OTC: AITX

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.

-1-

Table of Contents

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.

-2-

Table of Contents

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.

-3-

Table of Contents

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.

-4-

Table of Contents

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.

-5-

Table of Contents

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.

-6-

Table of Contents

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.

-7-

Table of Contents

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.

-8-

Table of Contents