{"url_path":"/sec/aitx/10-k/2026/item-1","section_key":"item-1","section_title":"Item 1 of this Report states that SARA enables devices to “perceive, decide, communicate, and act autonomously in real time, without","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-09","source_url":"https://www.sec.gov/Archives/edgar/data/1498148/0001493152-26-027796-index.html","accession_number":"0001493152-26-027796","cik":"0001498148","ticker":"AITX","issuer_name":"Artificial Intelligence Technology Solutions Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1498148/0001493152-26-027796-index.html","primary_entity_key":"0001498148","primary_entity_name":"Artificial Intelligence Technology Solutions Inc."},"word_count":2573,"has_tables":true,"body_markdown":"Item 1 of this Report states that SARA enables devices to “perceive, decide, communicate, and act autonomously in real time, without\ncontinuous human intervention” — describing this as a present operational characteristic. Investors should understand that\nthis characterization reflects design intent under supported field conditions; deployed systems may require more human oversight than\ndescribed in certain situations and may not consistently deliver the autonomous escalation, voice intervention, and first-responder coordination\ndescribed in this Report. Item 1 also states that the Company’s firearm detection analytic “identifies visible handguns and\nlong guns in real time”—an unqualified performance claim. Actual detection accuracy and response performance are subject\nto environmental conditions, image quality, and system configuration; the Company does not represent that the analytic will detect all\nfirearms in all conditions, and the ASTORS award recognition does not constitute independent validation of detection accuracy rates or\nperformance specifications. Failures of the Company’s AI systems to detect threats, correctly identify individuals or vehicles,\nor appropriately escalate or de-escalate situations could result in harm to persons or property, exposure to liability, and damage to\nthe Company’s reputation and customer relationships. Industry award recognitions referenced in this Report do not constitute validation\nof the safety, accuracy, or commercial efficacy of any product.\n\n \n\n-13-\n\n[Table of Contents](#toc_001)\n\n \n\n**The\nCompany Relies on Trade Secrets and Confidentiality Protections Rather Than Patents and May Be Unable to Adequately Protect Its Intellectual\nProperty.**\n\n** **\n\nThe\nCompany does not currently rely materially on patent protection for its hardware designs, software, firmware, AI models, the SARA platform,\nautonomous navigation stack, or related technology. Instead, the Company relies on trade secret protection, confidentiality and invention-assignment\nagreements with employees and contractors, copyrights, and trademark registrations. These protections may be insufficient to prevent\nmisappropriation, reverse engineering, or independent development of competing technologies by third parties. Confidentiality agreements\nmay be breached; trade secret protections may prove difficult to enforce, particularly across international jurisdictions; and employees\nor contractors with access to the Company’s proprietary systems, code, or AI models may depart and join competitors or establish\ncompeting businesses. The Company’s Sri Lanka operations at RAD Lanka introduce additional jurisdictional complexity with respect\nto IP enforcement. If the Company’s intellectual property is misappropriated or independently replicated, the Company may lose\nthe technological differentiation that underpins its competitive positioning.\n\n \n\n**Cybersecurity\nIncidents Could Compromise the Company’s Products, Customer Data, and Operations.**\n\n** **\n\nThe\nCompany’s products are connected to the internet and to customer networks, and the SARA platform and related cloud services process\nand transmit data from deployed devices—including video, audio, and access-control information—across an expanding footprint\nof connected devices. Although the Company has achieved and maintained SOC 2 Type 2 status since February 2025, cybersecurity certifications\ndo not guarantee the absence of vulnerabilities or the prevention of successful attacks. A breach of the Company’s systems, a compromise\nof deployed customer devices, or a successful attack on the SARA platform could result in unauthorized access to sensitive data, disruption\nof device functionality at customer sites, customer contract terminations, regulatory scrutiny, litigation, and significant reputational\ndamage. The Company’s cybersecurity posture will require ongoing investment as threats evolve, as ROAMEO deployments expand the\nnumber of connected autonomous vehicles in the field, and as RAD Europe operations increase the Company’s exposure to GDPR and\nother international data protection regimes.\n\n \n\n**The\nSARA Platform May Not Achieve the Commercial Adoption Anticipated by RAD-G.