Artificial Intelligence Technology Solutions Inc 10-K for FY2026
Artificial Intelligence Technology Solutions Inc. (AITX)
About this 10-K
Artificial Intelligence Technology Solutions Inc filed this 10-K on June 9, 2026, covering the fiscal year ended February 28, 2026 (FY2026).
Headline figures
Fiscal year ended February 28, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.75M
- up 26.3% from $6.13M a year earlier
- Net loss
- $14.51M
- compared with a net loss of $18.94M a year earlier
- Diluted EPS
- -$0.07
- compared with -$0.16 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties, and assumptions that may cause actual results to differ materially from those expressed or implied herein. Artificial Intelligence Technology Solutions Inc. (the “Company,” “AITX,” “we,” “our,” or “us”) has a history of net losses, negative operating cash flows, and accumulated deficits. Shares of the Company’s common stock are highly speculative. Prospective investors could lose all or a substantial portion of their investment.
Forward-looking statements reflect management’s estimates and assumptions as of the date of this Report. The Company undertakes no obligation to update or revise any forward-looking statement except as required by applicable law. Industry characterizations, including the “Fourth Industrial Revolution” analogy and the “RAD Town” concept, are expressions of management’s strategic narrative and belief, not statements of established fact. References to award recognitions, industry relationships, and competitive positioning are statements of management’s view and do not constitute validation of commercial viability, product efficacy, or competitive outcome. Product capability descriptions in this Report, including descriptions of SARA as enabling devices to “perceive, decide, communicate, and act autonomously in real time, without continuous human intervention,” descriptions of ROAMEO as operating without on-site human pilots, and descriptions of the firearm detection analytic as identifying visible handguns and long guns in real time—reflect design intent and supported field conditions; actual performance depends on environmental conditions, network connectivity, software configuration, and the nature of each deployment, and certain situations may require human review or override. Competitive characterizations in this Report—including that incumbent guard service providers are “structurally disadvantaged” by labor cost pressures and that legacy hardware vendors “typically lack” agentic AI capability—reflect management’s current view and are not statements of established fact; competitors retain significant market share, customer relationships, and competitive resources. Non-GAAP operational metrics—including pipeline quality, conversion rates, dealer network characterizations, and subsidiary-level financial characterizations—are management’s current assessments and are not defined terms under GAAP or SEC requirements. Nothing in this Report constitutes an offer to sell or a solicitation to buy any securities. This Report should not be relied upon as the basis for any investment decision without independent verification and the advice of qualified legal, tax, and financial advisors.
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PART I
ITEM 1. 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.
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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 and 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.
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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.
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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.
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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 it’s 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.
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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.
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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.
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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.
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ITEM 1A. RISK FACTORS
Forward-Looking Statement Categories
The following categories of statements in this Report are forward-looking, and each is subject to material risks and uncertainties that could cause actual results to differ materially from those described or implied:
1. Revenue and Financial Projections.
Statements that RAD-I’s recurring revenue and gross margin could, on a standalone basis, support positive cash flow operations and management’s characterization that RAD-I has “achieved a point” at which it could support positive cash flow operations today; that RAD-M will surpass RAD-I’s monthly recurring revenue contribution at some future point; that subscription gross margin will exceed 75% and outright-sale gross margin will exceed 50% based on average bill of materials costs and pricing that the market “has appeared to accept,” each of which is a forward-looking characterization dependent on assumptions about continued pricing acceptance, stable input costs, and manufacturing scale that may not be realized; that RAD-G will generate substantial revenue from SARA platform licensing; that RAD-M represents a higher revenue ceiling than stationary solutions; and that penetration of any covered industry would produce sufficient revenue to support profitability.
2. Product Development and Commercialization.
Statements regarding the planned introduction of additional stationary solutions during fiscal year 2027; the establishment of RAD Europe during fiscal 2027 and the anticipated benefits thereof; all statements regarding ROAMEO’s commercial viability, autonomous operation without on-site human pilots, production ramp, and revenue trajectory following commencement of commercial billing in May 2026; statements regarding planned RAD-I product introductions, including their timing, features, and market acceptance; and statements regarding expansion of the authorized dealer network and anticipated contributions from the dealer channel.
3. Market and Industry Characterizations.
All characterizations of the physical security industry as undergoing a structural transition analogous to Industry 4.0; assertions that the human-guard labor model is experiencing unsustainable cost pressures; characterizations of the total addressable market for AI-driven and autonomous security solutions; any implication that competitive dynamics will favor the Company; and the “RAD Town” concept in its entirety, which is a conceptual design target and strategic roadmap, not a contracted project, existing deployment, or assured business outcome.
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4. SARA Platform and Agentic AI.
All characterizations of SARA as an agentic AI platform enabling autonomous real-time action without continuous human intervention, including the Item 1 description that SARA enables devices to “perceive, decide, communicate, and act autonomously in real time, without continuous human intervention,” which states this as a present operational characteristic rather than design intent and should be read in light of the actual performance qualifications in this Item 1A; statements regarding SARA licensing and commercialization with third-party hardware manufacturers and monitoring platforms (including the Immix integration); anticipated expansion of the dealer network and platform ecosystem; statements regarding SARA’s performance in detection, escalation, and response workflows; the characterization in Item 1 that the firearm detection analytic “identifies visible handguns and long guns in real time,” which omits the design-intent and environmental-conditions qualifications that investors should consider when evaluating this statement; and all characterizations of RAD-G’s sales funnel as “substantial” or of management’s expectations for RAD-G revenue as “high.” Industry award recognitions do not constitute validation of product safety, efficacy, or commercial viability.
5. Management Estimates and Unaudited Financial Characterizations.
The approximate $20 million cumulative ROAMEO development figure is a management estimate not audited or reviewed by the Company’s independent registered public accounting firm. Segment-level profitability and cash flow characterizations for RAD-I—including management’s characterization in Item 1 that RAD-I “has achieved a point” at which its recurring revenue and gross margin could support positive cash flow operations today—are based on internal analysis for which no separately audited financial statements are published. This characterization excludes all expenses not directly attributable to the stationary solutions business, including shared corporate overhead, interest expense, and investment in RAD-M and RAD-G, and does not indicate that the Company as a whole operates at or near positive cash flow. No financial characterization of any individual subsidiary should be treated as audited data. Characterizations of gross margin expectations are based on average bill of materials costs and market pricing over limited historical periods, as well as pricing that the market “has appeared to accept,” and may not be representative of future results.
6. International Expansion.
Statements regarding the anticipated establishment of RAD Europe during fiscal 2027; expected benefits of RAD Lanka’s Port City Colombo status, including cost efficiency and tax benefits; and anticipated GDPR-compliant service capabilities to be provided through RAD Europe. All such forward-looking statements are subject to regulatory, legal, and operational risks inherent in international expansion.
ADDITIONAL MATERIAL RISK FACTORS
In addition to the forward-looking statement categories described above, investors should carefully consider the following material risk factors. Each could cause actual results, financial condition, or business performance to differ materially from those described or implied in this Report. These risk factors reflect the Company’s business as described in Item 1 of this Annual Report and the disclosures made in prior AITX periodic and current filings with the Securities and Exchange Commission. This list is not exhaustive, and additional risks not currently anticipated by management may emerge.
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I. FINANCIAL AND GOING CONCERN RISKS
Substantial Doubt About the Company’s Ability to Continue as a Going Concern.
The Company’s independent registered public accounting firm has included an explanatory paragraph in its audit reports expressing substantial doubt about the Company’s ability to continue as a going concern. The Company has incurred recurring net losses, has a history of negative operating cash flows, and carries an accumulated deficit that, as of recent reporting periods, has exceeded $171 million. The Company’s total liabilities substantially exceed its total assets, and it maintains negative stockholders’ equity. These conditions raise material uncertainty as to whether the Company will be able to meet its obligations as they come due. The Company’s financial statements do not include any adjustments to reflect the possible effects on the classification or carrying value of assets and liabilities that might result from the outcome of this uncertainty. There can be no assurance that the Company will be able to generate sufficient revenue, raise adequate capital, or otherwise secure the resources necessary to continue operations beyond the near term.
The Company Requires Continued External Financing and May Be Unable to Obtain It on Acceptable Terms or at All.
The Company’s operations are not yet self-funding. The Company has relied, and expects to continue to rely, on external debt and equity financing to fund operations, capital expenditures, product development, and the planned production ramp of ROAMEO and other new products. A significant portion of the Company’s debt has historically been owed to entities controlled by a single individual, creating concentrated lender risk and potential conflicts of interest. The Company has also utilized equity financing arrangements, including agreements providing for the issuance of common shares at variable prices, to access capital. If the Company is unable to obtain financing on acceptable terms—or if existing financing arrangements are not renewed or are terminated—the Company may be required to curtail or cease operations, defer planned capital expenditures (including the ROAMEO production ramp and RAD Europe establishment), reduce headcount, or otherwise alter its operating plans in ways that could materially harm its business and prospects.
