|
| Office equipment |
4 years |
|
| Warehouse equipment |
5 years |
|
| Demo Devices |
4 years |
|
| Vehicles | 3 years |
|
| Leasehold improvements |
5 years, the life of the lease |
The
Company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying
amounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss, if any, is recognized in income.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Research
and Development
Research
and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless
they meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited
to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.
If all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned.
At February 28, 2026 and February 28, 2025, the Company had no deferred development costs.
Contingencies
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision
for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.
If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated
financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments
about future events and can rely heavily on estimates and assumptions.
Sales
of Future Revenues
The
Company has entered into transactions, as more fully described in footnote 10, in which it has received funding from investors in exchange
for which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage
of sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance
debt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement
constitutes a sale of future revenues or debt:
| ● | Does the agreement purport, in substance, to be a sale |
|
| ● | Does the Company have continuing involvement in the generation of cash flows due the investor |
|
| ● | Is the transaction cancellable by either party through payment of a lump sum or other transfer of assets |
|
| ● | Is the investors rate of return implicitly limited by the terms of the agreement |
|
| ● | Does the Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate of return |
|
| ● | Does the investor have recourse relating to payments due |
In
the event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue
method. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method.
As of the date of these financial statements, the Company has determined that all such agreements are debt.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Recognition
ASU
2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and
industry specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange
for those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted
in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the
amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance
obligation.. For the year ended February 28, 2026, two customers accounted for 55% of total revenue and for the year ended February 28,
2025, one customer accounted for 55% of total revenue (see Note-3).
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income
and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets
arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax
return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset
tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before
the tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
On
December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires
companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects
of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued
based on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance,
and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward
and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial
results, including disclosures, for the Company’s fiscal year ending February 28, 2026, but the Company does not expect the Tax
Act to have a material impact on the Company’s consolidated financial statements.
Leases
Lease
agreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer
of ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater
than a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments
and any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f)
equals or exceeds substantially all of the fair value of the underlying asset.
If
at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and
if none of the four criteria are met, the lease is classified by the Company as an operating lease.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating
lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount
of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally
results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the
later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.
Distinguishing
Liabilities from Equity
The
Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable
and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The
Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument,
other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of
its equity shares.
Once
the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial
instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”).
The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the
Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Our
CEO and Chairman holds sufficient shares of the Company’s voting stock that give sufficient voting rights under the articles of
incorporation and bylaws of the Company such that the CEO and Chairman can at any time unilaterally vote to increase the number of authorized
shares of common stock of the Company without the need to call a general meeting of common shareholders of the Company.
Initial
Measurement
The
Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value,
or cash received.
Subsequent
Measurement – Financial Instruments Classified as Liabilities
The
Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes
in fair value of its financial instruments classified as liabilities are recorded as other income (expenses).
Fair
Value of Financial Instruments
ASC
Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value
in accordance with generally accepted accounting principles.
ASC
Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1)
market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs).
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under ASC Topic 820 are described as follows:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. |
|
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|
| ● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured
on a Recurring Basis
The
following table presents information about our assets and liabilities measured at fair value on a recurring basis, aggregated by the
level in the fair value hierarchy within which those measurements fell:
| Amount at |
Fair Value Measurement Using |
|||||||||||||||
| Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
| February 28, 2026 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment at cost |
$ | 100,000 | $ | 50,000 | $ | $ | 50,000 | |||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares |
$ | 5,500,000 | $ | $ | $ | 5,500,000 | ||||||||||
| February 28, 2025 | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares |
$ | 4,000,000 | $ | $ | $ | 4,000,000 | ||||||||||
For
the incentive compensation plan , the Company recorded stock based compensation of $ and $ for the years ended February
28, 2026 and February 28, 2025 with corresponding adjustments to incentive compensation plan payable.
The
method of valuation of the incentive compensation plan payable is based on the redemption value of the Series G Preferred Shares. The
method of valuation of the Level 3 investment at cost is an independent third party valuation of the common share value of the investment.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances,
accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
Basic
earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential
common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.
In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from
the exercise of stock options and/or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Basic
loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share
is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to
include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments.
Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in
nature with regards to earnings per share.
Recently
Adopted Accounting Pronouncements
ASU
2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The
amendments require enhanced disclosures about significant segment expenses and other segment items, require disclosure of the title and
position of the chief operating decision maker (“CODM”), explain how the CODM uses reported measures of segment profit or
loss to assess performance and allocate resources, and expand interim disclosure requirements. The amendments apply to entities with
a single reportable segment as well as entities with multiple reportable segments.
The
Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, during fiscal 2025.
The standard requires enhanced disclosures regarding segment expenses and CODM information and applies to entities with a single reportable
segment. Adoption of the standard impacted the Company’s segment reporting disclosures only and did not affect its consolidated
financial position, results of operations, or cash flows.
Recently
issued accounting pronouncement not yet effective
ASU
2024-04—Debt with Conversion and Other Options (Topic 470-20): Induced Conversions of Convertible Debt Instruments
In
November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-04, Debt with Conversion and Other Options
(Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. The amendments clarify the requirements for determining whether
certain settlements of convertible debt instruments should be accounted for as induced conversions or as debt extinguishments. Under
the amended guidance, an induced conversion requires that the inducement offer provide the holder, at a minimum, the consideration issuable
under the existing conversion privileges of the instrument.
The
amendments are effective for annual reporting periods beginning after December 15, 2025, including interim reporting periods within those
fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on
its consolidated financial statements and related disclosures.
ASU
2025-05—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract
Assets
In
July 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-05, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments refine the guidance in ASC
326 related to the measurement of expected credit losses for accounts receivable and contract assets arising from revenue transactions
accounted for under ASC 606. The update clarifies the application of the current expected credit loss (“CECL”) model to such
assets, including the use of practical expedients and considerations in estimating expected credit losses over the contractual term of
the asset.
The
amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal
years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-05 on its consolidated financial
statements and related disclosures.
3.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue
is earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services
are accounted for under Topic 606, , and short-term rentals are accounted for under Topic 842 (which addresses lease accounting and was
adopted on March 1, 2019).
As
disclosed in the revenue recognition section of Note 2 – Accounting Polices, the Company adopted Topic 606 in accordance with the
effective date on March 1, 2018. Note 2 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s
financial statements. Revenue is recognized on direct sales of goods or services when it transfers promised goods or services to customers
in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
After
adopting Topic 842, also referred to above in Note 3, the Company is accounting for revenue earned from rental activities where an identified
asset is transferred to the customer and the customer has the ability to control that asset. The Company recognizes revenue from its
device rental activities when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction
price is fixed or determinable and collection is reasonably assured. Performance obligations associated with device rental transactions
are satisfied over the rental period. Rental periods are short-term in nature. Therefore, the Company has elected to apply the practical
expedient which eliminates the requirement to disclose information about remaining performance obligations. Payments are due from customers
at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced
and remain as accounts receivable until collected.