**\n\n** **\n\nRAD-G’s\nbusiness model depends substantially on expanding the SARA ecosystem through licensing and integration arrangements with third-party\nhardware manufacturers, monitoring platforms (including central station platforms such as Immix), dealers, and enterprise end users.\nThe commercial success of RAD-G depends on third parties choosing to integrate SARA into their products, platforms, and workflows—decisions\nthat are outside the Company’s control and that may not materialize on the timeline or at the scale management anticipates. The\nRAD-G sales funnel, characterized by management as substantial for an early-stage AI platform business, has not yet produced revenue\ncommensurate with management’s expectations. Competition from large, well-funded AI technology companies with greater distribution\nand integration resources could impair RAD-G’s ability to establish SARA as a platform-of-choice in the physical security ecosystem.\n\n \n\n**IV.\nMARKET, COMPETITIVE, AND REGULATORY RISKS**\n\n** **\n\n**The\nCompany Operates in a Competitive Market and Faces Competition from Larger, Better-Capitalized Companies.**\n\n** **\n\nThe\nCompany competes across three distinct but related markets: traditional guard services and manned monitoring; legacy passive security\nhardware (cameras, access control devices, alarm systems); and an emerging set of AI-driven and autonomous security technology companies.\nMany of the Company’s actual and potential competitors have substantially greater financial resources, brand recognition, established\ndistribution networks, and installed customer bases than the Company. Large security integrators and major technology companies may develop,\nlicense, or acquire AI and autonomous security capabilities that compete directly with the Company’s products and platform. The\nmarket characterizations in this Report—including statements that incumbent competitors are “structurally disadvantaged”\nor that legacy vendors “typically lack” agentic AI capability—reflect management’s view and are not statements\nof established fact. Competitive dynamics may develop in ways unfavorable to the Company, including through technological advances by\ncompetitors, price compression across the autonomous security category, or the market entry of well-capitalized technology companies.\n\n \n\n-14-\n\n[Table of Contents](#toc_001)\n\n** **\n\n**Deployment\nof Autonomous Security Devices Is Subject to Evolving Legal, Regulatory, and Privacy Constraints.**\n\n** **\n\nThe\nCompany’s products deploy autonomous devices—including outdoor mobile robotic vehicles (ROAMEO), vehicle access management\nsystems (AVA), visitor management systems (TOM), and AI-enabled cameras (ROSA, RIO, RAM, RADCam)—that collect audio, video, biometric,\nand identification data in commercial, residential, industrial, and potentially public-access environments. The legal framework governing\nthe collection and processing of such data is complex, rapidly evolving, and varies significantly across jurisdictions. Applicable regulations\ninclude state biometric privacy statutes (such as the Illinois Biometric Information Privacy Act), the California Consumer Privacy Act,\nGDPR as applicable to the Company’s anticipated European operations through RAD Europe, and various other federal, state, and local\nprivacy and data protection laws. Autonomous vehicles and robotic platforms operating in public or semi-public spaces may be subject\nto licensing, permitting, insurance, or operational requirements that vary by municipality, state, or country. The Company’s anticipated\nestablishment of RAD Europe during fiscal 2027 will directly increase its exposure to GDPR compliance obligations. Failure to comply\nwith applicable laws and regulations could result in regulatory enforcement actions, fines, litigation, mandatory product modifications,\nor constraints on the Company’s ability to operate or deploy products in affected markets.\n\n \n\n**Market\nAdoption of AI-Driven and Autonomous Security Solutions May Be Slower Than Management Anticipates.**\n\n** **\n\nThe\nCompany’s business plan assumes that customers in the physical security market will adopt AI-driven and autonomous solutions at\na pace and scale consistent with management’s view of the industry’s structural transition. This assumption may not prove\ncorrect. Customers may be slower than expected to replace human guard labor or legacy surveillance systems with automated alternatives,\nwhether due to risk aversion, labor union obligations, insurance requirements, regulatory constraints, concerns about AI reliability,\nor other factors. The “RAD Town” concept—in which the Company’s portfolio of stationary and mobile products operates\nas an integrated autonomous-security fabric across a campus or jurisdiction—is a long-term design target, not an existing deployment\nor contracted commercial arrangement. The analogies drawn in this Report to Industry 4.0 transitions in other sectors are management’s\nnarrative framework and may not accurately predict the pace or trajectory of adoption in the physical security industry. Slower-than-anticipated\nadoption would adversely affect the Company’s ability to achieve its revenue projections and extend the period during which the\nCompany requires external financing.