Quarterly Report for Quarter Ending NOVEMBER 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion of our financial condition and results of operations for the three and nine months ended November 30, 2025 and November 30, 2024 should be read in conjunction with our unaudited consolidated financial statements and the notes to those 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 Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended February 28, 2025, as filed on May 29, 2025 with the SEC. 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.

Unless expressly indicated or the context requires otherwise, the terms "AITX", the "Company", "we", "us", and "our" refer to Artificial Intelligence Technology Solutions Inc.

Overview

AITX was incorporated in Florida on March 25, 2010. AITX reincorporated into Nevada on February 17, 2015. AITX's 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.

AITX's mission is to apply Artificial Intelligence (AI) technology to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of the client organization.

A short list of basic examples include:

	1.	Typical security guard-related functions such as monitoring a parking lot during and after hours and responding appropriately. This scenario applies to perimeters, interior yard areas, and related similar environments.
	2.	Integrated hardware/software with AI-driven responses, simulating and expanding on what legacy or manned solutions could perform.
	3.	Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today.

RAD solutions are unique because they:

	1.	Start with an AI-driven autonomous response utilizing cellular-optimized communications, while easily connecting to a human operator for a manned response, as needed.
	2.	Use unique hardware purpose-built by RAD for delivery of these solutions. Various form factors have been customized to deliver this new functionality.
	3.	Deliver services through RAD-developed software and cloud services, allowing enterprise IT groups to focus on core competencies instead of maintenance of complex video and security platforms.

We encourage everyone to ensure they have the most up to date news by visiting AITX at AITX News - AITX - Artificial Intelligence Technology Solutions.

Management Discussion and Analysis

Results of Operations for the Three Months Ended November 30, 2025, and 2024

The following table shows our results of operations for the three months ended November 30, 2025, and 2024. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

		Period								Change
		Three Months Ended November 30, 2025				Three Months Ended November 30, 2024				Dollars				Percentage
Revenues		$	2,010,158			$	1,750,968			$	259,190				15	%
Gross profit			1,300,452				1,173,830				126,622				11	%
Operating expenses			3,931,952				3,476,728				455,224				13	%
Loss from operations			(2,631,500	)			(2,302,898	)			(328,602	)			(14	)%
Other income (expense), net			(2,099,300	)			(1,401,076	)			(698,224	)			(50	)%
Net loss		$	(4,730,800	)		$	(3,703,974	)		$	(1,026,826	)			(28	)%

Revenue

The following table presents revenues from contracts with customers disaggregated by product/service:

		Three Months Ended November 30,				Three Months Ended November 30,				Change
		2025				2024				Dollars				Percentage
Device rental activities		$	1,807,083			$	1,429,112			$	377,971				26	%
Direct sales of goods and services			203,075				321,856				(118,781	)			(37	)%
Total revenues		$	2,010,158			$	1,750,968			$	259,190				15	%

Total revenue for the three-month period ended November 30, 2025, was $2,010,158 which represented an increase of $259,190 compared to total revenue of $1,750,968 for the three months ended November 30, 2024. There has been a 15% increase in revenues as a result of higher rental activities growing each quarter through the deployment of new revenue earning devices.

Gross profit

Total gross profit for the three-month period ended November 30, 2025, was $1,173,830, which represented an increase of $126,622 compared to gross profit of $1,173,830 for the three months ended November 30, 2024. The gross profit increased due to the higher sales. The gross profit % of 65% for the three-month period ended November 30, 2025, was slightly lower than the gross profit % of 67% for the prior year's corresponding period.

Operating Expenses

		Period								Change
		Three Months Ended November 30, 2025				Three Months Ended November 30, 2024				Dollars				Percentage
Research and development		$	1,096,970			$	579,045			$	517,925				89	%
General and administrative			2,737,329				2,733,547				3,782				0	%
Depreciation and amortization			36,358				106,261				(69,903	)			(66	)%
Operating lease cost and rent			61,295				57,875				3,420				6	%
Total operating expenses		$	3,931,952			$	3,476,728			$	455,224				13	%

Our operating expenses were comprised of general and administrative expenses, research and development, and depreciation. General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the three-month period ended November 30, 2025, and November 30, 2024, were $3,931,952 and $3,476,728, respectively. The overall increase of $455,224 was primarily attributable to the following changes in operating expenses of:

●	General and administrative expenses increased by $3,782. There were no significant changes.
●	Research and development increased by $517,925 as the Company continues to develop new hardware and software solutions.
●	Depreciation and amortization decreased by $60,903 due to changes in estimates for the allocation of revenue earning devices not in use.
●	Operating lease cost and rent increased by $3,420 due to one more lease in the current period.

Other Income (Expense)

Other income (expense) during the three months ended November 30, 2024, and November 30, 2023, was ($2,099,300) and ($1,401,076), respectively. The $698,224 increase in other expense was due to higher interest expense and a loss on settlement of debt.

Net loss

We had a net loss of $4,730,800 for the three months ended November 30, 2025, compared to a net loss of $3,703,974 for the three months ended November 30, 2024. The increase in net loss of $1,026,826 is due to a number of factors: higher research and development expenses partially offset by higher gross profit in the three months ended November 30, 2025.