The
following table presents revenues from contracts with customers disaggregated by product/service:
| Year Ended February 28, 2026 |
Year Ended February 28, 2025 |
|||||||
| Device rental activities | $ | 6,920,336 | $ | 5,050,255 | ||||
| Direct sales of goods and services |
825,000 | 1,080,631 | ||||||
| $ | 7,745,336 | $ | 6,130,886 | |||||
The
Company operates as one reportable segment The Chief Executive Officer (“CEO”) serves as the Chief Operating Decision Maker
(“CODM”). The CODM evaluates the Company’s performance based on consolidated net income. This measure aligns with the
Company’s consolidated financial statements and serves as the basis for resource allocation and performance assessment. The measure
of segment assets is reported on the balance sheet as total consolidated assets. The CODM monitors profitability and strategic growth
initiatives on a consolidated basis, without disaggregating profit or loss into separate operating segments. The Company determined there
are no significant segment expenses that require a separate disclosure. The consolidated net income is used to assess overall company
performance, benchmark against industry standards, and identify profitability trends, which guides resource allocation and investment
in expansion and program upgrades. The CODM also evaluates company performance using operating income. Operating income provides the
CODM with a focused view of the Company’s profitability excluding the effects of financing activities, tax strategies, and other
non-operating items. This measure enables the CODM to assess operational efficiency, monitor performance trends, and evaluate the effectiveness
of strategies aimed at revenue generation and cost management.
4.
LEASES
We
lease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we
recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed
after the adoption of Topic 842, we did not combine lease and non-lease components.
There
is no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there
is a transfer of title or purchase option reasonably certain of exercise.
Below
is a summary of our lease assets and liabilities at February 28, 2026 and February 28, 2025.
| Leases | Classification | February 28, 2026 |
February 28, 2025 |
|||||||
| Assets | ||||||||||
| Operating | Operating Lease Assets |
$ | 931,814 | $ | 1,010,545 | |||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Operating | Current Operating Lease Liability | $ | 243,690 | $ | 197,349 | |||||
| Noncurrent | ||||||||||
| Operating | Noncurrent Operating Lease Liabilities |
676,694 | 810,513 | |||||||
| Total lease liabilities | $ | 920,384 | $ | 1,007,862 | ||||||
Note:
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above
was based on the information available at commencement date in determining the present value of lease payments. We compare against loans
we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly
higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM
charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating
lease cost and rent was $251,883 and $240,731 for both the twelve months ended February 28, 2026 and February 28, 2025, respectively.
5.
INVESTMENT
On
December 23, 2022 the Company entered into a Simple Agreement for Future Equity (SAFE) contract to invest $50,000 to acquire shares of
a company’s capital stock at a discount. On June 3, 2024 the Company acquired a $50,000 convertible note receivable from Nightingale
Intelligent Systems, Inc., a private Delaware corporation that provides unmanned aerial vehicles
(UAV) for commercial applications. On January 3, 2025 the Company exchanged it’s convertible note receivable for : Series
A preferred shares, common shares and common share warrants. On February 28, 2025, there was a 10 :1 split. The Company
now holds Series A preferred shares, common shares and common share warrants (at a strike price of $/share).
The Company values the Nightingale Intelligent Systems, Inc.’s shares and warrants
at $50,000 bringing total investments at cost to $100,000 at February 28, 2026.
6.
REVENUE EARNING DEVICES
Revenue
earning devices (RED) consisted of the following:
| February 28, 2026 |
February 28, 2025 |
|||||||
| Revenue earning devices | $ | 8,355,295 | $ | 6,831,352 | ||||
| Less: Accumulated depreciation | (3,257,668 | ) | (2,292,172 | ) | ||||
| $ | 5,097,627 | $ | 4,539,180 | |||||
During
the year ended February 28, 2026, the Company made total additions to revenue earning devices of $2,632,720 which were transferred from
inventory. For the year ended February 28, 2026, the Company disposed of assets with a value $1,108,776 and related accumulated depreciation
$1,037,839 with a net book value of $70,937 for zero net proceeds..
During
the year ended February 28, 2025, the Company made total additions to revenue earning devices of $3,398,505 which were transferred from
inventory. There was no permanent impairment on revenue earning services for the year ended February 28, 2025.
Depreciation
and amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:
| Depreciation and Amortization RED |
Year Ended February 28, 2026 |
Year Ended February 28, 2025 |
||||||
| Cost of Goods Sold | $ | 1,981,679 | $ | 1,051,498 | ||||
| Operating expenses | 91,811 | 287,830 | ||||||
| Total Depreciation and Amortization RED |
$ | 2,073,490 | $ | 1,339,328 | ||||
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
FIXED ASSETS
Fixed
assets consisted of the following:
| February 28, 2026 |
February 28, 2025 |
|||||||
| Automobile | $ | 74,237 | $ | 74,237 | ||||
| Demo devices | 265,421 | 302,186 | ||||||
| Tooling | 107,020 | 107,020 | ||||||
| Machinery and equipment | 17,246 | 8,825 | ||||||
| Computer equipment | 157,448 | 157,448 | ||||||
| Office equipment | 15,312 | 15,312 | ||||||
| Furniture and fixtures | 21,225 | 21,225 | ||||||
| Warehouse equipment | 38,746 | 36,305 | ||||||
| Leasehold improvements | 26,956 | 26,956 | ||||||
| 723,611 | 749,514 | |||||||
| Less: Accumulated depreciation | (540,426 | ) | (491,186 | ) | ||||
| $ | 183,185 | $ | 258,328 | |||||
During
the year ended February 28, 2026, the Company made additions to fixed assets of $10,863 and also additions through inventory transfers
of $55,701. For the year ended February 28, 2026, the Company disposed of assets with a value $92,466 and related accumulated depreciation
$70,154 with a net book value of $22,312 for zero net proceeds.
During
the year ended February 28, 2025, the Company made additions to fixed assets of $23,724 and also additions through inventory transfers
of $107,836.
Depreciation
and amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:
| Depreciation and Amortization |
Year Ended February 28, 2026 |
Year Ended February 28, 2025 |
||||||
| Fixed assets | $ | 49,240 | $ | 141,309 | ||||
| Revenue earning devices | 91,811 | 287,830 | ||||||
| Total Depreciation and Amortization included in operating expenses |
$ | 141,051 | $ | 429,139 | ||||
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
DEFERRED VARIABLE PAYMENT OBLIGATION
On
February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 in exchange for
a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses
from financial instruments (Revenues). At February 29, 2020 the investor has advanced the full $900,000.
On
May 9, 2019 the Company entered into two similar arrangements with two investors:
| (1) | The investor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $400,000 has been paid to the Company. |
|
| (2) | The investor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues. At February 29, 2020, $50,000 has been paid to the Company. |
These
variable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available
cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum
on the unpaid amount.
In
the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market
value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors.
The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments
associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect
a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of
the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.
On
November 18, 2019 the Company entered into another similar arrangement with the (February 1, 2019) investor above whereby the investor
would advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues (commencing on
quarter ending May 31, 2020). At February 29, 2020 the investor has advanced $109,000 and the investor advanced the $116,000 remainder
as of May 2020.
On
December 30, 2019 the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $100,000
in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020).
At February 29, 2020 the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020. If the total investor
advances turns out to be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted
on a pro-rata basis.
On
April 22, 2020 the Company entered into another similar arrangement with the (first May 9, 2019) investor above whereby the investor
would advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues. At May 31, 2020
the investor has fully funded this commitment.
On
July 1, 2020 the Company entered into a similar agreement with the first investor whereby the investor would pay up to $800,000 in exchange
for a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue. These Payments are to be made 90 days
after the fiscal quarter with the first payment being due no later than May 31, 2021. If the Payments would deplete RAD’s available
cash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the
first payment due July 2020 and the final payment no later than February 28, 2021. As at August 31, 2020 the investor had fully funded
the $800,000 commitment
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
August 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for
$900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $1,925,000. This new agreement
is for similar terms as the above agreements save for the following: the rate payment is revised to 14.25% payable on revenues commencing
the quarter ended August 31, 2020 and the Payments are secured by the assets of the Company. This interest may be secured by UCC filing
but is subordinated to equipment financing on the products the Company leases to its customers.
