Executive Summary / Key Takeaways

• Artificial Intelligence Technology Solutions (AITX) is disrupting the physical security market with its vertically integrated suite of AI-powered robotic solutions, offering significant cost savings (35-80%) over traditional manned guarding.
• The Company demonstrated explosive top-line growth in FY 2025, with revenue surging 175% year-over-year to $6.13 million, driven primarily by a 211% increase in higher-margin rental activities, leading to a dramatic improvement in gross margin to 61%.
• AITX's core technological differentiator is its Agentic AI platform, SARA, enabling autonomous detection, decision-making, and voice interaction, positioning its devices beyond passive surveillance systems and earning industry recognition.
• Despite strong revenue and gross profit growth, the Company faces significant liquidity challenges, reporting negative operating cash flow of $12.20 million and an accumulated deficit of $156.50 million as of February 28, 2025, raising substantial doubt about its ability to continue as a going concern without securing additional capital.
• Management targets achieving positive operational cash flow within 18 months and projects FY 2026 revenue between $12 million and $18 million, supported by strategic initiatives like cost reductions, product expansion (e.g., RIO Mini, RADCam into enterprise), and leveraging recent debt restructuring for potential Q2 FY26 net profitability.

Setting the Scene: Redefining Security with Autonomous Intelligence

Artificial Intelligence Technology Solutions (AITX), through its subsidiary Robotic Assistance Devices (RAD), is on a mission to fundamentally change the physical security and facility management landscape. Born from the acquisition of RAD in 2017, AITX pivoted from its original transportation focus to address critical inefficiencies plaguing traditional security models: the escalating cost and scarcity of human labor, the slow response time to incidents, and the inherent limitations of passive surveillance systems. In a market estimated to reach nearly $1 trillion globally, AITX is positioning itself not merely as a participant, but as a disruptor, leveraging artificial intelligence and robotics to automate high-frequency security, concierge, and operational tasks.

The Company's strategy is built on a vertically integrated model, controlling the development of its hardware, software, AI analytics, and voice engagement capabilities in-house. This allows for rapid innovation, tailored solutions, and a cohesive ecosystem designed to offer businesses and institutions a compelling alternative to costly human guards. AITX aims to deliver significant cost savings, cited between 35% and 80%, by deploying intelligent, autonomous devices that can proactively deter, detect, and respond to threats.

Technological Differentiation: The Power of Agentic AI

At the heart of AITX's offering is SARA, the Speaking Autonomous Responsive Agent. This is not merely a standard AI analytics package; SARA represents Agentic AI in practice within physical security. Unlike traditional systems that might flag an event for human review, SARA empowers RAD devices to perceive their environment, make context-aware decisions, take autonomous action (like issuing a voice command), and adapt with minimal human intervention. This capability transforms passive monitoring into active, intelligent engagement.

The tangible benefits of SARA-powered devices are central to AITX's value proposition. Devices like ROSA (Responsive Observation Security Agent), the Company's most deployed solution with over 1000 units built, and RIO (ROSA Independent Observatory), a rapidly growing solar-powered mobile tower, utilize SARA for real-time deterrence and response. AVA (Autonomous Verified Access) automates gate entry with AI-powered recognition and voice interaction, while TOM (The Office Manager) streamlines visitor management. RADCam, initially for residential use, is expanding into SMB and enterprise markets, bringing AI and voice capabilities to a wider range of deployments. Mobile platforms like ROAMEO (Rugged Observation Assistance Mobile Electronic Officer) and the law enforcement-focused RADDOG LE2 leverage AI for autonomous patrolling and situational awareness. Even existing infrastructure can be upgraded with ROSS software or the RAM hardware module, adding AI analytics and voice capabilities to legacy cameras without costly replacements.

AITX's R&D efforts are focused on enhancing these capabilities and expanding the product line. The transition to Gen 4 platforms aims for improved stability and efficiency. Recent initiatives like making the RIO lineup Starlink-compatible target expanding market reach to remote, off-grid locations. The planned integration with platforms like Immix seeks to enhance real-time incident management through AI automation. While specific quantitative performance metrics like processing speed improvements or cost reduction percentages from these R&D efforts are not consistently detailed across all initiatives, the stated goal is consistently to improve efficiency, expand functionality, and reduce operational costs for clients, thereby strengthening AITX's competitive moat. The development of HERO, a humanoid security robot expected in late 2025, signals AITX's ambition to push the boundaries of physical security presence and interaction.

