{"url_path":"/sec/aitx/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS**","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":1498,"has_tables":true,"body_markdown":"**ITEM\n1A. RISK FACTORS**\n\n \n\n**Forward-Looking\nStatement Categories**\n\n** **\n\nThe\nfollowing categories of statements in this Report are forward-looking, and each is subject to material risks and uncertainties that could\ncause actual results to differ materially from those described or implied:\n\n \n\n**1.\nRevenue and Financial Projections.**\n\n \n\nStatements\nthat RAD-I’s recurring revenue and gross margin could, on a standalone basis, support positive cash flow operations and management’s\ncharacterization that RAD-I has “achieved a point” at which it could support positive cash flow operations today; that RAD-M\nwill surpass RAD-I’s monthly recurring revenue contribution at some future point; that subscription gross margin will exceed 75%\nand outright-sale gross margin will exceed 50% based on average bill of materials costs and pricing that the market “has appeared\nto accept,” each of which is a forward-looking characterization dependent on assumptions about continued pricing acceptance, stable\ninput costs, and manufacturing scale that may not be realized; that RAD-G will generate substantial revenue from SARA platform licensing;\nthat RAD-M represents a higher revenue ceiling than stationary solutions; and that penetration of any covered industry would produce\nsufficient revenue to support profitability.\n\n \n\n**2.\nProduct Development and Commercialization.**\n\n \n\nStatements\nregarding the planned introduction of additional stationary solutions during fiscal year 2027; the establishment of RAD Europe during\nfiscal 2027 and the anticipated benefits thereof; all statements regarding ROAMEO’s commercial viability, autonomous operation\nwithout on-site human pilots, production ramp, and revenue trajectory following commencement of commercial billing in May 2026; statements\nregarding planned RAD-I product introductions, including their timing, features, and market acceptance; and statements regarding expansion\nof the authorized dealer network and anticipated contributions from the dealer channel.\n\n \n\n**3.\nMarket and Industry Characterizations.**\n\n \n\nAll\ncharacterizations of the physical security industry as undergoing a structural transition analogous to Industry 4.0; assertions that\nthe human-guard labor model is experiencing unsustainable cost pressures; characterizations of the total addressable market for AI-driven\nand autonomous security solutions; any implication that competitive dynamics will favor the Company; and the “RAD Town” concept\nin its entirety, which is a conceptual design target and strategic roadmap, not a contracted project, existing deployment, or assured\nbusiness outcome.\n\n \n\n-9-\n\n[Table of Contents](#toc_001)\n\n** **\n\n**4.\nSARA Platform and Agentic AI.**\n\n \n\nAll\ncharacterizations of SARA as an agentic AI platform enabling autonomous real-time action without continuous human intervention, including\nthe Item 1 description that SARA enables devices to “perceive, decide, communicate, and act autonomously in real time, without\ncontinuous human intervention,” which states this as a present operational characteristic rather than design intent and should\nbe read in light of the actual performance qualifications in this Item 1A; statements regarding SARA licensing and commercialization\nwith third-party hardware manufacturers and monitoring platforms (including the Immix integration); anticipated expansion of the dealer\nnetwork and platform ecosystem; statements regarding SARA’s performance in detection, escalation, and response workflows; the characterization\nin Item 1 that the firearm detection analytic “identifies visible handguns and long guns in real time,” which omits the design-intent\nand environmental-conditions qualifications that investors should consider when evaluating this statement; and all characterizations\nof RAD-G’s sales funnel as “substantial” or of management’s expectations for RAD-G revenue as “high.”\nIndustry award recognitions do not constitute validation of product safety, efficacy, or commercial viability.\n\n \n\n**5.\nManagement Estimates and Unaudited Financial Characterizations.**\n\n \n\nThe\napproximate $20 million cumulative ROAMEO development figure is a management estimate not audited or reviewed by the Company’s\nindependent registered public accounting firm. Segment-level profitability and cash flow characterizations for RAD-I—including\nmanagement’s characterization in Item 1 that RAD-I “has achieved a point” at which its recurring revenue and gross\nmargin could support positive cash flow operations today—are based on internal analysis for which no separately audited financial\nstatements are published. This characterization excludes all expenses not directly attributable to the stationary solutions business,\nincluding shared corporate overhead, interest expense, and investment in RAD-M and RAD-G, and does not indicate that the Company as a\nwhole operates at or near positive cash flow. No financial characterization of any individual subsidiary should be treated as audited\ndata. Characterizations of gross margin expectations are based on average bill of materials costs and market pricing over limited historical\nperiods, as well as pricing that the market “has appeared to accept,” and may not be representative of future results.\n\n \n\n**6.\nInternational Expansion.