In
summary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the
investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an
independent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the
total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares
are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments
in one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for
the shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted
below. This aggregate asset disposition % was reduced from 43.77 % to 33.77%
The
Payments will first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended
May 31, 2019 and will accrue every quarter thereafter. As of February 28, 2026, the Company has accrued approximately $3,161,727 in Payments,
of which $1,901,259 is in arrears. As of February 28, 2025, the Company has accrued approximately $1,901,258 in Payments, of which $904,377
is in arrears No notices have been received by the Company.
On
March 1, 2021 the first investor referred to above whose aggregate investment is $1,925,000 revised his agreements as follows:
| 1) | The rate payment was reduced from 14.25 % to 9.65 % |
|
| 2) | The asset disposition % (see below) was reduced from 31 % to 21% |
In
consideration for the above changes, the investor received Series F Convertible Preferred Stock and a warrant to purchase 367 shares
of its Series F Convertible Preferred Stock with a five-year term and an exercise price of $1.00. During the three months ended May 31,
2021 the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred Stock. The company attributed a fair
value based on recent transactions for the Series F Preferred stock and warrants of $33,015,214 and recorded a loss on settlement of
debt with a corresponding adjustment to paid in capital.
The
Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be
made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements.
As of February 28, 2026, and February 28, 2025, the long-term balances other than Payments already owed is the cash received of $2,525,000
and $2,525,000, respectively.
For
both the years ended February 28, 2026 and February 28, 2025, the Company has received $0 related to the deferred payment obligation
as the balance remains $2,525,000 at both February 28, 2026 and February 28, 2025.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
RELATED PARTY TRANSACTIONS
For
the years ended February 28, 2026, and February 28, 2025, the Company had net (advances) repayments of ($132,268) and ($71,927), respectively,
to its loan payable-related party. At February 28, 2026, the loan payable-related party was $461,633 and $329,365 at February 28, 2025.
As of February 28, 2026, included in the balance due to the related party is $285,638 of deferred salary all of which bears interest
at 12%. As of February 28, 2025, included in the balance due to the related party is $190,013 of deferred salary all of which bears interest
at 12%. The accrued interest included at February 28, 2026, was $79,268 (February 28, 2025- $51,575).
During
the year ended February 28, 2026, the Company a net repayment of $390,744 in deferred compensation for the CEO. This would bring his
annual bonus for the year ended February 28, 2026, to $ million. For the fiscal year ended February 28, 2025, the Company paid out
$1,390,744 to the CEO. During the year ended February 28, 2025, the Company a net accrual of $1,663,833 in deferred compensation for
the CEO. This would bring his annual bonus for the year ended February 28, 2025, to $ million. For the fiscal year ended February
28, 2025, the Company paid out $836,167 to the CEO. This was all in accordance with a December 2023 board action allowing for $1 million
of discretionary compensation.
During
the years ended February 28, 2026, and February 28, 2025, the Company accrued Series G shares to be issued totaling $1,500,000
and Series G preferred shares to be issued totaling $1,500,000, respectively, both per Company resolution. The Series G preferred
shares are redeemable at $ per share and will be issued by the Company at the appropriate time. The balance of Incentive Compensation
Plan Payable at February 28, 2026, was $ and the balance February 28, 2025, was $.
During
the years ended February 28, 2026, and February 28, 2025, the Company was charged $2,576,111 and $2,541,180, respectively in consulting
fees for research and development to a company partially owned by a principal shareholder included in research and development expenses.
The principal shareholder received no compensation from this partially owned research and development company and the fees were spent
on core development projects. As at February 28, 2026, and February 28, 2025, the balance due to this company was $160,557 and $76,532,
respectively.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
10.
LOANS PAYABLE
Loans
payable at February 28, 2026 consisted of the following:
| Date | Maturity | Description | Principal | Interest Rate |
|||||||||
| July 18, 2016 | July 18, 2017 | Promissory note | (1)* | $ | 3,500 | 22 | % | ||||||
| December 10, 2020 | March 1, 2027 | Promissory note | (2) | 3,921,168 | 12 | % | |||||||
| December 10, 2020 | March 1, 2027 | Promissory note | (3) | 2,754,338 | 12 | % | |||||||
| December 10, 2020 | December 10, 2024 | Promissory note | (4) | 12 | % | ||||||||
| December 14, 2020 | March 1, 2027 | Promissory note | (5) | 310,375 | 12 | % | |||||||
| December 30, 2020 | March 1, 2027 | Promissory note | (6) | 350,000 | 12 | % | |||||||
| January 1, 2021 | March 1, 2027 | Promissory note | (7) | 25,000 | 12 | % | |||||||
| January 1, 2021 | March 1, 2027 | Promissory note | (8) | 145,000 | 12 | % | |||||||
| January 14, 2021 | March 1, 2027 | Promissory note | (9) | 237,500 | 12 | % | |||||||
| February 22, 2021 | March 1, 2027 | Promissory note | (10) | 1,650,000 | 12 | % | |||||||
| March 1, 2021 | March 1, 2027 | Promissory note | (11) | 6,000,000 | 12 | % | |||||||
| June 8, 2021 | June 8, 2027 | Promissory note | (12) | 2,750,000 | 12 | % | |||||||
| July 12, 2021 | July 26, 2026 | Promissory note | (13) | 7 | % | ||||||||
| September 14, 2021 | September 14, 2027 | Promissory note | (14) | 1,650,000 | 12 | % | |||||||
| July 28, 2022 | March 1, 2027 | Promissory note | (15) | 170,000 | 15 | % | |||||||
| August 30, 2022 | August 30,2027 | Promissory note | (16) | 3,000,000 | 15 | % | |||||||
| September 7, 2022 | March 1, 2027 | Promissory note | (17) | 400,000 | 15 | % | |||||||
| September 8, 2022 | March 1, 2027 | Promissory note | (18) | 475,000 | 15 | % | |||||||
| October 13, 2022 | March 1, 2027 | Promissory note | (19) | 350,000 | 15 | % | |||||||
| October 28, 2022 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| November 9, 2022 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| November 10, 2022 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| November 15, 2022 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| January 11, 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| February 6, 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| April 5. 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| April 20, 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| May 11, 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| October 27, 2023 | October 31, 2026 | Promissory note | (20) | 400,000 | 15 | % | |||||||
| November 30, 2023 | April 30, 2027 | Purchase Agreement | (21) | 203,000 | 15 | % | |||||||
| March 8, 2024 | August 8, 2027 | Purchase Agreement | (22) | 350,000 | 15 | % | |||||||
| July 26, 2025 | July 26, 2026 | Promissory note | (23) | 165,000 | 15 | % | |||||||
| August 7,2025 | August 7,2026 | Promissory note | (24) | 245,000 | 15 | % | |||||||
| August 25, 2025 | August 25, 2026 | Promissory note | (25) | 137,500 | 15 | % | |||||||
| August 25, 2025 | May 6, 2026 | Future Receivables Purchase and Sale Agreement | (26) | 189,951 | 108 | % | |||||||
| September 25, 2025 | September 25, 2026 | Promissory note | (27) | 550,000 | 15 | % | |||||||
| October 30. 2025 | October 30. 2026 | Promissory note | (28) | 200,000 | 15 | % | |||||||
| November 6, 2025 | November 6, 2026 | Promissory note | (29) | 275,000 | 15 | % | |||||||
| November 24, 2025 | November 24, 2026 | Promissory note | (30) | 450,000 | 15 | % | |||||||
| December 9, 2025 | December 9, 2026 | Promissory note | (31) | 450,000 | 15 | % | |||||||
| December 17, 2025 | September 23, 2026 | Business loan | (32) | 329,962 | 65 | % | |||||||
| December 22, 2025 | December 22, 2026 | Convertible note | (33) | 495,000 | 12 | % | |||||||
| December 27, 2025 | December 27, 2026 | Promissory note | (34) | 275,000 | 15 | % | |||||||
| January 12, 2026 | January 12, 2027 | Promissory note | (35) | 330,000 | 15 | % | |||||||
| January 27, 2026 | January 27, 2027 | Promissory note | (36) | 170,000 | 15 | % | |||||||
| February 2, 2026 | February 2, 2027 | Promissory note | (37) | 330,000 | 15 | % | |||||||
| February 19, 2026 | February 19, 2027 | Convertible note | (38) | 165,000 | 12 | % | |||||||
| February 24, 2026 | February 24, 2027 | Promissory note | (39) | 170,000 | 15 | % | |||||||
| $ | 33,672,294 | ||||||||||||
| Less: current portion of loans payable |
(9,483,914 | ) | |||||||||||
| Less: discount on non-current loans payable |
|||||||||||||
| Non-current loans payable, net of discount |
$ | 24,188,380 | |||||||||||
| Current portion of loans payable | $ | 9,483,914 | |||||||||||
| Less: discount on current portion of loans payable |
(635,774 | ) | |||||||||||
| Current portion of loans payable, net of discount |
$ | 8,848,140 | |||||||||||
As