For investors, this technological foundation is critical. SARA's Agentic AI provides a differentiated offering in a crowded market. The ability to deliver proactive, autonomous security solutions that genuinely reduce the need for expensive human labor underpins the potential for significant cost savings for clients, which in turn drives the adoption of AITX's subscription-based model and its recurring monthly revenue (RMR) base.

Competitive Landscape: Disrupting the Status Quo

The security industry is a complex mix of traditional manned guarding services, legacy hardware providers, and a growing number of technology companies. AITX operates within this landscape, directly competing with companies offering AI-enabled security robotics and surveillance, such as Knightscope (KSCP), and indirectly with broader security technology providers like Axon Enterprise (AXON), consumer robotics companies like iRobot (IRBT) extending into commercial use, and AI analytics platforms like Palantir Technologies (PLTR).

Traditional security guard services represent the primary target for displacement, offering a high-cost, labor-intensive model that AITX's automated solutions aim to replace or augment. Compared to these legacy approaches, AITX's solutions promise substantial cost reductions (35-80%) and consistent, tireless performance.

Against technology-focused competitors, AITX emphasizes its vertically integrated ecosystem. While Knightscope offers autonomous security robots, AITX's in-house development across hardware, software, and AI is presented as enabling faster speed to market and deployment scale. AITX's recent revenue growth (175% in FY25) significantly outpaced Knightscope's (~25% in 2024) and Axon's (~28% in 2024), albeit from a much smaller base. AITX's gross margin of 61% in FY25 also compares favorably to Knightscope's (~35%) and is competitive with Axon's (~60%). However, AITX's estimated market share (2-5%) remains considerably smaller than Axon's dominant position in law enforcement tech (40-50%) and even Knightscope's presence (5-10%) in specific robotics niches.

AITX's technological advantages, particularly the Agentic AI capabilities of SARA and the claimed efficiencies from its hardware platforms, are key differentiators. The ability to integrate voice interaction and autonomous decision-making sets its devices apart from more passive surveillance systems or software-only analytics platforms offered by some competitors. The expansion of products like RADCam into SMB and enterprise markets, and the introduction of the RIO Mini, demonstrate a strategic effort to capture market share across multiple price points and deployment scenarios, directly challenging both traditional and tech-enabled competitors.

Despite these technological and growth advantages, AITX's smaller scale and financial position represent competitive vulnerabilities. Larger, more established competitors like Axon and Palantir possess significantly greater financial resources, profitability, and market penetration, which could allow them to invest more heavily in R&D, sales channels, or withstand pricing pressures more effectively. AITX's strategy relies on its cost-effectiveness and innovation speed to carve out and expand its niche in this competitive landscape.

Financial Performance: Explosive Growth and Margin Expansion

AITX's financial results for the fiscal year ended February 28, 2025, reveal a company experiencing rapid top-line expansion. Total revenue reached $6.13 million, a substantial 175% increase compared to $2.23 million in the prior fiscal year. This growth was heavily skewed towards the Company's device rental activities, which surged by 211% to $5.05 million, demonstrating strong adoption of the subscription-based model. Direct sales of goods and services also grew, increasing 80% to $1.08 million, driven by higher monitoring RMC on new installations.

This shift towards higher-margin rental revenue had a dramatic positive impact on profitability. Gross profit soared by 562% to $3.74 million, and the gross profit margin expanded significantly from 25% in FY 2024 to 61% in FY 2025. Management attributed this improvement primarily to the favorable revenue mix and the allocation of overhead over a larger sales base, in addition to the absence of a prior-year inventory write-down.

However, this impressive gross profit growth was partially offset by a 22% increase in operating expenses, which totaled $17.69 million. General and administrative expenses saw the largest increase ($3.60 million), driven by factors including higher stock-based compensation accruals for the CEO, increased staff wages and commissions tied to growth, and rising insurance and maintenance costs. Research and development expenses remained relatively stable at $3.46 million as the Company focused on current product improvements.

The net result was a net loss of $18.94 million for FY 2025, a slight improvement from the $20.71 million loss in FY 2024, primarily due to lower amortization of debt discounts. Interest expense remained substantial at $5.46 million. The Deferred Variable Payment Obligation (DVPO) expense, tied directly to revenue levels, also increased significantly, reflecting the top-line growth.