The Company’s Common Stock Is Subject to Substantial Dilution Risk.
The Company has issued, and may continue to issue, substantial numbers of shares of common stock in connection with financing transactions, employee and director compensation, debt conversions, and other purposes. As of February 28, 2026, total common shares outstanding exceeded 267 million (post-reverse-split). In March 2026, FINRA processed a 100-for-1 reverse stock split; however, the authorized share count remains at approximately 12 billion shares, preserving the structural capacity for future dilutive issuances. Variable-price equity financing arrangements and debt conversion rights may result in issuances at prices below the then-current market price of the Company’s common stock, causing material dilution to existing shareholders. The reverse stock split does not alter the underlying financial condition of the Company or reduce the potential for future dilutive issuances. The Company does not provide assurance that future equity issuances will not substantially reduce the proportionate ownership or economic interest of existing stockholders.
The Company Has a History of Net Losses and Cannot Assure Future Profitability.
The Company has not achieved profitability in any fiscal year. Net loss for the fiscal year ended February 28, 2026 were approximately $14.5 million. Operating expenses—including research and development, sales and marketing, and general and administrative costs—have consistently exceeded gross profit, and interest expense on the Company’s debt obligations represents an additional recurring charge. While gross margin on deployed subscription units has improved and the Company’s Solutions-as-a-Service model is designed to produce improving margins at scale, the Company’s operating cost structure, investment in ROAMEO commercialization, RAD-G platform development, and debt service obligations may prevent it from achieving profitability even as revenues increase. No assurance can be given as to whether or when the Company will achieve or sustain profitability.
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Gross Margin Expectations May Not Be Achieved.
Item 1 of this Report states that subscription gross margin “will exceed” 75% and outright-sale gross margin “will exceed” 50% over deployment lifecycles, based on average bill of materials costs and pricing that the market “has appeared to accept”—language that reflects observed pricing acceptance rather than contracted or assured revenue, and that is itself a forward-looking characterization. These expectations assume continued pricing acceptance, no material input cost increases, manufacturing cost improvements associated with scale, and the absence of significant warranty, maintenance, or retrieval costs on churned units. To date, hardware gross margins have been achieved under small-batch production conditions. None of these assumptions are guaranteed, and actual gross margins may differ materially, particularly during the ROAMEO production ramp period when per-unit manufacturing costs may be higher than at scale.
II. OPERATIONAL AND PRODUCT RISKS
ROAMEO Commercial Deployment and Production Ramp Involve Significant Execution Risk.
The Company commenced commercial billing on ROAMEO units in May 2026 following what management estimates to be approximately $20 million in cumulative development investment. ROAMEO is a fully autonomous, outdoor mobile security vehicle operating without on-site human pilots, and its commercial viability depends on the continued reliable performance of its autonomous navigation stack, on-board sensor systems, cellular and 5G connectivity, and full integration with the SARA agentic AI platform in real-world field conditions. Initial commercial deployments are at a limited number of enterprise customer sites. Scaling ROAMEO to meet broader commercial demand will require significant expansion of the Company’s production capacity and manufacturing operations, neither of which has been demonstrated at commercial scale. Mechanical failures, software defects, connectivity disruptions, navigation errors, environmental limitations, or other operational issues experienced by deployed ROAMEO units could damage the Company’s reputation, result in contract terminations, expose the Company to liability, and materially impair the Company’s ability to achieve the revenue projections attributed to the RAD-M business. Management’s statements that RAD-M will surpass RAD-I’s revenue contribution are forward-looking and dependent on successful execution of each of these steps.
The Company’s Revenue Is Highly Concentrated and Dependent on Subscription Renewals.
Substantially all of the Company’s revenue is derived from recurring monthly subscription contracts, typically with initial terms of twelve months. Customer retention and subscription renewal are critical to the Company’s revenue stability and growth. A single customer has at times represented a disproportionate share of the Company’s revenue—one customer has previously accounted for approximately 47% of six-month revenue. The loss of one or more significant customers, a material reduction in subscription renewal rates, a failure to maintain service quality levels that support renewals, or disruption to services provided to the Fortune Top 10 enterprise customer or any large enterprise account could materially and adversely affect the Company’s revenue, cash flow, and operating results. The Company retains ownership of hardware deployed under subscription contracts; accordingly, subscriber churn results not only in revenue loss but also in costs associated with device retrieval, redeployment, or write-down.
The Company’s Hardware Manufacturing Operations Are Subject to Supply Chain, Capacity, and Quality Risks.
The Company performs final assembly, system integration, software loading, and quality assurance at its facility in Ferndale, Michigan, and sources sub-components—including machined metal and plastic components, printed circuit boards, and selected sub-assemblies—from domestic and international suppliers. The Company’s hardware gross margins to date have been produced under small-batch production conditions, and the ability to achieve projected margin improvements depends on production volume increases that have not yet been demonstrated. A disruption affecting one or more key suppliers, an inability to secure critical components at acceptable prices, quality defects, or a failure to scale manufacturing capacity to meet demand could delay product deployments, increase costs, reduce gross margins, and impair the Company’s ability to fulfill customer commitments. International supply chain disruptions, tariff changes, or export control regulations affecting components sourced from outside the United States could have a material adverse effect on component availability and cost. These risks are heightened during the ROAMEO production ramp, when any manufacturing bottleneck would directly constrain the Company’s ability to generate revenue from its highest-anticipated growth segment.
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The RAD-R Residential Business Has Underperformed and Presents Ongoing Uncertainty.
The Company’s RAD-R subsidiary, which operates the RADCam residential security product, generated an immaterial amount of consolidated revenue during fiscal 2026, substantially below the Company’s expectations. The Company attributes this underperformance primarily to the structural differences between its B2B-oriented sales model and the consumer marketing investment required to compete in the B2C residential channel. The Company has no immediate plans to discontinue the RADCam product but has not committed to the additional consumer marketing spend management believes would be required to compete effectively. Although the Company has modified the residential software for deployment into small-and-medium business and enterprise markets through RAD-I, there can be no assurance that this repositioning will generate material revenue. The RAD-R segment may continue to generate losses, and the Company’s assessment of the segment’s strategic value may change in ways that result in impairment charges, operational restructuring, or reallocation of capital.
New Product Introductions and RAD Europe Establishment Are Subject to Execution Risk.
The Company has stated its intention to introduce additional stationary solutions during fiscal year 2027 and to establish RAD Europe during the same period. Both initiatives involve engineering, regulatory, operational, and commercial risks that could delay or prevent their realization. New product introductions may be delayed by supply chain constraints, manufacturing challenges, software development setbacks, or unfavorable customer reception. The establishment of RAD Europe will require legal entity formation, regulatory compliance infrastructure, staffing, and local market development in a new geography. There can be no assurance that either initiative will proceed on the stated timeline or will produce the anticipated revenue contribution.
III. TECHNOLOGY AND INTELLECTUAL PROPERTY RISKS
The Company’s AI and Autonomous Technology May Not Perform as Described or Expected.
The SARA platform and the Company’s suite of AI-driven security products rely on large language model architecture, machine learning models, computer vision analytics, autonomous decision-making systems, and voice interaction capabilities. AI systems of this nature are subject to known limitations, including errors in detection or classification, failure to perform reliably across varied environmental conditions, susceptibility to adversarial inputs, and performance degradation as the threat landscape or deployment environment changes. Item 1 of this Report states that SARA enables devices to “perceive, decide, communicate, and act autonomously in real time, without continuous human intervention” — describing this as a present operational characteristic. Investors should understand that this characterization reflects design intent under supported field conditions; deployed systems may require more human oversight than described in certain situations and may not consistently deliver the autonomous escalation, voice intervention, and first-responder coordination described in this Report. Item 1 also states that the Company’s firearm detection analytic “identifies visible handguns and long guns in real time”—an unqualified performance claim. Actual detection accuracy and response performance are subject to environmental conditions, image quality, and system configuration; the Company does not represent that the analytic will detect all firearms in all conditions, and the ASTORS award recognition does not constitute independent validation of detection accuracy rates or performance specifications. Failures of the Company’s AI systems to detect threats, correctly identify individuals or vehicles, or appropriately escalate or de-escalate situations could result in harm to persons or property, exposure to liability, and damage to the Company’s reputation and customer relationships. Industry award recognitions referenced in this Report do not constitute validation of the safety, accuracy, or commercial efficacy of any product.