\n\n \n\n**Government\nand Municipal Markets Present Additional Regulatory and Procurement Risks.**\n\n** **\n\nThe\nCompany’s end-user base includes government entities, and the Company has identified government as a target vertical market. Government\nprocurement cycles are typically longer and more complex than commercial sales cycles, are subject to appropriations risk and political\nchange, and may require certifications, clearances, or compliance with specific regulatory frameworks (including federal cybersecurity\nstandards) that the Company may not currently hold or may be unable to obtain. Autonomous security devices deployed in public or government-managed\nspaces may attract heightened public and regulatory scrutiny regarding civil liberties, facial recognition, and autonomous decision-making\nin law enforcement-adjacent contexts. There can be no assurance that the Company will be able to successfully compete for or retain government\ncontracts.\n\n** **\n\n**V.\nMANAGEMENT, PERSONNEL, AND KEY PERSON RISKS**\n\n** **\n\n**The\nCompany Is Dependent on Key Personnel, Particularly Its Chief Executive Officer and Chief Technology Officer.**\n\n** **\n\nThe\nCompany’s success is substantially dependent on the continued services of Steven Reinharz, who serves as both Chief Executive Officer\nand Chief Technology Officer and is the founder of RAD and its principal architect. Steven Reinharz is also the Company’s single\nlargest equity holder and plays a central role in product strategy, customer relationships, investor relations, and industry positioning,\nincluding through his service on the Board of the Security Industry Association and chairmanship of its Autonomous Working Group. Item\n1 of this Report states that Steven Reinharz has “written and spoken extensively” about the physical security industry’s\nstructural transformation since the Company’s inception and is a “regular speaker” at events hosted by SIA and ASIS,\nthe two leading industry organizations. This public profile, while reflecting genuine industry standing, further concentrates the Company’s\nmarket credibility and industry positioning in a single individual; any reputational, health, or availability issue affecting Steven\nReinharz could have an outsized adverse effect on the Company’s relationships with customers, partners, dealers, and investors\nbeyond the direct operational impact of his absence. The combined CEO and CTO role concentrates both business leadership and technical\narchitecture in a single individual. The loss of Steven Reinharz, or any material reduction in his involvement in the Company’s\nbusiness, could have a severe and potentially irreversible adverse effect on the Company. The Company does not currently represent that\nit has key-person insurance sufficient to compensate for this risk, and the ability to recruit a suitable replacement would be highly\nuncertain given the specialized combination of technical, operational, and strategic capabilities involved.\n\n \n\n-15-\n\n[Table of Contents](#toc_001)\n\n \n\n**The\nCompany’s Ability to Attract and Retain Qualified Technical, Sales, and Operational Personnel Is Critical.**\n\n** **\n\nThe\nCompany has approximately 135 employees across the United States, Canada, the United Kingdom, and Asia, including Sri Lanka, and its\noperations depend on specialized technical expertise in robotics engineering, AI development, autonomous systems, software architecture,\nand security operations. Competition for qualified engineers and AI talent is intense. The loss of other senior technical, sales, or\noperational personnel could disrupt operations and product development. The Company’s culture—centered on emotional intelligence,\naccountability, and multidisciplinary ownership—is described by management as a meaningful operational asset, but there can be\nno assurance that the Company can maintain this culture or retain key team members as it scales, particularly during periods of capital\nconstraint, extended development timelines, or operational setbacks.\n\n \n\n**The\nCompany’s International Operations Introduce Additional Risks.**\n\n** **\n\nThe\nCompany currently operates internationally through RAD Lanka, a Sri Lanka subsidiary operating within the Port City Colombo special economic\nzone, and has team members in the United Kingdom and Asia. The Company anticipates establishing RAD Europe during fiscal 2027 to support\nEuropean market entry and GDPR-compliant service delivery. International operations expose the Company to risks including currency fluctuation,\ngeopolitical instability, changes in local tax and regulatory regimes, difficulty enforcing contracts or intellectual property rights\nin foreign jurisdictions, and the operational complexity of managing distributed teams across multiple time zones and legal systems.