of February 28, 2026 , all long term debt matures in the fiscal year ending February 29, 2028.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | The note, with an original principal amount of $350,000, may be pre-payable at any time. The note balance includes an original issue discount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year term and having a relative fair value of $271,250. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their respective values, a debt discount of $271,250 with a corresponding adjustment to paid in capital for the relative fair value of the warrant. On March 1, 2024, the unamortized relative fair value discount of $65,092 was removed with a corresponding adjustment to accumulated deficit. A $8,399 unamortized discount remained. On November 28, 2023, the parties extended the maturity date from December 10, 2023, to March 1, 2025, with all other terms and conditions remaining the same. On April 16, 2025, the parties again extended the maturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions remaining the same. For the year ended February 28, 2026, the Company recorded amortization expense of $138, with an unamortized discount of $0 at February 28, 2026.The loan is fully amortized. |
| (7) | |
| (8) |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (9) | |
| (10) | |
| (11) | |
| (12) |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (13) | |
| (14) | |
| (15) | |
| (16) | |
| (17) | |
| (18) |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (19) | |
| (20) | |
| October 28, 2022, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants and 1 Series F Preferred Share having a relative fair value of $299,399. On March 1, 2024, the unamortized relative fair value discount of $286,775 was removed with a corresponding adjustment to accumulated deficit. A $47,892 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of $18,483, with an unamortized discount of $14,428 at February 28, 2026. |
|
| November 9, 2022, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $299,750. On March 1, 2024, the unamortized relative fair value discount of $288,513 was removed with a corresponding adjustment to accumulated deficit. A $48,126 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of $18,573, with an unamortized discount of $14,502 at February 28, 2026. |
November
10, 2022, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $302,020.
On March 1, 2024, the unamortized relative fair value discount of $291,694 was removed with a corresponding adjustment to accumulated
deficit. A $48,290 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,637, with an unamortized discount of $18,647 at February 28, 2026.
November
15, 2022, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $299,959.
On March 1, 2024, the unamortized relative fair value discount of $287,814 was removed with a corresponding adjustment to accumulated
deficit. A $47,976 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,515, with an unamortized discount of $14,456 at February 28, 2026.
January
11, 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $299,959.
On March 1, 2024, the unamortized relative fair value discount of $286,813 was removed with a corresponding adjustment to accumulated
deficit. A $48,124 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,573, with an unamortized discount of $14,502 at February 28, 2026.
February
6, 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $299,959.
On March 1, 2024, the unamortized relative fair value discount of $288,342 was removed with a corresponding adjustment to accumulated
deficit. A $48,294 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,638, with an unamortized discount of $14,557 at February 28, 2026.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
April
5, 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $296,245.
On March 1, 2024, the unamortized relative fair value discount of $286,821 was removed with a corresponding adjustment to accumulated
deficit. A $48,409 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,683, with an unamortized discount of $14,594 at February 28, 2026.
April
20, 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $302,219.
On March 1, 2024, the unamortized relative fair value discount of $294,824 was removed with a corresponding adjustment to accumulated
deficit. A $48,777 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,824, with an unamortized discount of $14,711 at February 28, 2026.
May
11, 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $348,983.
On March 1, 2024, the unamortized relative fair value discount of $348,831 was removed with a corresponding adjustment to accumulated
deficit. A $49,978 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$19,288, with an unamortized discount of $15,096 at February 28, 2026.
October
27 2023, $400,000 loan, original issue discount of $50,000, Series F Preferred Share warrants having a relative fair value of $261,759.
On March 1, 2024, the unamortized relative fair value discount of $254,487 was removed with six a corresponding adjustment to accumulated
deficit. A $48,611 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of
$18,761, with an unamortized discount of $14,657 at February 28, 2026.
| (21) | |
| (22) | |
| (23) | |
| (24) | |
| (25) | |
| (26) | |
| (27) | |
| (28) | |
| (29) | |
| (30) |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(31)
|
|
| (32) | |
|
(33) |
|
| (34) |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
STOCKHOLDERS’ DEFICIT
Preferred
Stock: The Company is authorized to issue up to shares of $ par value preferred stock. The board of directors is
authorized to designate any series of preferred stock up to the total authorized number of shares.
Series
B Convertible, Redeemable Preferred Stock
The
board of directors has designated shares of Series B Convertible, Redeemable Preferred Stock with a par value of $ per share.
As of February 28, 2026 , there are no shares of Series B Preferred Stock outstanding. The Series B Convertible Preferred Stock are redeemable
at $ per share, rank in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights
on a converted basis and receives quarterly dividends of 8%. Each holder may, at any time and from time to time convert all, but not
less than all, of their shares of Series B Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares
of common stock determined by dividing the redemption value by the Conversion Price. The Conversion price is equal to the lower of (1)
a fixed price equaling the closing bid price of the Common Stock on the trading day immediately preceding the date of the acquisition
of the shares and (2) the lowest traded price of the Common Stock during the ten (10) calendar days immediately preceding, but not including,
the Conversion Date. Following an event of default,” as defined in the Purchase Agreement, the Conversion price shall equal the
lower of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty five percent (85%) of the lowest traded
price for the Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion
Date. Each share of Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of eight percent
(8%) per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share
has been converted or redeemed. Dividends may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any dividends
that are not paid a shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14% per annum or
the lesser rate permitted by applicable law which shall accrue and compound daily from the dividend payment date through and including
the date of actual payment in full. On the thirtieth day following the issue date of this Preferred Stock the Company shall have the
obligation to redeem one-third of the Preferred Stock outstanding for a redemption price equal to the redemption value of each such share
of Preferred Stock, plus any accrued but unpaid dividends, plus all other amounts due to the Holder including, but not limited to Late
Fees, liquidated damages and the legal fees and expenses of the Holder’s counsel. On the sixtieth (60th) calendar day
following the date Preferred Stock is issued, the Corporation shall have the obligation to redeem one-half of the Preferred Stock then
outstanding for the redemption price. On the ninetieth (90th) calendar day following the date Preferred Stock is issued, the
Corporation shall have the obligation to redeem all of the Preferred Stock then outstanding for the redemption price. From the date of
issuance until the date no shares of Series B Preferred Stock are issued and outstanding, unless Holders of at least 75% in Stated Value
of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall
not permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect
to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (b) other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend its charter documents,
including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely affects any rights
of the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common Stock, Common Stock
Equivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction Documents: (e)
pay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate of the
Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length
basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required
for board approval); or(g) enter into any agreement with respect to any of the foregoing.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Series
C Convertible, Redeemable Preferred Stock
The
board of directors has designated
shares of Series C Convertible, Redeemable Preferred Stock with a par value of $
per share. As of the February 28, 2026, there are
shares of Series C Preferred Stock outstanding. The Series C Convertible Preferred Stock are redeemable at $
per share, rank in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights on a
converted basis and receives quarterly dividends of 12%.