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The Company Relies on Trade Secrets and Confidentiality Protections Rather Than Patents and May Be Unable to Adequately Protect Its Intellectual Property.
The Company does not currently rely materially on patent protection for its hardware designs, software, firmware, AI models, the SARA platform, autonomous navigation stack, or related technology. Instead, the Company relies on trade secret protection, confidentiality and invention-assignment agreements with employees and contractors, copyrights, and trademark registrations. These protections may be insufficient to prevent misappropriation, reverse engineering, or independent development of competing technologies by third parties. Confidentiality agreements may be breached; trade secret protections may prove difficult to enforce, particularly across international jurisdictions; and employees or contractors with access to the Company’s proprietary systems, code, or AI models may depart and join competitors or establish competing businesses. The Company’s Sri Lanka operations at RAD Lanka introduce additional jurisdictional complexity with respect to IP enforcement. If the Company’s intellectual property is misappropriated or independently replicated, the Company may lose the technological differentiation that underpins its competitive positioning.
Cybersecurity Incidents Could Compromise the Company’s Products, Customer Data, and Operations.
The Company’s products are connected to the internet and to customer networks, and the SARA platform and related cloud services process and transmit data from deployed devices—including video, audio, and access-control information—across an expanding footprint of connected devices. Although the Company has achieved and maintained SOC 2 Type 2 status since February 2025, cybersecurity certifications do not guarantee the absence of vulnerabilities or the prevention of successful attacks. A breach of the Company’s systems, a compromise of deployed customer devices, or a successful attack on the SARA platform could result in unauthorized access to sensitive data, disruption of device functionality at customer sites, customer contract terminations, regulatory scrutiny, litigation, and significant reputational damage. The Company’s cybersecurity posture will require ongoing investment as threats evolve, as ROAMEO deployments expand the number of connected autonomous vehicles in the field, and as RAD Europe operations increase the Company’s exposure to GDPR and other international data protection regimes.
The SARA Platform May Not Achieve the Commercial Adoption Anticipated by RAD-G.
RAD-G’s business model depends substantially on expanding the SARA ecosystem through licensing and integration arrangements with third-party hardware manufacturers, monitoring platforms (including central station platforms such as Immix), dealers, and enterprise end users. The commercial success of RAD-G depends on third parties choosing to integrate SARA into their products, platforms, and workflows—decisions that are outside the Company’s control and that may not materialize on the timeline or at the scale management anticipates. The RAD-G sales funnel, characterized by management as substantial for an early-stage AI platform business, has not yet produced revenue commensurate with management’s expectations. Competition from large, well-funded AI technology companies with greater distribution and integration resources could impair RAD-G’s ability to establish SARA as a platform-of-choice in the physical security ecosystem.
IV. MARKET, COMPETITIVE, AND REGULATORY RISKS
The Company Operates in a Competitive Market and Faces Competition from Larger, Better-Capitalized Companies.
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 and autonomous security technology companies. Many of the Company’s actual and potential competitors have substantially greater financial resources, brand recognition, established distribution networks, and installed customer bases than the Company. Large security integrators and major technology companies may develop, license, or acquire AI and autonomous security capabilities that compete directly with the Company’s products and platform. The market characterizations in this Report—including statements that incumbent competitors are “structurally disadvantaged” or that legacy vendors “typically lack” agentic AI capability—reflect management’s view and are not statements of established fact. Competitive dynamics may develop in ways unfavorable to the Company, including through technological advances by competitors, price compression across the autonomous security category, or the market entry of well-capitalized technology companies.
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Deployment of Autonomous Security Devices Is Subject to Evolving Legal, Regulatory, and Privacy Constraints.
The Company’s products deploy autonomous devices—including outdoor mobile robotic vehicles (ROAMEO), vehicle access management systems (AVA), visitor management systems (TOM), and AI-enabled cameras (ROSA, RIO, RAM, RADCam)—that collect audio, video, biometric, and identification data in commercial, residential, industrial, and potentially public-access environments. The legal framework governing the collection and processing of such data is complex, rapidly evolving, and varies significantly across jurisdictions. Applicable regulations include state biometric privacy statutes (such as the Illinois Biometric Information Privacy Act), the California Consumer Privacy Act, GDPR as applicable to the Company’s anticipated European operations through RAD Europe, and various other federal, state, and local privacy and data protection laws. Autonomous vehicles and robotic platforms operating in public or semi-public spaces may be subject to licensing, permitting, insurance, or operational requirements that vary by municipality, state, or country. The Company’s anticipated establishment of RAD Europe during fiscal 2027 will directly increase its exposure to GDPR compliance obligations. Failure to comply with applicable laws and regulations could result in regulatory enforcement actions, fines, litigation, mandatory product modifications, or constraints on the Company’s ability to operate or deploy products in affected markets.
Market Adoption of AI-Driven and Autonomous Security Solutions May Be Slower Than Management Anticipates.
The Company’s business plan assumes that customers in the physical security market will adopt AI-driven and autonomous solutions at a pace and scale consistent with management’s view of the industry’s structural transition. This assumption may not prove correct. Customers may be slower than expected to replace human guard labor or legacy surveillance systems with automated alternatives, whether due to risk aversion, labor union obligations, insurance requirements, regulatory constraints, concerns about AI reliability, or other factors. The “RAD Town” concept—in which the Company’s portfolio of stationary and mobile products operates as an integrated autonomous-security fabric across a campus or jurisdiction—is a long-term design target, not an existing deployment or contracted commercial arrangement. The analogies drawn in this Report to Industry 4.0 transitions in other sectors are management’s narrative framework and may not accurately predict the pace or trajectory of adoption in the physical security industry. Slower-than-anticipated adoption would adversely affect the Company’s ability to achieve its revenue projections and extend the period during which the Company requires external financing.
Government and Municipal Markets Present Additional Regulatory and Procurement Risks.
The Company’s end-user base includes government entities, and the Company has identified government as a target vertical market. Government procurement cycles are typically longer and more complex than commercial sales cycles, are subject to appropriations risk and political change, and may require certifications, clearances, or compliance with specific regulatory frameworks (including federal cybersecurity standards) that the Company may not currently hold or may be unable to obtain. Autonomous security devices deployed in public or government-managed spaces may attract heightened public and regulatory scrutiny regarding civil liberties, facial recognition, and autonomous decision-making in law enforcement-adjacent contexts. There can be no assurance that the Company will be able to successfully compete for or retain government contracts.
V. MANAGEMENT, PERSONNEL, AND KEY PERSON RISKS
The Company Is Dependent on Key Personnel, Particularly Its Chief Executive Officer and Chief Technology Officer.
The Company’s success is substantially dependent on the continued services of Steven Reinharz, who serves as both Chief Executive Officer and Chief Technology Officer and is the founder of RAD and its principal architect. Steven Reinharz is also the Company’s single largest equity holder and plays a central role in product strategy, customer relationships, investor relations, and industry positioning, including through his service on the Board of the Security Industry Association and chairmanship of its Autonomous Working Group. Item 1 of this Report states that Steven Reinharz has “written and spoken extensively” about the physical security industry’s structural transformation since the Company’s inception and is a “regular speaker” at events hosted by SIA and ASIS, the two leading industry organizations. This public profile, while reflecting genuine industry standing, further concentrates the Company’s market credibility and industry positioning in a single individual; any reputational, health, or availability issue affecting Steven Reinharz could have an outsized adverse effect on the Company’s relationships with customers, partners, dealers, and investors beyond the direct operational impact of his absence. The combined CEO and CTO role concentrates both business leadership and technical architecture in a single individual. The loss of Steven Reinharz, or any material reduction in his involvement in the Company’s business, could have a severe and potentially irreversible adverse effect on the Company. The Company does not currently represent that it has key-person insurance sufficient to compensate for this risk, and the ability to recruit a suitable replacement would be highly uncertain given the specialized combination of technical, operational, and strategic capabilities involved.
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The Company’s Ability to Attract and Retain Qualified Technical, Sales, and Operational Personnel Is Critical.
The Company has approximately 135 employees across the United States, Canada, the United Kingdom, and Asia, including Sri Lanka, and its operations depend on specialized technical expertise in robotics engineering, AI development, autonomous systems, software architecture, and security operations. Competition for qualified engineers and AI talent is intense. The loss of other senior technical, sales, or operational personnel could disrupt operations and product development. The Company’s culture—centered on emotional intelligence, accountability, and multidisciplinary ownership—is described by management as a meaningful operational asset, but there can be no assurance that the Company can maintain this culture or retain key team members as it scales, particularly during periods of capital constraint, extended development timelines, or operational setbacks.