\nThe special economic zone status under which RAD Lanka operates may be subject to changes in Sri Lankan law or policy. The anticipated\nbenefits of RAD Lanka’s Port City Colombo status, including cost efficiency and tax advantages, are not guaranteed to continue.\nThere can be no assurance that the Company’s international expansion will proceed as planned or that the anticipated benefits of\ninternational operations will be realized.\n\n** **\n\n**VI.\nSECURITIES AND INVESTOR RISKS**\n\n** **\n\n**The\nCompany’s Common Stock Trades on the OTC Pink Market and Is Subject to Significant Volatility and Liquidity Constraints.**\n\n** **\n\nThe\nCompany’s common stock is quoted on the OTC Pink marketplace under the symbol “AITX,” which is not a registered national\nsecurities exchange. OTC Pink securities are generally subject to less rigorous disclosure and listing standards than exchange-listed\nsecurities, and the market for such securities may be less liquid, more volatile, and more susceptible to manipulation than exchange-listed\nmarkets. Shareholders may find it difficult to buy or sell shares at prices that reflect the Company’s intrinsic value, and bid-ask\nspreads may be wide. The Company’s stock price has been, and may continue to be, highly volatile in response to operating results,\nfinancing transactions, product announcements, press releases regarding ROAMEO deployments or RAD-G partnerships, and general market\nconditions. The March 2026 reverse stock split (100-for-1) does not guarantee any improvement in trading liquidity, price stability,\nor long-term shareholder value. Investors in OTC Pink securities should be aware that such investments carry a high degree of risk, and\nthe Company’s shares should be considered highly speculative.\n\n \n\n**Insider\nand Related-Party Transactions Represent Potential Conflicts of Interest.**\n\n** **\n\nApproximately\n96% of the Company’s total loans payable has, at recent reporting dates, been owed to entities controlled by a single individual.\nRelated-party lending of this concentration creates potential conflicts of interest between the interests of that lender and the broader\nshareholder base, including with respect to the terms of any refinancing, conversion, restructuring, or settlement of such indebtedness.\nTransactions between the Company and related parties may not be negotiated at arm’s length, and the Company’s ability to\nobtain independent third-party financing to refinance related-party debt on terms favorable to all shareholders is uncertain. Steven\nReinharz, as CEO, CTO, and the Company’s single largest equity holder, may have interests that diverge from those of other stockholders\nin certain circumstances. The Company’s governance framework may not fully mitigate these potential conflicts, and investors should\nbe aware that the interests of related-party lenders and controlling stockholders may not always be aligned with those of the broader\nshareholder base.\n\n \n\n-16-\n\n[Table of Contents](#toc_001)\n\n \n\n**The\nCompany’s Prior and Ongoing Use of Variable-Price Equity Financing Creates Structural Dilution Risk.**\n\n** **\n\nThe\nCompany has historically utilized equity financing arrangements that provide for the issuance of common shares at variable prices, including\nat prices below the then-prevailing market price. These arrangements have contributed to the Company’s substantial share count\n(in excess of 267 million shares post-reverse-split) and have resulted in material dilution to existing shareholders. Although the Company\ncompleted a 100-for-1 reverse stock split in March 2026, the authorized share count of approximately 12 billion shares remains unchanged,\npreserving the structural capacity to issue additional shares. Continued reliance on these financing mechanisms—which may be required\nto fund ongoing operations, the ROAMEO production ramp, RAD-G platform development, or RAD Europe establishment—could result in\nfurther dilution and downward pressure on the trading price of the Company’s common stock.\n\n \n\n**General\nDisclaimer Applicable to All Risk Factors**\n\n** **\n\nThe\nrisk factors described in this Item 1A are not exhaustive. Additional risks not currently anticipated by management, or risks that management\ndoes not currently consider material, may emerge and could have a material adverse effect on the Company’s business, financial\ncondition, results of operations, and stock price. The magnitude of any individual risk factor, and the interaction among risk factors,\ncannot be predicted with certainty. This Item 1A should be read in conjunction with the Cautionary Statement Regarding Forward-Looking\nInformation at the front of this Report, Item 1 (Business), Item 7 (Management’s Discussion and Analysis), and the financial statements\nand notes thereto. Nothing in this Report constitutes investment, legal, tax, or financial advice. Investors should consult their own\nadvisors before making any investment decision with respect to the Company’s securities."}