Each holder may, after 180 days after issuance, at any time and from time to time convert all, but not less than all, of their
shares of Series C Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares of common stock
determined by dividing the redemption value by the Conversion Price. The
Conversion price is equal to the lower of (1) a fixed price equaling the closing bid price of the Common Stock on the trading day
immediately preceding the date of the acquisition of the shares and (2) the lowest traded price of the Common Stock during the ten
(10) calendar days immediately preceding, but not including, the Conversion Date. Following an event of default,” as defined
in the Purchase Agreement, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price
per share equaling ninety percent (90%) of the lowest traded price for the Company’s common stock during the ten (10) Trading
Days immediately preceding, but not including, the Conversion Date. Each
share of Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of twelve percent (12%)
per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share has
been converted or redeemed. Dividends may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any
dividends that are not paid a shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14%
per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the dividend payment date
through and including the date of actual payment in full. On the one hundred eightieth day following the issue date of this
Preferred Stock the Company shall have the obligation to redeem all outstanding Series Preferred Shares for one hundred nine and one
half percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts due to the Holder pursuant
to the Certificate of Designation and/or any Transaction Documents (“Redemption Date”). Prior to the Redemption Date,
the Company at its discretion and on three (3) Trading Days’ written notice, may redeem all outstanding Preferred Shares for
one hundred nine and one half percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts
due to the Holder pursuant to the Certificate of Designation and/or any Transaction Documents.
From
the date of issuance until the date no shares of Series C Preferred Stock are issued and outstanding, unless Holders of at least 75%
in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall
not, and shall not permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create,
incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee,
on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits
therefrom; (b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect
to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend
its charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely
affects any rights of the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common
Stock, Common Stock Equivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction
Documents: (e) pay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate
of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made
on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than
a quorum otherwise required for board approval); or(g) enter into any agreement with respect to any of the foregoing.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Series
E Preferred Stock
The
board of directors has designated shares of Series E Preferred Stock. As of February 28, 2026, there are shares of
Series E Preferred Stock outstanding. The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions
of assets upon liquidation, dissolution or winding up of the Corporation. The Series E preferred stock is non-redeemable, does not have
rights upon liquidation of the Company and does not receive dividends. The outstanding shares of Series E Preferred Stock have the right
to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of
equity instruments with voting rights. As a result, the holder of Series E Preferred Stock has 2/3rds of the voting power of all shareholders
at any time corporate action requires a vote of shareholders.
Series
F Convertible Preferred Stock
The
board of directors has designated shares of Series F Convertible Preferred Stock with a par value of $ per share. As of February
28, 2026 , there are shares of Series F Convertible Preferred Stock outstanding. The Series F Convertible Preferred Stock is non-redeemable,
does not have rights upon liquidation of the Company, does not have voting rights and does not receive dividends. Each holder may, at
any time and from time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number
of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common
stock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis. So long as any shares of Series F Convertible
Preferred Stock are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders: (a) alter
or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible
preferred stock; (b) create any Senior Securities; (c) create any pari passu Securities; (d) do any act or thing not authorized or contemplated
by the Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time
to time amended, (or otherwise suffer to exist any such taxation as a result thereof).
Series
G Preferred Stock
The
board of directors has designated shares of Series G Preferred Stock. As of the date of this report, there are shares of Series
G Preferred Stock outstanding. The series G shares are redeemable at $ per share The Series G preferred stock does not have voting
rights, does not have rights upon liquidation of the Company and does not receive dividends.
Summary
of Preferred Stock Activity
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Series
C Convertible, Redeemable Preferred Stock (Temporary Equity)
On
February 10, 2025, in connection with a Share Purchase Agreement the Company created a new class of Series C Convertible Redeemable with
authorized shares.
In
exchange for
Series C Convertible Redeemable Preferred Shares (“Series
C”), the Company received gross proceeds of $306,000
with net proceeds of $278,580
after paying $6,000
in legal fees and $21,420
in broker fees both charged against paid in capital. The Company
must redeem the shares at stated capital of
per share and a 1.095 premium at 180 days after issuance. The
Company recorded the
outstanding shares at its redemption value of $402,084
at February 28, 2025, with the offsetting adjustment
to paid in capital. During the year the Company issued 12%
quarterly dividends in
Series C shares with a value of $58,100.
The Company failed to redeem the Series C shares on the August 9, 2025 redemption date and a penalty of
Series C shares with a value of $149,307
was recorded. In August 2025 the Company redeemed
Series C shares for $125,000
including a deemed dividend of $29,871.
In September 2025 the Company failed to convert a conversion notice of
shares. This conversion was withdrawn in December 2025
and a new conversion for
Series C shares with a value of $111,690
including a dividend of $84,690
with a corresponding adjustment to paid in capital .In exchange
for the converted Series C shares , the Company issued
common shares. In January 2026, the Company failed to convert
a conversion notice of
shares. On March 19, 2026 the Company
entered into an agreement with the investor whereby the parties agreed to reduce the penalty on the September 2025 and January 2026 failed
conversion to 133 Series C shares at a value of $175,140 ( The penalty was reduced from 345 Series C shares to 133 Series C shares) .
The parties agreed on the Series C share balance at February 28, 2026 to be 417 series C shares. In addition the parties agreed to issue
an additional 222 Series C shares for proceeds of $200,000 and fees of $22,000. These shares have a redemption value of $291.708. Also
on March 19, 2026 ,the parties agreed to convert 165 Series C shares at a value of $198,000 for 13,550,625 common shares. At February
28, 2026 and February 28, 2025 there are 417 and 306 outstanding Series C shares.
Series
F Convertible Preferred Stock
Each
holder of Series F Convertible Preferred Shares may, at any time and from time to time convert all, but not less than all, of their shares
into a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares
of common stock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis.
On
April 30, 2024 the Company increased authorized shares to Series F Preferred Shares.
Series
F Preferred Stock Activity:
During
the year ended February 28, 2026 Series F shareholders there was no activity.
During
the year ended February 28, 2025 Series F shareholders had the following activity:
| — | A Series F preferred shareholder exchanged Series F preferred shares for a $ note payable. (see Note 11). The Company record an adjustment to the par value of the shares of $, paid -in capital for the carrying value of the shares of $ with the remaining amount of $ a deemed dividend. |
At
both February 28, 2026 and February 28, 2025 there are outstanding Series F preferred stock.
Unissued
Series F Preferred Stock
At
both February 28, 2026 and February 28, 2025 there remains issuable Series F preferred stock at a value of $99,086.
Summary
of Preferred Stock Warrant Activity
| Number of Series F Preferred Warrants |
Weighted Average |
Weighted Average |
||||||||||
| Outstanding at March 1, 2025 | 939 | $ | 1.00 | 8.5 | ||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | — | |||||||||||
| Outstanding at February 28, 2026 | 939 | $ | 1.00 | 7.5 | ||||||||
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summary
of Common Stock Activity
The
Company increased authorized common shares from to on July 8, 2022, from to on
March 19, 2023 from to on August 30, 2023, from to on March 22, 2024., from
to on October 4, 2024 from to on February 21, 2025, from to
on July 25, 2025 and from to on October 15, 2025.
The
Company decreased authorized common shares from to on March 19, 2026.