The Company’s International Operations Introduce Additional Risks.
The Company currently operates internationally through RAD Lanka, a Sri Lanka subsidiary operating within the Port City Colombo special economic zone, and has team members in the United Kingdom and Asia. The Company anticipates establishing RAD Europe during fiscal 2027 to support European market entry and GDPR-compliant service delivery. International operations expose the Company to risks including currency fluctuation, geopolitical instability, changes in local tax and regulatory regimes, difficulty enforcing contracts or intellectual property rights in foreign jurisdictions, and the operational complexity of managing distributed teams across multiple time zones and legal systems. The special economic zone status under which RAD Lanka operates may be subject to changes in Sri Lankan law or policy. The anticipated benefits of RAD Lanka’s Port City Colombo status, including cost efficiency and tax advantages, are not guaranteed to continue. There can be no assurance that the Company’s international expansion will proceed as planned or that the anticipated benefits of international operations will be realized.
VI. SECURITIES AND INVESTOR RISKS
The Company’s Common Stock Trades on the OTC Pink Market and Is Subject to Significant Volatility and Liquidity Constraints.
The Company’s common stock is quoted on the OTC Pink marketplace under the symbol “AITX,” which is not a registered national securities exchange. OTC Pink securities are generally subject to less rigorous disclosure and listing standards than exchange-listed securities, and the market for such securities may be less liquid, more volatile, and more susceptible to manipulation than exchange-listed markets. Shareholders may find it difficult to buy or sell shares at prices that reflect the Company’s intrinsic value, and bid-ask spreads may be wide. The Company’s stock price has been, and may continue to be, highly volatile in response to operating results, financing transactions, product announcements, press releases regarding ROAMEO deployments or RAD-G partnerships, and general market conditions. The March 2026 reverse stock split (100-for-1) does not guarantee any improvement in trading liquidity, price stability, or long-term shareholder value. Investors in OTC Pink securities should be aware that such investments carry a high degree of risk, and the Company’s shares should be considered highly speculative.
Insider and Related-Party Transactions Represent Potential Conflicts of Interest.
Approximately 96% of the Company’s total loans payable has, at recent reporting dates, been owed to entities controlled by a single individual. Related-party lending of this concentration creates potential conflicts of interest between the interests of that lender and the broader shareholder base, including with respect to the terms of any refinancing, conversion, restructuring, or settlement of such indebtedness. Transactions between the Company and related parties may not be negotiated at arm’s length, and the Company’s ability to obtain independent third-party financing to refinance related-party debt on terms favorable to all shareholders is uncertain. Steven Reinharz, as CEO, CTO, and the Company’s single largest equity holder, may have interests that diverge from those of other stockholders in certain circumstances. The Company’s governance framework may not fully mitigate these potential conflicts, and investors should be aware that the interests of related-party lenders and controlling stockholders may not always be aligned with those of the broader shareholder base.
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The Company’s Prior and Ongoing Use of Variable-Price Equity Financing Creates Structural Dilution Risk.
The Company has historically utilized equity financing arrangements that provide for the issuance of common shares at variable prices, including at prices below the then-prevailing market price. These arrangements have contributed to the Company’s substantial share count (in excess of 267 million shares post-reverse-split) and have resulted in material dilution to existing shareholders. Although the Company completed a 100-for-1 reverse stock split in March 2026, the authorized share count of approximately 12 billion shares remains unchanged, preserving the structural capacity to issue additional shares. Continued reliance on these financing mechanisms—which may be required to fund ongoing operations, the ROAMEO production ramp, RAD-G platform development, or RAD Europe establishment—could result in further dilution and downward pressure on the trading price of the Company’s common stock.
General Disclaimer Applicable to All Risk Factors
The risk factors described in this Item 1A are not exhaustive. Additional risks not currently anticipated by management, or risks that management does not currently consider material, may emerge and could have a material adverse effect on the Company’s business, financial condition, results of operations, and stock price. The magnitude of any individual risk factor, and the interaction among risk factors, cannot be predicted with certainty. This Item 1A should be read in conjunction with the Cautionary Statement Regarding Forward-Looking Information at the front of this Report, Item 1 (Business), Item 7 (Management’s Discussion and Analysis), and the financial statements and notes thereto. Nothing in this Report constitutes investment, legal, tax, or financial advice. Investors should consult their own advisors before making any investment decision with respect to the Company’s securities.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
Securing
our business information, intellectual property, customer and employee data and technology systems is essential for the continuity of
our business, meeting applicable regulatory requirements and maintaining the trust of our stockholders.
To help protect us from a major cybersecurity incident that could have a material impact on operations or our financial results, the Company is in the process of continually implementing policies, programs and controls, including technology investments that focus on cybersecurity incident prevention, identification and mitigation. The steps we expect to take to reduce our vulnerability to cyberattacks and to mitigate impacts from cybersecurity incidents include but are not limited to: penetration testing by a third-party vendor, agent-based security scanning that runs continuously, establishing information security policies and standards, implementing information protection processes and technologies, monitoring our information technology systems for cybersecurity threats and implementing cybersecurity training. The Company has reached SOC 2 Type 2 status which shows the Company’s compliance with best industry practices. The SOC 2 Report has become a benchmark standard, and now an often-specified requirement, in the software procurement process. Established by the American Institute of Certified Public Accountants (AICPA), criteria and reporting principles are outlined as a means for organizations to create a documented framework of policies and procedures to prove how they manage and secure data in the cloud and ensure protection of customer privacy and ensure internal communications are suitably handled. This achievement reflects the Company’s stated goals of best-in-class data protection and internal processes. In addition, we annually purchase a cybersecurity risk insurance policy that would help defray the costs associated with a covered cybersecurity incident if it occurred.
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Our
CEO and management are actively engaged in overseeing and reviewing our strategic direction and objectives, taking into account, among
other considerations, our risk profile and related exposures, including oversight of risks from cybersecurity threats.
ITEM 2. PROPERTIES
On March 10, 2021 the Company entered into a ten-year lease of a 29,316 square foot building located at 10800 Galaxie Avenue, Ferndale, Michigan 48220. The lease began on May 1, 2021. These premises are being used for offices, manufacturing and distribution. The annual rental cost for this facility is approximately $190,000, plus a proportionate share of operating expenses of approximately $28,000 annually.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
AITX’s common stock began trading on the “Over the Counter” Bulletin Board (“OTC”) under the symbol “AITX” in June 2011 and as AITX on August 24, 2018. The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter market, as reported and summarized by OTC Markets Group, Inc. On August 24, 2018, the Company undertook a 100:1 reverse stock split, on March 27, 2020 a 10,000:1 reverse split, and on February 5, 2026 a 100:1 reverse split.. The share capital has been retrospectively adjusted accordingly to reflect this reverse stock split, except for the conversion price of certain convertible notes as the conversion price is not subject to adjustment from forward and reverse stock splits.
These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions. There is an absence of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile, which may affect the prices listed below.
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| High | Low | |||||||
| Fiscal Year Ended February 28, 2026: | ||||||||
| Quarter ended February 28, 2026 | $ | 0.09 | $ | 0.03 | ||||
| Quarter ended November 30, 2025 | $ | 0.15 | $ | 0.07 | ||||
| Quarter ended August 31, 2025 | $ | 0.16 | $ | 0.07 | ||||
| Quarter ended May 31, 2025 | $ | 0.28 | $ | 0.12 | ||||
| Fiscal Year Ended February 28, 2025: | ||||||||
| Quarter ended February 28, 2025 | $ | 0.52 | $ | 0.24 | ||||
| Quarter ended November 30, 2024 | $ | 0.43 | $ | 0.25 | ||||
| Quarter ended August 31, 2024 | $ | 0.74 | $ | 0.30 | ||||
| Quarter ended May 31, 2024 | $ | 0.99 | $ | 0.27 | ||||
On June 1, 2026, the closing price per share of the Company’s common stock as quoted on the OTC was $0.0185.
Dividends
To date, we have not paid dividends on shares of the Company’s common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, AITX’s financial condition, and other factors deemed relevant by its Board of Directors.
Holders of Common Stock
As of June 2, 2026, there were 114 holders of AITX’s common stock of which 45 were active. The number of foregoing holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Common Stock
The Company is authorized to issue 12,000,000,000 shares of common stock, with a par value of $0.00001. The closing price of its common stock on June 1, 2026, as quoted by OTC Markets Group, Inc., was $0.0185. There were 387,232,589 shares of common stock issued and outstanding as of June 1, 2026. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of its assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.
Our Articles of Incorporation, Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders of our securities.