**\n\n \n\nStatements\nregarding the anticipated establishment of RAD Europe during fiscal 2027; expected benefits of RAD Lanka’s Port City Colombo status,\nincluding cost efficiency and tax benefits; and anticipated GDPR-compliant service capabilities to be provided through RAD Europe. All\nsuch forward-looking statements are subject to regulatory, legal, and operational risks inherent in international expansion.\n\n \n\n**ADDITIONAL\nMATERIAL RISK FACTORS**\n\n** **\n\nIn\naddition to the forward-looking statement categories described above, investors should carefully consider the following material risk\nfactors. Each could cause actual results, financial condition, or business performance to differ materially from those described or implied\nin this Report. These risk factors reflect the Company’s business as described in Item 1 of this Annual Report and the disclosures\nmade in prior AITX periodic and current filings with the Securities and Exchange Commission. This list is not exhaustive, and additional\nrisks not currently anticipated by management may emerge.\n\n** **\n\n-10-\n\n[Table of Contents](#toc_001)\n\n** **\n\n**I.\nFINANCIAL AND GOING CONCERN RISKS**\n\n** **\n\n**Substantial\nDoubt About the Company’s Ability to Continue as a Going Concern.**\n\n** **\n\nThe\nCompany’s independent registered public accounting firm has included an explanatory paragraph in its audit reports expressing substantial\ndoubt about the Company’s ability to continue as a going concern. The Company has incurred recurring net losses, has a history\nof negative operating cash flows, and carries an accumulated deficit that, as of recent reporting periods, has exceeded $171 million.\nThe Company’s total liabilities substantially exceed its total assets, and it maintains negative stockholders’ equity. These\nconditions raise material uncertainty as to whether the Company will be able to meet its obligations as they come due. The Company’s\nfinancial statements do not include any adjustments to reflect the possible effects on the classification or carrying value of assets\nand liabilities that might result from the outcome of this uncertainty. There can be no assurance that the Company will be able to generate\nsufficient revenue, raise adequate capital, or otherwise secure the resources necessary to continue operations beyond the near term.\n\n \n\n**The\nCompany Requires Continued External Financing and May Be Unable to Obtain It on Acceptable Terms or at All.**\n\n** **\n\nThe\nCompany’s operations are not yet self-funding. The Company has relied, and expects to continue to rely, on external debt and equity\nfinancing to fund operations, capital expenditures, product development, and the planned production ramp of ROAMEO and other new products.\nA significant portion of the Company’s debt has historically been owed to entities controlled by a single individual, creating\nconcentrated lender risk and potential conflicts of interest. The Company has also utilized equity financing arrangements, including\nagreements providing for the issuance of common shares at variable prices, to access capital. If the Company is unable to obtain financing\non acceptable terms—or if existing financing arrangements are not renewed or are terminated—the Company may be required to\ncurtail or cease operations, defer planned capital expenditures (including the ROAMEO production ramp and RAD Europe establishment),\nreduce headcount, or otherwise alter its operating plans in ways that could materially harm its business and prospects.\n\n \n\n**The\nCompany’s Common Stock Is Subject to Substantial Dilution Risk.**\n\n** **\n\nThe\nCompany has issued, and may continue to issue, substantial numbers of shares of common stock in connection with financing transactions,\nemployee and director compensation, debt conversions, and other purposes. As of February 28, 2026, total common shares outstanding exceeded\n267 million (post-reverse-split). In March 2026, FINRA processed a 100-for-1 reverse stock split; however, the authorized share count\nremains at approximately 12 billion shares, preserving the structural capacity for future dilutive issuances. Variable-price equity financing\narrangements and debt conversion rights may result in issuances at prices below the then-current market price of the Company’s\ncommon stock, causing material dilution to existing shareholders. The reverse stock split does not alter the underlying financial condition\nof the Company or reduce the potential for future dilutive issuances. The Company does not provide assurance that future equity issuances\nwill not substantially reduce the proportionate ownership or economic interest of existing stockholders.\n\n \n\n**The\nCompany Has a History of Net Losses and Cannot Assure Future Profitability.**\n\n** **\n\nThe\nCompany has not achieved profitability in any fiscal year. Net loss for the fiscal year ended February 28, 2026 were approximately $14.5\nmillion. Operating expenses—including research and development, sales and marketing, and general and administrative costs—have\nconsistently exceeded gross profit, and interest expense on the Company’s debt obligations represents an additional recurring charge.\nWhile gross margin on deployed subscription units has improved and the Company’s Solutions-as-a-Service model is designed to produce\nimproving margins at scale, the Company’s operating cost structure, investment in ROAMEO commercialization, RAD-G platform development,\nand debt service obligations may prevent it from achieving profitability even as revenues increase. No assurance can be given as to whether\nor when the Company will achieve or sustain profitability.\n\n** **\n\n-11-\n\n[Table of Contents](#toc_001)\n\n** **\n\n**Gross\nMargin Expectations May Not Be Achieved.**"}