On
February 5, 2026, the holders of a majority of the voting power of the Company’s outstanding voting securities executed the written
consent approving a reverse stock split of the Company’s issued and outstanding Common Stock at a ratio of 1-for-100. The common
shares have been adjusted to reflect this reverse stock split.
Summary
of Common Stock Activity
During
the year ended, February 28, 2026, common shareholders had the following activity:
| — | the Company issued common shares with gross proceeds of $5,185,344 and net proceeds of $4,801,184 after paid issuance costs of $274,161. Included in these common shares was a commitment fee of $90,000 on the issuance of shares bringing total fees to $364,161. |
|
| — | the Company issued common shares in gross proceeds of $6,384,000 to repay $5,411,000 loans payable and $37,500 in accrued interest with loss on settlement of $935,500 . |
|
| — |
the |
During
the year ended, February 28, 2025, common shareholders had the following activity:
| — | the Company issued common shares with gross proceeds of $13,697,245 and net proceeds of $13,120,679 after paid issuance costs of $576,565. Included in the net proceeds are $ in share proceeds receivable received after year end. Included in these common shares was a commitment fee of $125,000 on the issuance of shares bringing total fees to $701,565. |
|
| — | the Company issued common shares to repay $562,000 loans payable from two different lenders. |
Summary
of Warrant and Stock Option Activity
| Number of Warrants |
Weighted Average Exercise Price |
Weighted Average Remaining Years |
||||||||||
| Outstanding at February 29, 2024 | 3,005,957 | $ | 0.30 | |||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | (2,533,243 | ) | (0.30 | ) | — | |||||||
| Outstanding at February 28, 2025 | 472,714 | $ | 0.30 | |||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | (2,714 | ) | (0.04 | ) | — | |||||||
| Outstanding at February 28, 2026 | 470,000 | $ | 0.04 | |||||||||
During
the year ended February 28, 2026 warrant holders had the following activity:
| — | During the year warrants to acquire shares expired. |
During
the year ended February 28, 2025 warrant holders had the following activity:
| — | During the year warrants to acquire shares expired. |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended February 28, 2026 and February 29, 2025, the Company recorded a total of $ and $, respectively on stock-based payments
for warrants with a corresponding adjustment to additional paid-in capital.
For
the years ended February 28, 2026 and February 28, 2025 the Company recorded a total of $ and $ respectively, to stock-based
compensation for options and shares with a corresponding adjustment to additional paid-in capital. In addition for both the years ended
February 28, 2026 and February 28, 2025 the Company recorded other stock based compensation of $ payable in Series G Preferred shares
which have not yet been issued.
Summary
of Common Stock Option Activity
On
April 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved
and adopted the 2021 Incentive Stock Plan (the “2021 Plan”). On August 11, 2022
The
purpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors, executives, selected
Employees and Consultants, and reward participants for making major contributions to the success of the Company. The 2021 Plan authorizes
the granting of stock options, restricted stock, restricted stock units, stock appreciation rights and stock awards. A total of two million
() shares of common stock may be issued under the 2021 Plan. All awards under the 2021 Plan, whether vested or unvested, are
subject to the terms of any recoupment, clawback or similar policy of the Company in effect from time to time, as well as any similar
provisions of applicable law, which could in certain circumstances require repayment or forfeiture of awards or any shares of stock or
other cash or property received with respect to the awards, including any value received from a disposition of the shares acquired upon
payment of the awards. The 2021 Plan will be administered by the Board or any Committee authorized by the Board, if applicable, which
will have the sole authority to, among other things: construe and interpret the 2021 Plan; make rules and regulations relating to the
administration of the 2021 Plan; select participants; and establish the terms and conditions of awards, all in accordance with the terms
of the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the Board. Termination will not
affect awards then outstanding.
During
the year ended February 28, 2026 the Company had the following common stock option activity:
| — | On the original 2021 plan, options to purchase shares were forfeited due to employee terminations. On the 2023 plan (see below) options to purchase shares were forfeited due to employee terminations. |
During
the year ended February 28, 2025 the Company had the following common stock option activity:
| — | On the original 2021 plan, options to purchase shares were forfeited due to employee terminations. On the 2023 plan (see below) options to purchase shares were forfeited due to employee terminations. |
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Number of Options |
Weighted Average |
Weighted Average Remaining Years |
||||||||||
| Outstanding at March 1, 2024 | 1,886,670 | $ | 2.00 | |||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited, extinguished and cancelled |
(64,389 | ) | $ | 2.00 | ( | ) | ||||||
| Outstanding at February 28, 2025 | 1,822,281 | $ | 2.00 | |||||||||
| Number of Options |
Weighted Average |
Weighted Average Remaining Years |
||||||||||
| Outstanding at March 1, 2025 | 1,822,281 | $ | 2.00 | |||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited, extinguished and cancelled |
(90,160 | ) | $ | 2.00 | ( | ) | ||||||
| Outstanding at February 28, 2026 | 1,732,121 | $ | 2.00 | |||||||||
12.
COMMITMENTS AND CONTINGENCIES
Litigation
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision
for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated.
If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed
consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series
of complex judgments about future events and can rely heavily on estimates and assumptions.
The
related legal costs are expensed as incurred.
On
September 24, 2024, a prospective lender filed a claim against the Company for an alleged breach of a non-binding term sheet made on
June 7, 2024. The Company and its counsel believe the claim is without merit however the courts have mandated mediation. After consideration
of business factors the parties executed a settlement agreement in June 2025 with the Company agreeing to pay $65,000 with no admission
of wrongdoing. The Company paid the $65,000 on August 1, 2025.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating
Lease
On
March 10, 2021, the Company entered into a 10 year lease agreement for a manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan,
48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent of $15,880 per month. The base rent increase by 3%
per annum commencing May 1, 2024. The Company paid a security deposit of $15,880.
On
February 5, 2024, the Company entered into a 3-year lease agreement for a vehicle commencing February 5, 2024 through to February 5,
2027 with a minimum base rent of $1,223 per month. The Company paid a down payment of $9,357.
On
March 11, 2025, the Company entered into a 3-year lease agreement for a vehicle commencing March 11, 2025 through to March 11, 2028 with
a minimum base rent of $1,286 per month. The Company paid a down payment of $13,188. The Company recorded the right of use asset of $53,739
with a corresponding adjustment to operating lease liability.
The
Company’s leases are accounted for as operating leases. The weighted average discount rate used was 10% and the weighted average
remaining lease term at February 28, 2026 was 4.93 years. Rent expense and operating lease cost are recorded over the lease terms on
a straight-line basis. Rent expense and operating lease cost was $251,883 and $240,731 for the years ended February 28, 2026 and February
28, 2025, respectively.