During the years ended February 28, 2026 and February 28, 2025, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
Non-cumulative voting
Holders of shares of the Company’s common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
Securities Authorized for Issuance under Equity Compensation Plans
On April 14, 2021 the Company adopted an Incentive Stock Option Plan where full details are disclosed in Exhibit 10.1 of the Company’s 8K filing of April 20,2021. Under the plan the Company may grant options to service providers and employees to acquire up to 50,000 shares of the Company’s common stock. The options will be under the varying terms and conditions of an agreement but the exercise price cannot be lower than 100% to 110% of the fair value of the stock at date of grant and the term of the grant can be no longer than 5 years. 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 September 1, 2023, the Company as an addition to the afore-mentioned Incentive Stock Option Plan issued 1,142,170 shares to 48 employees. The shares were issued with an exercise price of $2.00, vest after 4 years with a 5 year term.
| -19- |
During the year ended February 28, 2026 the Company had the following common stock option activity:
| — | On the original 2021 plan, options to purchase 33,000 shares were forfeited due to employee terminations. On the 2023 plan (see below) 57,160 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 24,750 shares were forfeited due to employee terminations. On the 2023 plan 39,639 options to purchase shares were forfeited due to employee terminations. |
The Company recorded $136,969 in stock-based compensation on the 2023 plan which represents the current expense over the vesting period. In addition the company recorded $178,880 stock based compensation on the 2021 options , so for the year ended February 28, 2026 the Company recorded a total of $314,848 in stock based compensation with a corresponding increase in paid up capital. For the year ended February 28, 2025, the Company recorded $145,136 in stock-based compensation on the 2023 plan which represents the prior years’ expense over the vesting period. In addition the company recorded $186,549 stock based compensation on the 2021 options , so for the year ended February 28, 2025 the Company recorded a total of $331,685 in stock based compensation with a corresponding increase in paid up capital.
| — | On the original 2021 plan, options to purchase 313,250 shares were forfeited due to employee terminations |
| — | On the 2023 plan, options to purchase 96,820 shares were forfeited due to employee terminations |
The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance at February 28, 2026.
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | |||||||||
| Equity compensation plans approved by security holders. | 1,732,120 | $ | 2.00 | — | ||||||||
| Equity compensation plans not approved by security holders. | — | — | — | |||||||||
| Total | 1,732,120 | $ | 2.00 | — | ||||||||
| -20- |
Preferred Stock
The Company is authorized to issue up to 20,000,000 shares of $0.001 par value preferred stock. The board of directors is authorized to designate any series of preferred stock up to the total authorized number of shares.
Series 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 the 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.
| -21- |
Series C Convertible, Redeemable Preferred Stock
The board of directors has designated 1,000 shares of Series B Convertible, Redeemable Preferred Stock with a par value of $0.001 per share. As of February 28, 2026, there are 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 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.
Series E Preferred Stock
The Board of Directors has designated 4,350,000 shares of Series E Preferred Stock. As of February 28, 2026, there are 3,350,000 shares of Series E Preferred Stock outstanding. The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation. The Series E preferred stock is non-redeemable, does not have rights upon liquidation of the Company and does not receive dividends. The outstanding shares of Series E Preferred Stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of equity instruments with voting rights. As a result, the holders of Series E Preferred Stock have 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
| -22- |
Series F Convertible Preferred Stock
The Board of Directors has designated 10,000 shares of Series F Convertible Preferred Stock with a par value of $1.00 per share. As of February 28, 2026, there are 2,513 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 Redeemable Preferred Stock
The board of directors has designated 100,000 shares of Series G Preferred Stock. As of February 28, 2026, there are no shares of Series G Preferred Stock outstanding. The Series G preferred stock does not have voting rights, rank prior to all of the Corporation’s common stock and subordinate and junior to all shares of Series F Preferred Stock and pari passu with any of the Corporation’s preferred stock hereafter issued as to distributions of assets upon dissolution or winding up of the Corporation, whether voluntary or involuntary, and does not receive dividends. At any time, the Corporation may, at its option, redeem for cash out of funds legally available therefor, any or all of the outstanding Preferred Stock (“Optional Redemption”) at $1,000 per share.
Recent Sales of Unregistered Securities
The following is a summary of transactions by AITX involving sales of its securities that were not registered under the Securities Act.
| Date | Transaction | Consideration | Shares Issued | ||||||
| February 29, 2024 | Number of shares outstanding February 29, 2024 | 9,238,750,958 | |||||||
| August 8, 2024 | Debt exchange | $200,000 in debt exchanged for common shares | 57,142,857 | ||||||
| December 16, 2024 | Debt exchange | $200,000 in debt exchanged for common shares | 79,923,076 | ||||||
| February 11, 2025 | Debt exchange | $162,000 in debt exchanged for common shares | 60,000,000 | ||||||
| March 1, 2024-February 28, 2025 | Other registered sales | Various prices | 4,979,636,877 | ||||||
| Number of shares outstanding February 28, 2025 | 14,412,453,768 | ||||||||
| Date | Transaction | Consideration | Shares Issued | ||||||
| August 8, 2024 | Debt exchange | $200,000 in debt exchanged for common shares | 57,142,857 | ||||||
| December 16, 2024 | Debt exchange | $200,000 in debt exchanged for common shares | 79,923,076 | ||||||
| February 11, 2025 | Debt exchange | $162,000 in debt exchanged for common shares | 60,000,000 | ||||||
| March 1, 2025-February 28, 2026 | Other registered sales | Various prices | 4,979,636,877 | ||||||
| Number of shares outstanding February 28, 2026 | 14,412,453,768 | ||||||||
| Date | Transaction | Consideration | Shares Issued | ||||||
| 5-Mar-25 | Debt exchange | $150,500 in debt and $275,000 in accrued interest for a total Of $425,500 exchanged for common shares at a fair value of $444,000 for a loss on settlement of debt of $18,500 | 1,850,000 | ||||||
| 21-Apr-25 | Debt exchange | $475,000 in accrued interest exchanged for common shares at a fair value of $450,000 for a gain on settlement of debt of $25,000 | 2,500,000 | ||||||
| 15-May-25 | Debt exchange | $350,000 in accrued interest exchanged for common shares at a fair value of $350,000 | 2,500,000 | ||||||
| 9-Jun-25 | Debt exchange | $300,000 in accrued interest exchanged for common shares at a fair value of $350,000 for a loss on settlement of debt of $50,000 | 2,500,000 | ||||||
| 25-Jun-25 | Debt exchange | $275,000 in accrued interest exchanged for common shares at a fair value of $300,000 for a loss on settlement of debt of $25,000 | 2,500,000 | ||||||
| 24-Jul-25 | Debt exchange | $315,000 in accrued interest exchanged for common shares at a fair value of $350,000 for a loss on settlement of debt of $35,000 | 3,500,000 | ||||||
| 7-Aug-25 | Debt exchange | $360,000 in accrued interest exchanged for common shares at a fair value of $400,000 for a loss on settlement of debt of $40,000 | 4,000,000 | ||||||
| 17-Sep-25 | Debt exchange | $280,000 in accrued interest exchanged for common shares at a fair value of $480,000 for a loss on settlement of debt of $200,000 | 4,000,000 | ||||||
| 1-Oct-25 | Debt exchange | $280,000 in accrued interest exchanged for common shares at a fair value of $360,000 for a loss on settlement of debt of $80,000 | 4,000,000 | ||||||
| 21-Oct-25 | Debt exchange | $140,000 in accrued interest exchanged for common shares at a fair value of $180,000 for a loss on settlement of debt of $40,000 | 2,000,000 | ||||||
| 3-Nov-25 | Debt exchange | $280,000 in accrued interest exchanged for common shares at a fair value of $320,000 for a loss on settlement of debt of $40,000 | 4,000,000 | ||||||
| 14-Nov-25 | Debt exchange | $350,000 in accrued interest exchanged for common shares at a fair value of $400,000 for a loss on settlement of debt of $50,000 | 5,000,000 | ||||||
| 2-Dec-25 | Conversion of Series C Preferred Shares | Conversion of 85 Series C shares for fair value of $111,690 | 1,994,464 | ||||||
| 2-Dec-25 | Debt exchange | $378,000 in accrued interest exchanged for common shares at a fair value of $480,000 for a loss on settlement of debt of $102,000 | 6,000,000 | ||||||
| 12-Dec-25 | Debt exchange | $378,000 in accrued interest exchanged for common shares at a fair value of $420,000 for a loss on settlement of debt of $42,000 | 6,000,000 | ||||||
| 5-Jan-26 | Debt exchange | $324,000 in accrued interest exchanged for common shares at a fair value of $360,000 for a loss on settlement of debt of $36,000 | 6,000,000 | ||||||
| 18-Jan-26 | Debt exchange | $336,000 in accrued interest exchanged for common shares at a fair value of $420,000 for a loss on settlement of debt of $84,000 | 7,000,000 | ||||||
| 8-Feb-26 | Debt exchange | $192,000 in accrued interest exchanged for common shares at a fair value of $320,000 for a loss on settlement of debt of $128,000 | 8,000,000 | ||||||
| March 1, 2025-February 28, 2026 | Other registered sales | Various prices | 50,403,802 | ||||||
| Number of shares outstanding February 28, 2026 | 267,872,804 | ||||||||
* Shares adjusted for reverse stock splits: 100: 1 on August 24, 2018 and 10,000:1 on March 27, 2020 and 100:1 on February 5. 2026
In connection with the foregoing, the Registrant relied upon the exemption from registration under the Securities Act of 1933, as amended and the rules and regulations of the Securities and Exchange Commission thereunder, in reliance upon Section 4(a)(2) thereof and Regulation D thereunder.