Liquidity and Capital Resources: A Critical Challenge

Despite the strong revenue and gross profit performance, AITX's financial health presents significant challenges, particularly concerning liquidity. As of February 28, 2025, the Company reported negative working capital of $2.55 million and a cumulative accumulated deficit of $156.50 million. Operating activities consumed $12.20 million in cash during FY 2925.

Management explicitly states that they do not anticipate positive cash flow from operations in the near future and that these factors raise substantial doubt about the Company's ability to continue as a going concern for the next twelve months. The Company currently lacks the resources to meet all its obligations or fully execute its business plan without securing additional capital.

AITX's strategy to address this involves a multi-pronged approach: continued revenue growth, raising funds through equity issuances, and utilizing non-convertible debt. A key component is an equity financing agreement from September 2024, allowing an investor to purchase up to $30 million in common stock at a discount over two years, with approximately $24 million remaining under this facility as of the 10-K filing date. Subsequent to the fiscal year end, the Company has continued to issue shares for both cash ($2.14 million net proceeds from 1.40 billion shares) and debt settlement ($775,500 settled with 435 million shares), highlighting the ongoing reliance on equity financing, which results in significant dilution given the low stock price.

The Company also relies heavily on debt, with 87% of its loans payable concentrated with a single lender, and has a history of extending maturity dates on these obligations.

Outlook and Strategic Momentum

Looking ahead, AITX management is focused on converting its sales pipeline, driving operational efficiencies, and ultimately achieving positive cash flow. They estimate that with continued reasonable performance, the Company could reach and maintain profitability while working towards a Nasdaq uplist, which is targeted for 2026 (though recent news suggests a later target of 2027-2029).

Specific guidance includes a projected FY 2026 revenue range of $12 million to $18 million, representing significant continued growth. Management anticipates that recent debt restructuring, which settled over $4.5 million in debt for less than 10% of the amount owed, will result in a significant one-time gain and position the Company for net profitability in Q2 FY 2026 (which began June 1, 2025).

Strategic initiatives underpin this outlook. The Company is implementing efficiencies expected to yield over $1.2 million in annualized savings starting June 1, 2025, reflecting increased stability in its Gen 4 platform and a shift in focus towards production and efficiency improvements rather than new product creation. The expansion of RADCam into the SMB and enterprise markets, the launch of the RIO Mini to address surging demand for mobile security, and efforts to integrate with platforms like Immix are all aimed at accelerating revenue growth and market penetration. Management forecasts adding up to 500 RIO Mini units to sales expectations this fiscal year.

Risks and Challenges

The investment in AITX carries significant risks. The most prominent is the substantial doubt about the Company's ability to continue as a going concern, contingent on its ability to secure additional financing. The reliance on equity financing poses a significant risk of further dilution for existing shareholders.

Operational challenges include converting sales opportunities into deployed clients, particularly within the security industry, which management notes can be risk-averse towards adopting new technologies. While conversion rates are improving, overcoming this inertia requires sustained effort.

Financial risks extend beyond liquidity to the concentration of debt with a single lender and the need for continued debt extensions. The Company has also identified material weaknesses in its internal controls over financial reporting, including governance issues (lack of independent directors, audit committee) and accounting complexities, which could potentially lead to future financial misstatements.

Legal proceedings, such as the claim from a prospective lender, add uncertainty and potential costs. Cybersecurity risks, inherent in the nature of the business, also remain a concern despite SOC 2 Type 2 certification.

Conclusion

Artificial Intelligence Technology Solutions stands at a pivotal juncture. The Company has demonstrated compelling execution on its core business strategy, leveraging differentiated Agentic AI technology to deliver solutions that are clearly resonating with customers seeking alternatives to traditional security models. The explosive revenue growth and dramatic improvement in gross margins in FY 2025 are tangible indicators of market traction and the potential of its vertically integrated approach.

However, this operational momentum is overshadowed by significant financial challenges. The negative cash flow and accumulated deficit necessitate a continued reliance on external financing, raising substantial doubt about the Company's ability to sustain operations without securing additional capital. While management's plans for achieving positive cash flow and targeting a Nasdaq uplist outline a path forward, successful execution is critical and not assured. The ability to navigate these liquidity constraints while maintaining technological leadership and sales growth will determine whether AITX can translate its disruptive potential into sustainable long-term value for investors.