| Maturity of Lease Liabilities |
Operating Leases |
|||
| February 28, 2027 | $ | 243,690 | ||
| February 28, 2028 | 227,383 | |||
| February 29, 2029 | 207,558 | |||
| February 28, 2030 | 207,558 | |||
| February 28, 2031 | 207,558 | |||
| February 28, 2032 and after | 34,593 | |||
| Total lease payments | 1,128,340 | |||
| Less: Interest | (207,956 | ) | ||
| Present value of lease liabilities | $ | 920,384 | ||
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
| For the Year Ended |
||||||||
| February 28, | February 28, | |||||||
| 2026 | 2025 | |||||||
| Numerator: | ||||||||
| Net loss available to common shareholders | $ | (14,510,251 | ) | $ | (18,935,592 | ) | ||
| Effect of common stock equivalents | ||||||||
| Less redemption dividend to Series F and Series B preferred shareholders |
(114,561 | ) | (423,476 | ) | ||||
| Net loss adjusted for common stock equivalents | (14,624,812 | ) | (19,358,968 | ) | ||||
| Denominator: | ||||||||
| Weighted average shares – basic | 202,908,578 | 116,476,733 | ||||||
| Net loss per share – basic | $ | (0.07 | ) | $ | (0.16 | ) | ||
| Denominator: | ||||||||
| Weighted average shares – diluted | 202,908,578 | 116,476,733 | ||||||
| Net loss per share – diluted | $ | (0.07 | ) | $ | (0.16 | ) | ||
| For the Year Ended |
||||||||
| February 28, | February 28, | |||||||
| 2026 | 2025 | |||||||
| Convertible Series F Preferred Shares |
924,161,175 | 497,229,655 | ||||||
| Convertible Series C Preferred Shares | 22,830,847 | 1,718,308 | ||||||
| Convertible and exchangeable debt | 1,095,380,027 | |||||||
| Stock options and warrants | 2,202,121 | 2,294,996 | ||||||
| Total | 2,044,574,170 | 501,242,959 | ||||||
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
INCOME TAXES
The
Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation
of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The
income tax expense (benefit) consisted of the following for the fiscal years ended February 28, 2026 and ended February 28, 2025:
| February 28, 2026 |
February 28, 2025 |
|||||||
| Total current | $ | $ | ||||||
| Total deferred | ||||||||
| Total | $ | $ |
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The
following is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal
years ended February 28, 2026 and February 28, 2025:
| February 28, 2026 |
||||
| Federal statutory rate | $ | (2,900,000 | ) | |
| State income tax benefit, net of federal benefit | (660,000 | ) | ||
| Non deductible interest | 500,000 | |||
| Non deductible stock based compensation | 334,000 | |||
| Change in valuation allowance | 2,726,000 | |||
| Total | $ | |||
| February 28, 2025 |
||||
| Federal statutory rate | $ | (4,000,000 | ) | |
| State income tax benefit, net of federal benefit | (900,000 | ) | ||
| Non deductible interest | 500,000 | |||
| Non deductible stock based compensation | 322,000 | |||
| Change in valuation allowance | 4,078,000 | |||
| Total | $ | |||
For
the years ended February 28, 2026 and February 28, 2025, the expected tax benefit, temporary timing differences and long-term timing
differences are calculated at the 21% statutory rate.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Significant
components of the Company’s deferred tax assets and liabilities were as follows for the fiscal years February 28, 2026 and February
28, 2025:
| February 28, 2026 |
February 28, 2025 |
|||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 22,726,000 | $ | 20,000,000 | ||||
| Deferred tax liabilities: | ||||||||
| Depreciation | ||||||||
| Deferred revenue | ||||||||
| Total deferred tax liabilities | ||||||||
| Net deferred tax assets: | ||||||||
| Less valuation allowance | (22,726,000 | ) | (20,000,000 | ) | ||||
| Net deferred tax assets (liabilities) |
$ | $ | ||||||
The
Company has incurred losses since inception, therefore, the Company has no federal tax liability. Additionally there are limitations
imposed by certain transactions which are deemed to be ownership changes which occurred in the Company on August 28, 2017. The net deferred
tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward was approximately
$90,000,000 at February 28, 2026 and $76,973,800 at February 28, 2025, that is available for carryforward for federal income tax purposes
and begin to expire in 2030.
Although
the Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration. Accordingly, the future income
tax asset amounts have been fully reserved by a valuation allowance.
The
Company has maintained a full valuation allowance against its deferred tax assets at February 28, 2026 and February 28, 2025. A valuation
allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not
be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided.
The
Company does not have any uncertain tax positions at February 28, 2026 and February 28, 2025 that would affect its effective tax rate.
The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because
the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax
authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and
penalties as part of income tax expense.
The
Company’s tax returns for the years ended February 28, 2025 and February 29, 2024, and February 28, 2023 are open for examination
under Federal statute of limitations.
ARTIFICIAL
INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.
SUBSEQUENT EVENTS
Subsequent
to February 28, 2026 through to filing date,
—
the Company issued common shares pursuant to a share purchase agreement for gross proceeds of $, issuance costs of
$ and cash proceeds of $.
| — | the Company issued shares to a lender to settle $745,900, pursuant to exchange agreements with the lender. |
| — | the Series C Preferred Shareholder converted Series C preferred shares at a value of $391,572 for common shares |
| — | on May 4 2026 the Company entered into an Equity Financing Agreement whereby an investor shall invest up to $10,000,000 over the course of thirty-six (36) month at a purchase price of eighty-seven percent (87%) of the average of the three lowest bid trade price in the 10 day preceding period. In conjunction with the above agreement, the Company entered into a Registration Rights Agreement. |
| — | on March 12, 2026 the Company issued a promissory note to a lender for $170,000 with cash proceeds of $150,000 and an original issue discount of $20,000. The loan bears interest at 15% compounding annually, matures in 1 year and has a general security charging all of the Company’s present and after-acquired property. |
| — | on March 19, 2026 the Company entered into a memorandum of understanding whereby the outstanding Series C Preferred Shares were adjusted to Series C Preferred Shares. The memorandum reduced penalties that were added after the Company refused conversions . The reduction amounted to Series C Preferred Shares or a stated value of $254,492. In exchange, the Company agreed to proceed with the present conversion of Series C Preferred shares for common shares and issue new Series C shares with a redemption value of $291,708 in exchange for net proceeds of $200,000. |
| — | on March 25, 2026, the Company issued a convertible, redeemable note to a lender for $110,000 with cash proceeds of $95,000, an original issue discount of $10,000, and $5,000 for fees. The loan bears interest at 12%, the note is redeemable by the Company at any time subject to a premium ranging from 110% to 140% if redeemed within the first 180 days of the note . The note matures in 1 year and converts after 180 days at 80% of the lowest trading price 15 trading days prior to the conversion date. |
| — | on March 25, 2026, the Company issued a convertible, redeemable note to a lender for $630,000 with cash proceeds of $595,000, an original issue discount of $30,000, and $5,000 for fees. The loan bears interest at 12%, the note is redeemable by the Company at any time subject to a premium ranging from 110% to 140% if redeemed within the first 180 days of the note. The note matures in 1 year and converts after 180 days at 20% of the lowest trading price 15 trading days prior to the conversion date. A refundable commitment fee of 14.1 million common shares was issued, but is returnable if the loan plus accrued interest is paid back by May 5, 2026. On May 5, 2026, the Company repaid in full, principal and interest of $638,492 and the 14.1 million commitment fee shares were returned. |
| — | on April 20, 2026, the Company issued a convertible note to a lender for $277,778 with cash proceeds of $250,000, an original issue discount of $27,778, and $5,000 for fees. The loan bears interest at 12%, and the note matures in 1 year. If the loan is prepaid, one year’s full interest of $ 33,333 is due. The note converts at any time at 75% of the lowest closing trading price 10 trading days prior to the conversion date. Interest is payable in common shares at either the redemption date or maturity. A commitment fee of 5million common shares at a fair value of $164,500 was issued. |
| — | on April 20, 2026, the Company issued a convertible, redeemable note to a lender for $257,000 with cash proceeds of $250,000 and $7,000 for fees. The loan bears interest at 10%, the note is redeemable by the Company at any time subject to a premium ranging from 120% to 125% if redeemed within the first 180 days of the note. The note matures on January 15, 2027, and converts after 180 days at 65% of the lowest trading price 10 trading days prior to the conversion date. |
| — | on May 1, 2026, the Company issued a convertible, redeemable note to a lender for $157,000 with cash proceeds of $150,000 and $7,000 for fees. The loan bears interest at 10%, the note is redeemable by the Company at any time subject to a premium ranging from 120% to 125% if redeemed within the first 180 days of the note. The note matures on January 15, 2027, and converts after 180 days at 65% of the lowest trading price 10 trading days prior to the conversion date. |
| — | on May 4, 2026, the Company issued a convertible, redeemable note to a lender for $700,000 with cash proceeds of $630,000 and an original issue discount of $70,000. The loan bears interest at 12%, and the note matures in 1 year. The note must be redeemed in monthly instalments of 10% of outstanding principal plus accrued interest commencing 60 days after issuance. The note is convertible after 180 days at 65% of the lowest closing trading price 10 trading days prior to the conversion date. A commitment fee of 1.25 million common shares at a fair value of $28,750 was issued. |
|
| — | on May 29, 2026 the Company issued a promissory note to a lender for $225,000 with cash proceeds of $200,000 and an original issue discount of $25,000. The loan bears interest at 15% compounding annually, matures in 1 year and has a general security charging all of the Company’s present and after-acquired property. |
| — | on June 3, 2026, the Company issued a convertible, redeemable note to a lender for $230,000 with cash proceeds of $200,000 an original issue discount of $23,000 and $7,000 for fees. The loan bears interest at 6%, the note is redeemable by the Company at any time subject to a premium ranging from 105% to 140% if redeemed within the first 180 days of the note. The note matures on June 3, 2027, and converts after 180 days at 65% of the lowest trading price 20 trading days prior to the conversion date, including the conversion date. |
PROSPECTUS
Up to 43,213,508
Shares of Common Stock
June 15, 2026
– Prospectus Cover Page –
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
following table sets forth the estimated costs and expenses to be incurred in connection with the issuance and distribution of the securities
registered under this Registration Statement. All amounts are estimates except the SEC registration fee.