| -23- |
Penny Stock Regulations
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock falls within the definition of penny stock and therefore is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. In addition, the broker-dealer must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy and sell our stock.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers
We have not repurchased any shares of our common stock during the fiscal years ended February 28, 2026 or February 28, 2025.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Forward-Looking Statements and Business sections in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX’ fiscal year end is February 28 (February 29 during leap year). AITX is located at 10800 Galaxie Ave, Ferndale Michigan, 48220, and our telephone number is 877-767-6268.
| -24- |
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 Ended February 28, 2026 | Year Ended February 28, 2025 | 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 | )% | |||||||
| -25- |
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. |
| -26- |
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, 2025 and February 29, 2024, was ($2,566,584) 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 a 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.
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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 Ended February 28, 2026 | Year Ended February 28, 2025 | |||||||
| 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 principals generally accepted in the United States, management must make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value equity instruments used in debt settlements, amendments and extensions.
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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.
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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).
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The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. | |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3 – Inputs that are unobservable for the asset or liability. |
Measured on a Recurring Basis
The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:
| 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.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have any financial instruments that are exposed to significant market risk. We maintain our cash and cash equivalents in bank deposits and short-term, highly liquid money market investments. A hypothetical 100-basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents securities, or our earnings on such cash equivalents.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-36 of this annual report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
From October 31, 2019 through May 29, 2026, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and LJ Soldinger & Associates LLC (“LJ Soldinger”) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of February 28, 2026, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of February 28, 2026, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Limitations on Systems of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses identified in our evaluation, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. |
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of February 28, 2026, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the criteria established in Internal Control – Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) were: lack of a functioning audit committee; lack of a majority of independent members and a lack of a majority of outside directors on our board of directors; inadequate segregation of duties consistent with control objectives; management is dominated by a single individual; use of the inappropriate methodology of allocating proceeds in certain debt transactions and the expensing timing of the related debt discount; use of inappropriate fair values in certain preferred stock issuances and settlements. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of February 28, 2026.
Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
No changes were made to our internal control over financial reporting during the year ended February 28, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this report. Our directors serve for one year and until their successors are elected and qualified. Our officers are elected by the board of directors to a term of one year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
| Name | Age | Position | ||
| 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 Aeospace 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.
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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. (see bio on page 33).
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.
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ITEM 11. 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
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 $420,000.
Outstanding Equity Awards at 2026 Fiscal Year-End
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for Mr Brenz, our sole executive officers outstanding as of February 28, 2026:
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option
Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||
| -36- |
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 d 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
At June 1, 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 1, 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 | ||||||||
| Name | Beneficial
Ownership (1) | Percent of Common Stock (2) | ||||||
| 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 1, 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 on 387,232,5899 shares of the Company’s common stock issued and outstanding as of June 1, 2026. |
| (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 1,302,460,588shares 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. |
| -37- |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions. When such transactions arise, they are referred to our board of directors for its consideration.
For the years ended February 28, 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.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On October 31, 2019 the Board of Directors of the Company approved and ratified the engagement (“Engagement”) of LJ Soldinger & Associates LLC (“LJ Soldinger”) as the Company’s 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 | ||
| -38- |
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.
The Company’s principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements and Financial Statement Schedules on page F-1 and included on pages F-2 through F-36.
(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.
| -39- |
(3) Exhibits.
| * | Filed or furnished herewith. |
| -40- |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC. | ||
| Date: June 8, 2026 | By: | /s/ Steven Reinharz |
| Steven Reinharz | ||
| President, Chief Executive Officer | ||
| Date: June 8, 2026 | By: | /s/ Anthony Brenz |
| Anthony Brenz | ||
| Chief Financial Officer (principal financial and accounting officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Steven Reinharz | President, Chief Executive Officer and Director (principal executive officer) | June 8, 2026 | ||
| Steven Reinharz | ||||
| /s/ Anthony Brenz | Chief Financial Officer (principal financial and accounting officer) | June 8, 2026 | ||
| Anthony Brenz |
| -41- |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Artificial Intelligence Technology Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Artificial Intelligence Technology Solutions, Inc. 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/
| |
| We have served as the Company’s auditor since 2019. | |
| PCAOB
ID: | |
| June 8, 2026 | |
| F-2 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
February 28, 2026 | February 28, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Share proceeds receivable | ||||||||
| Device parts inventory, net | ||||||||
| Prepaid expenses and deposits | ||||||||
| Total current assets | ||||||||
| Operating lease asset | ||||||||
| Revenue earning devices,
net of accumulated depreciation of $ | ||||||||
| Fixed assets, net of accumulated
depreciation of $ | ||||||||
| Trademarks | ||||||||
| Investment at cost | ||||||||
| Security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Customer deposits | ||||||||
| Current operating lease liability | ||||||||
| Current portion of deferred variable payment obligation | ||||||||
| Loan payable - related party | ||||||||
| Deferred compensation for CEO | ||||||||
| Current portion of loans
payable, net of discount of $ | ||||||||
| Current portion of accrued interest payable | ||||||||
| Total current liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Loans payable, net of discount
of $ | ||||||||
| Deferred variable payment obligation | ||||||||
| Incentive compensation plan payable | ||||||||
| Accrued interest payable | ||||||||
| Total liabilities | ||||||||
| Series B Convertible, Redeemable Preferred
Stock. $ par value; | ||||||||
| Series C Convertible, Redeemable Preferred
Stock. $ par value; $ | ||||||||
| 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 | ||||||||
| Series F Convertible Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common Stock, $ par value; shares authorized and shares issued, issuable and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Preferred stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year
Ended February 28, 2026 | Year
Ended February 28, 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Depreciation and Amortization | ||||||||
| Loss on disposal of revenue earning devices | ||||||||
| Total Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| Research and development (note 9) | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Operating lease cost and rent | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense), net: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on settlement of debt | ||||||||
| Total other income (expense), net | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share - basic | $ | ( | ) | $ | ( | ) | ||
| Net loss per share - diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common share outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Cumulative Effect Adjustment RFV discount per adoption of ASU 2020-06 at March 1, 2024 | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of shares, net of $ | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Debt exchanged for common stock | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Series F Preferred Shares exchanged for debt | — | — | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of Series B Preferred Shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Series B Preferred Shares issued as commitment fee | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Series B Preferred shares issued as dividend | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Redemption of Series B Preferred shares | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at February 28, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance
of shares, net of $ | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Debt exchanged for common stock | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred shares | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Cash redemption of Series C shares | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||||||||||||||||
| Series C Preferred shares issued as dividend | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Penalty on failure to redeem Series C Preferred shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Penalty on failure to convert Series C Preferred shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at February 28, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
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 | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Inventory provision (recovery) | ( | ) | ( | ) | ||||
| Bad debts expense | ||||||||
| Reduction of right of use asset | ||||||||
| Accretion of lease liability | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discounts | ||||||||
| Penalty added to face value of the loan | ||||||||
| Gain on settlement of debt | ( | ) | ( | ) | ||||
| Loss on disposal of revenue earning devices and fixed assets | ||||||||
| Increase in related party accrued payroll and interest | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Deposit on right of use asset | ( | ) | ||||||
| Security deposit on operating lease | ( | ) | ||||||
| Device parts inventory | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Deferred compensation for CEO | ( | ) | ||||||
| Customer deposits | ||||||||
| Operating lease liability payments | ( | ) | ( | ) | ||||
| Current portion of deferred variable payment obligations for Payments | ||||||||
| Accrued interest payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Purchase of trademarks | ( | ) | ( | ) | ||||
| Purchase of investment (convertible note receivable) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Share proceeds net of issuance costs | ||||||||
| Proceeds on issuance of Series B Preferred Shares | ||||||||
| Redemption of Series B or Series C Preferred Shares | ( | ) | ( | ) | ||||
| Proceeds on issuance of Series C Preferred Shares | ||||||||
| Proceeds from loans payable | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash and non-cash transactions: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Right of use asset for lease liability | $ | $ | ||||||
| Transfer from device parts inventory to fixed assets | $ | $ | ||||||
| Series C penalty shares issued | $ | |||||||
| Discount applied to face value of loans | $ | $ | ||||||
| Exchange of Series F Preferred Shares for loans payable | $ | $ | ||||||
| Exchange of loans payable and accrued interest for common shares | $ | $ | ||||||
| Convertible note receivable exchanged for investment at cost | $ | $ | ||||||
| Dividend on Series B or Series C Preferred Shares paid in Series B or Series C Preferred Shares | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
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 $
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 $
| F-8 |
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 principals generally accepted in the United States, management must make estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value equity instruments 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 $
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.
| F-9 |
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 $
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 $
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.