| Accounting fees and expenses | $ |
10,000 |
|
| Total | $ |
10,000 |
We
are paying all expenses of the offering listed above. No portion of these expenses will be borne by the Selling Stockholder. The Selling
Stockholder, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs
of sale.
Item
14. Indemnification of Directors and Officers
Our
Bylaws provide that the Company shall indemnify its directors and officers from and against any liability arising out of their service
as a director or officer of the Corporation or any subsidiary or affiliate of which they serve as an officer or director at the request
of the Corporation to the fullest extent not prohibited by NRS Chapter 78. The effect of this provision of our bylaws is to eliminate
our right and our stockholders (through stockholders’ derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our bylaws
are necessary to attract and retain qualified persons as directors and officers.
As
far as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item
15. Recent Sales of Unregistered Securities
None.
Item
16. Exhibits and Financial Statements
(a)(1)
Financial Statements
The
consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements
and Financial Statement Schedules on page F-1 and included on pages F-2 through F-65.
2)
Financial Statement Schedules
All
schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions,
are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included
herein.
| Exhibit # |
Description | |
| 3.1 | Articles of Incorporation filed with Nevada Secretary of State on 9/8/2014 (previously filed as Exhibit 3.1 to the Registrant’s Transition Report on Form 10-KT filed on 3/12/2018. | |
| 3.2 | Amended Bylaws (previously filed as Exhibit 4.1 on Form S-3 on 9/2/2021 and incorporated by reference) |
| 4.3 | Amendment to Certificate of Designation of Series E Convertible Preferred Stock (previously filed as Exhibit 3.5 to Registrant’s Transition Report on Form 10-KT filed on 3/12/2018 and incorporated by reference) | |
| 4.4 | Certificate of Designation of Series F Convertible Preferred Stock (previously filed as exhibit 3.4 to the Registrant’s Transition Report on Form 10-KT filed on 3/12/2018 and incorporated by reference) | |
| 4.5 | Amendment No. 2 to Certificate of Designation of Series F Convertible Preferred Stock (previously filed as Exhibit 10.1 of Registrant’s Form 8-K filed on 8/24/2021 and incorporated by reference) | |
| 4.6 | Certificate of Designation of Series G Preferred Stock (previously filed as Exhibit 3.4 to the Registrant’s Transition Report on Form 10-KT on 3/12/2018 and incorporated by reference) | |
| 5.1 | Opinion of Frederick M. Lehrer, P. A. * | |
| 10.1 | Equity Financing Agreement (previously filed as Exhibit 10.1 to the Registrant’s Form S-1 dated March 31, 2023) | |
| 10.2 | Registration Rights Agreement (previously filed as Exhibit 10.2 to the Registrant’s Form S-1 dated March 31, 2023) | |
| 10.3 | Placement Agent Agreement with Icon Capital Group (previously filed as Exhibit 10.3 to the Registrant’s Form S-1 dated March 31, 2023) | |
| 10.4 | September 24, 2023 Finder’s Fee Agreement with JH Darbie & Co. (previously filed as Exhibit 10.4 to the Registrant’s Form S-1 dated September 29, 2023) | |
| 10.5 | April 29, 2024 Securities Purchase Agreement with GHS (previously filed as Exhibit 10.5 to the Registrant’s Form S-1A dated May 9, 2024) |
|
| 10.6 | May 27, 2025 Equity Financing Agreement with GHS (previously filed as Exhibit 10.6 to the Registrant’s Post-Effective Form S-1/Amendment 2 dated June 6, 2025) |
|
| 10.7 |
May |
|
| 10.8 |
June |
|
| 10.9 | June 11, 2025 Registration Rights Agreement with GHS (previously filed as Exhibit 10.2 on Form 8-K dated June 11, 2025) |
|
| 10.10 | June 16, 2025 Equity Financing Agreement with AIV Investments LLC (previously filed as Exhibit 10.1 on Form 8-K dated June 17, 2025) | |
| 10.11 | June 16, 2025 Registration Rights Agreement with AIV (previously filed as Exhibit 10.2 on Form 8-K dated June 17, 2025) |
|
| 10.12 |
June 16, 2025 Termination Agreement with GHS Investments, LLC (previously filed as Exhibit 10.3 on Form 8-K dated June 17, 2025) |
|
| 10.13 |
Agreement with Craft Capital Management LLC (previously filed as Exhibit 10.4 on Form 8-K dated June 17, 2025) |
|
| 10.14 |
September 19, 2024 Purchase Agreement with AIV Investments, LLC* |
|
| 10.15 | August 7, 2025 Resolution Agreement with AIV Investments, LLC* | |
| 23.1 | Consent of Frederick M. Lehrer, P. A. (included in Exhibit 5.1) * | |
| 23.2 | Consent of L J Soldinger Associates, LLC, Independent Registered Public Accounting Firm * | |
| 107 | Calculation of Filing Fee Table** | |
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. * |
|
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document * | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document * |
|
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document * |
|
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document * |
|
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document * |
|
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * |
*
Filed or furnished herewith
** Previously filed
Item
16. 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; |
| 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% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
|
| 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; |
2.
That, for the purpose of determining any liability under the Securities Act of 1933, 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 of the registrant under the Securities Act of 1933 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. |
5.
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: Each Prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other
than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. 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 first
use, 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 date of first use.
As
far as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
the registrant has been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment
by us of expenses incurred or paid by a director, officer or controlling person of the corporation in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act, and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in Ferndale, Michigan on June 9, 2026.
| Artificial Intelligence Technology Solutions, Inc. |
||
| By: | /s/ Steven Reinharz |
|
| Steven Reinharz | ||
| Chief Executive Officer, Director (Principal 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
and on the dates stated.
| Signature | Title | Date | ||
| /s/ Steven Reinharz |
Chief Executive Officer/Director | June 15, 2026 | ||
| Steven Reinharz | ||||
| /s/ Anthony Brenz |
Chief Financial Officer | June 15, 2026 |
||
| Anthony Brenz |
[/gpt3]