SCHEDULE OF FIXED ASSETS STATED AT COST
| Computer equipment | ||
| Furniture and fixtures | ||
| Office equipment | ||
| Warehouse equipment | ||
| Demo Devices | ||
| Vehicles | ||
| Leasehold improvements |
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.
| F-10 |
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.
| F-11 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
ASU
2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and
industry specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange
for those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted
in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the
amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance
obligation.. For the year ended February 28, 2026, two customers accounted for
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.
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.
| F-12 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.
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).
| F-13 |
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:
SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE
| Amount at | Fair Value Measurement Using | |||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| February 28, 2026 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment at cost | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | ||||||||||||
| February 28, 2025 | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Incentive compensation plan payable – revaluation of equity awards payable in Series G shares | $ | $ | $ | $ | ||||||||||||
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.
| F-14 |
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.
| F-15 |
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:
SCHEDULE OF REVENUES FROM CONTRACTS WITH CUSTOMERS
| Year
Ended February 28, 2026 | Year
Ended February 28, 2025 | |||||||
| Device rental activities | $ | $ | ||||||
| Direct sales of goods and services | ||||||||
| Revenue | $ | $ | ||||||
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.
SCHEDULE OF LEASE ASSETS AND LIABILITIES
| Leases | Classification | February
28, 2026 | February
28, 2025 | |||||||
| Assets | ||||||||||
| Operating | Operating Lease Assets | $ | $ | |||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Operating | Current Operating Lease Liability | $ | $ | |||||||
| Noncurrent | ||||||||||
| Operating | Noncurrent Operating Lease Liabilities | |||||||||
| Total lease liabilities | $ | $ | ||||||||
Note:
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of
| F-16 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating
lease cost and rent was $
5. INVESTMENT
On
December 23, 2022 the Company entered into a Simple Agreement for Future Equity (SAFE) contract to invest $
6. REVENUE EARNING DEVICES
Revenue earning devices (RED) consisted of the following:
SCHEDULE OF REVENUE EARNING DEVICES
| February
28, 2026 | February
28, 2025 | |||||||
| Revenue earning devices | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
During
the year ended February 28, 2026, the Company made total additions to revenue earning devices of $
During
the year ended February 28, 2025, the Company made total additions to revenue earning devices of $
Depreciation and amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:
SCHEDULE OF DEPRECIATION AND AMORTIZATION
| Depreciation and Amortization RED | Year
Ended February 28, 2026 | Year
Ended February 28, 2025 | ||||||
| Cost of Goods Sold | $ | $ | ||||||
| Operating expenses | ||||||||
| Total Depreciation and Amortization RED | $ | $ | ||||||
| F-17 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. FIXED ASSETS
Fixed assets consisted of the following:
SCHEDULE OF FIXED ASSETS
| February
28, 2026 | February
28, 2025 | |||||||
| Automobile | $ | $ | ||||||
| Demo devices | ||||||||
| Tooling | ||||||||
| Machinery and equipment | ||||||||
| Computer equipment | ||||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Warehouse equipment | ||||||||
| Leasehold improvements | ||||||||
| Fixed assets gross | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net of accumulated depreciation | $ | $ | ||||||
During
the year ended February 28, 2026, the Company made additions to fixed assets of $
During
the year ended February 28, 2025, the Company made additions to fixed assets of $
Depreciation and amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:
SCHEDULE OF DEPRECIATION AND AMORTIZATION IN OPERATING EXPENSES
| Depreciation and Amortization | Year
Ended February 28, 2026 | Year
Ended February 28, 2025 | ||||||
| Fixed assets | $ | $ | ||||||
| Revenue earning devices | ||||||||
| Total Depreciation and Amortization included in operating expenses | $ | $ | ||||||
| F-18 |
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 $
On May 9, 2019 the Company entered into two similar arrangements with two investors:
| (1) | The
investor would pay up to $ | |
| (2) | The
investor would pay up to $ |
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
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 $
On
December 30, 2019 the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $
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 $
On
July 1, 2020 the Company entered into a similar agreement with the first investor whereby the investor would pay up to $
| F-19 |
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
$
In
summary of all agreements mentioned above if in the event that at least
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 $
On
March 1, 2021 the first investor referred to above whose aggregate investment is $
| 1) | The
rate payment was reduced from | |
| 2) | The
asset disposition % (see below) was reduced from |
In
consideration for the above changes, the investor received Series F Convertible Preferred Stock and a warrant to purchase
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 $
For
both the years ended February 28, 2026 and February 28, 2025, the Company has received $
| F-20 |
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 ($
During
the year ended February 28, 2026, the Company a net repayment of $
During
the years ended February 28, 2026, and February 28, 2025, the Company accrued Series G shares to be issued totaling $
During
the years ended February 28, 2026, and February 28, 2025, the Company was charged $
| F-21 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. LOANS PAYABLE
Loans payable at February 28, 2026 consisted of the following:
SCHEDULE OF LOANS PAYABLE
| Date | Maturity | Description | Principal | Interest Rate | |||||||||
| Promissory note | (1)* | $ | % | ||||||||||
| Promissory note | (2) | % | |||||||||||
| Promissory note | (3) | % | |||||||||||
| Promissory note | (4) | % | |||||||||||
| Promissory note | (5) | % | |||||||||||
| Promissory note | (6) | % | |||||||||||
| Promissory note | (7) | % | |||||||||||
| Promissory note | (8) | % | |||||||||||
| Promissory note | (9) | % | |||||||||||
| Promissory note | (10) | % | |||||||||||
| Promissory note | (11) | % | |||||||||||
| Promissory note | (12) | % | |||||||||||
| Promissory note | (13) | % | |||||||||||
| Promissory note | (14) | % | |||||||||||
| Promissory note | (15) | % | |||||||||||
| Promissory note | (16) | % | |||||||||||
| Promissory note | (17) | % | |||||||||||
| Promissory note | (18) | % | |||||||||||
| Promissory note | (19) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Promissory note | (20) | % | |||||||||||
| Purchase Agreement | (21) | % | |||||||||||
| Purchase Agreement | (22) | % | |||||||||||
| Promissory note | (23) | % | |||||||||||
| Promissory note | (24) | % | |||||||||||
| Promissory note | (25) | % | |||||||||||
| Future Receivables Purchase and Sale Agreement | (26) | % | |||||||||||
| Promissory note | (27) | % | |||||||||||
| Promissory note | (28) | % | |||||||||||
| Promissory note | (29) | % | |||||||||||
| Promissory note | (30) | % | |||||||||||
| Promissory note | (31) | % | |||||||||||
| Business loan | (32) | % | |||||||||||
| Convertible note | (33) | % | |||||||||||
| Promissory note | (34) | % | |||||||||||
| Promissory note | (35) | % | |||||||||||
| Promissory note | (36) | % | |||||||||||
| Promissory note | (37) | % | |||||||||||
| Convertible note | (38) | % | |||||||||||
| Promissory note | (39) | % | |||||||||||
| $ | |||||||||||||
| Less: current portion of loans payable | ( | ) | |||||||||||
| Less: discount on non-current loans payable | |||||||||||||
| Non-current loans payable, net of discount | $ | ||||||||||||
| Current portion of loans payable | $ | ||||||||||||
| Less: discount on current portion of loans payable | ( | ) | |||||||||||
| Current portion of loans payable, net of discount | $ | ||||||||||||
| * |
As of February 28, 2026 , all long term debt matures in the fiscal year ending February 29, 2028.
| F-22 |
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 $ |
| (7) | |
| (8) |
| F-23 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (9) | |
| (10) | |
| (11) | |
| (12) |
| F-24 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (13) | |
| (14) | |
| (15) | |
| (16) | |
| (17) | |
| (18) |
| F-25 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (19) | |
| (20) | |
| October
28, 2022, $ | |
| November
9, 2022, $ |
November
10, 2022, $
November
15, 2022, $
January
11, 2023, $
February
6, 2023, $
| F-26 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
April
5, 2023, $
April
20, 2023, $
May
11, 2023, $
October
27 2023, $
| (21) | |
| (22) | |
| (23) | |
| (24) | |
| (25) | |
| (26) | |
| (27) | |
| (28) | |
| (29) | |
| (30) |
| F-27 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(31)
|
|
| (32) | |
(33) |
|
| (34) |
| (35) |
|
| (36) |
| (37) |
|
(38) |
| (39) |
|
| F-28 |
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
| F-29 |
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
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.
| F-30 |
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
| F-31 |
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 $
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 $
Summary of Preferred Stock Warrant Activity
SUMMARY OF PREFERRED STOCK WARRANT ACTIVITY
| Number
of Series F Preferred Warrants | Weighted Average | Weighted Average | ||||||||||
| Outstanding at March 1, 2025 | $ | |||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | — | |||||||||||
| Outstanding at February 28, 2026 | $ | |||||||||||
| F-32 |
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 $ | |
| — | the
Company issued common shares in gross proceeds of $ | |
| — | the
Company issued common shares in gross proceeds of $ |
During the year ended, February 28, 2025, common shareholders had the following activity:
| — | the
Company issued common shares with gross proceeds of $ | |
| — | the
Company issued common shares to repay $ |
Summary of Warrant and Stock Option Activity
SUMMARY OF WARRANT AND STOCK OPTION ACTIVITY
| Number
of Warrants | Weighted
Average Exercise Price | Weighted
Average Remaining Years | ||||||||||
| Outstanding at February 29, 2024 | $ | |||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | ( | ) | ( | ) | — | |||||||
| Outstanding at February 28, 2025 | $ | |||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited and cancelled | ( | ) | ( | ) | — | |||||||
| Outstanding at February 28, 2026 | $ | |||||||||||
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. |
| F-33 |
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. |
| F-34 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF COMMON STOCK OPTION ACTIVITY
| Number
of Options | Weighted Average | Weighted
Average Remaining Years | ||||||||||
| Outstanding at March 1, 2024 | $ | |||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited, extinguished and cancelled | ( | ) | $ | ( | ) | |||||||
| Outstanding at February 28, 2025 | $ | |||||||||||
| Number
of Options | Weighted Average | Weighted
Average Remaining Years | ||||||||||
| Outstanding at March 1, 2025 | $ | |||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Forfeited, extinguished and cancelled | ( | ) | $ | ( | ) | |||||||
| Outstanding at February 28, 2026 | $ | |||||||||||
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 $
| F-35 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operating Lease
On
March 10, 2021,
The
Company’s leases are accounted for as operating leases. The weighted average discount rate used was
SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES
| Maturity of Lease Liabilities | Operating Leases | |||
| February 28, 2027 | $ | |||
| February 28, 2028 | ||||
| February 29, 2029 | ||||
| February 28, 2030 | ||||
| February 28, 2031 | ||||
| February 28, 2032 and after | ||||
| Total lease payments | ||||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| F-36 |
ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE
| 2026 | 2025 | |||||||
| For the Year Ended | ||||||||
| February 28, | February 28, | |||||||
| 2026 | 2025 | |||||||
| Numerator: | ||||||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Effect of common stock equivalents | ||||||||
| Less redemption dividend to Series F and Series B preferred shareholders | ( | ) | ( | ) | ||||
| Net loss adjusted for common stock equivalents | ( | ) | ( | ) | ||||
| Denominator: | ||||||||
| Weighted average shares - basic | ||||||||
| Net loss per share – basic | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average shares – diluted | ||||||||
| Net loss per share – diluted | $ | ( | ) | $ | ( | ) | ||
SCHEDULE OF ANTI-DILUTIVE SHARES OF COMMON STOCK EQUIVALENTS
| 2026 | 2025 | |||||||
| For the Year Ended | ||||||||
| February 28, | February 28, | |||||||
| 2026 | 2025 | |||||||
| Convertible Series F Preferred Shares | ||||||||
| Convertible Series C Preferred Shares | ||||||||
| Convertible and exchangeable debt | ||||||||
| Stock options and warrants | ||||||||
| Total | ||||||||
| F-37 |
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:
SCHEDULE OF INCOME TAX EXPENSES (BENEFIT)
| 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:
SCHEDULE OF EXPECTED STATUTORY FEDERAL INCOME TAX PROVISION
| February
28, 2026 | ||||
| Federal statutory rate | $ | ( | ) | |
| State income tax benefit, net of federal benefit | ( | ) | ||
| Non deductible interest | ||||
| Non deductible stock based compensation | ||||
| Change in valuation allowance | ||||
| Total | $ | |||
| February
28, 2025 | ||||
| Federal statutory rate | $ | ( | ) | |
| State income tax benefit, net of federal benefit | ( | ) | ||
| Non deductible interest | ||||
| Non deductible stock based compensation | ||||
| Change in valuation allowance | ||||
| 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
| F-38 |
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:
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
| February
28, 2026 | February
28, 2025 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Depreciation | ||||||||
| Deferred revenue | ||||||||
| Total deferred tax liabilities | ||||||||
| Net deferred tax assets: | ||||||||
| Less valuation allowance | ( | ) | ( | ) | ||||
| 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
$
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.
| F-39 |
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 $ |
| — | the
Series C Preferred Shareholder converted Series C preferred shares at a value of $ |
| — | on
May 4 2026 |
| — | on
March 12, 2026 the Company issued a promissory note to a lender for $ |
| — | 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 $ |
| — | on
March 25, 2026, the Company issued a convertible, redeemable note to a lender for $ |
| — | on
March 25, 2026, the Company issued a convertible, redeemable note to a lender for $ |
| — | on
April 20, 2026, the Company issued a convertible note to a lender for $ |
| — | on
April 20, 2026, the Company issued a convertible, redeemable note to a lender for $ |
| — | on
May 1, 2026, the Company issued a convertible, redeemable note to a lender for $ |
| — | on
May 4, 2026, the Company issued a convertible, redeemable note to a lender for $ | |
| — | on
May 29, 2026 the Company issued a promissory note to a lender for $ |
| — | on
June 3, 2026, the Company issued a convertible, redeemable note to a lender for $ |
| F-40 |
Exhibit 21.1
Artificial Intelligence Technology Solutions Inc.
Subsidiaries
| Name | Jurisdiction of Incorporation | |
| Robotic Assistance Devices, Inc. | Nevada | |
| Robotic Assistance Devices Group, Inc. | Nevada | |
| Robotic Assistance Devices Mobile, Inc. | Nevada | |
| Robotic Assistance Devices Residential, Inc | Nevada | |
| Robotic Assistance Devices Lanka (Private) Limited | Sri Lanka |
Exhibit 31.1
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, Steven Reinharz, certify that:
1. I have reviewed this Annual Report on Form 10-K of Artificial Intelligence Technology Solutions Inc. (the “Company”) for the year ended February 28, 2026.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: June 8, 2026 | BY: | /s/ Steven Reinharz |
| Steven Reinharz | ||
| President, Chief Executive Officer (principal executive officer) |
Exhibit 31.2
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, Anthony Brenz, certify that:
1. I have reviewed this Annual Report on Form 10-K of Artificial Intelligence Technology Solutions Inc. (the “Company”) for the year ended February 28, 2026.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: June 8, 2026 | BY: | /s/ Anthony Brenz |
| Anthony Brenz | ||
| Chief Financial Officer (principal financial and accounting officer) |
Exhibit 32.1
SECTION 1350 CERTIFICATION
In connection with the Annual Report on Form 10-K of Artificial Intelligence Technology Solutions Inc. (the “Company”) for the year ended February 28, 2026 as filed with the Securities and Exchange Commission (the “Report”), I, Steven Reinharz, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: June 8, 2026 | BY: | /s/ Steven Reinharz |
| Steven Reinharz | ||
| President, Chief Executive Officer (principal executive officer) |
This certification accompanies this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
Exhibit 32.2
SECTION 1350 CERTIFICATION
In connection with the Annual Report on Form 10-K of Artificial Intelligence Technology Solutions Inc. (the “Company”) for the year ended February 28, 2026 as filed with the Securities and Exchange Commission (the “Report”), I, Anthony Brenz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: June 8, 2026 | BY: | /s/ Anthony Brenz |
| Anthony Brenz | ||
| Chief Financial Officer (principal financial and accounting officer) |
This certification accompanies this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.