Results of Operations for the Nine Months Ended November 30, 2025, and 2024

The following table shows our results of operations for the nine months ended November 30, 2025, and 2024. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Revenue

		Period								Change
		Nine Months Ended November 30, 2025				Nine Months Ended November 30, 2024				Dollars				Percentage
Revenues		$	5,753,744			$	4,277,951			$	1,475,793				34	%
Gross profit			3,878,818				2,860,255				1,018,563				36	%
Operating expenses			11,998,145				10,610,283				1,387,862				13	%
Loss from operations			(8,119,327	)			(7,750,028	)			(369,299	)			(5	)%
Other income (expense), net			(442,426	)			(4,078,628	)			3,636,202				89	%
Net loss		$	(8,561,753	)		$	(11,828,656	)		$	3,266,903				28	%

The following table presents revenues from contracts with customers disaggregated by product/service:

		Nine Months Ended November 30,				Nine Months Ended November 30,				Change
		2025				2024				Dollars				Percentage
Device rental activities		$	5,129,840			$	3,475,546			$	1,654,294				48	%
Direct sales of goods and services			623,904				802,405				(178,501)				(22	)%
Total revenues		$	5,753,744			$	4,277,951			$	1,475,793				34	%

Total revenue for the nine-month period ended November 30, 2025, was $5,753,744 which represented an increase of $1,475,793 compared to total revenue of $4,277,951 for the nine months ended November 30, 2024. This 34% increase was because of higher rental activities partially offset by lower direct sales for the year to date November 30, 2025.

Gross profit

Total gross profit for the nine-month period ended November 30, 2025, was $3,878,818 which represented an increase of $1,018,563, compared to gross profit of $2,860,255 for the nine months ended November 30, 2024. The gross profit increased due to the higher sales. The gross profit percentage of 67% for the nine-month period ended November 30, 2025, was slightly lower than the gross profit percentage of 69% for the prior year's corresponding period.

Operating Expenses

		Period								Change
		Nine Months Ended November 30, 2025				Nine Months Ended November 30, 2024				Dollars				Percentage
Research and development		$	3,104,303			$	1,897,165			$	1,207,138				64	%
General and administrative			8,604,371				8,220,564				383,807				5	%
Depreciation and amortization			107,379				309,699				(202,320	)			(65)	%
Operating lease cost and rent			182,092				182,855				(763	)			(0	)%
Total Operating expenses		$	11,998,145			$	10,610,283			$	1,387,862				13	%

General and administrative expenses consisted primarily of professional services, automobile expenses, advertising, salaries and wages, travel expenses and consultants. Our operating expenses during the six-month period ended November 30, 2025 and November 30, 2024, were $11,998,145and $10,610,283, respectively. The overall increase of $1,387,862 was primarily attributable to the following changes in operating expenses of:

●	General and administrative expenses increased by $383,807. In comparing the nine months ended November 30, 2025, and November 30, 2024 the increase may be partially explained by the following increases: wages and salaries by $337,125, sub-contractors by $265,245 and office expenses by $88,545. These were partially offset by decreases in the following accounts: installation costs by $85,402, professional fees by $58,326, repairs and maintenance by $39,911 and freight by $63,997.
●	Research and development increased by $1,207,138 due to an increase in software development and new products such as the ROAMEO.
●	Depreciation and amortization decreased by $202,320 due to due to changes in estimates for the allocation of revenue earning devices not in use.
●	Operating lease cost and rent decreased by $763 due to the reduction of one lease offset by the addition of another.

Other Income (Expense)

Other income (expense) during the nine months ended November 30, 2025, and November 30, 2024, was ($442,426) and ($4,078,628), respectively. The $3,636,202 decrease in other expense was primarily attributable to the gain on settlement of debt of $3,740,185 offset by an increase in interest expense.

Net loss

We had a net loss of $8,561,753 for the nine months ended November 30, 2025, compared to a net loss of $11,828,656 for the nine months ended November 30, 2024. The decrease in net loss of $3,266,903 is due to a number of factors: higher gross profit and lower other expenses (due to gain on settlement of debt) offset by higher operating expenses for the nine months ended November 30, 2025.

Liquidity, Capital Resources and Cash Flows

Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.

As of November 30, 2025, we had a cash balance of $143,801, accounts receivable of $1,306,020, device parts inventory of $1,138,333 and $17,117,268 in current liabilities. At the current cash consumption rate, we will need to consider additional funding sources going forward. We are taking proactive measures to reduce operating expenses and drive growth in revenue.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

Capital Resources

The following table summarizes total current assets, liabilities and working capital (deficit) for the periods indicated:

		November 30, 2025				February 28, 2025
Current assets		$	3,093,439			$	5,028,543
Current liabilities			17,117,268				7,576,681
Working capital		$	(14,023,829	)		$	(2,548,138	)

As of November 30, 2025 and February 28, 2025, we had a cash balance of $143,801 and $865,975, respectively.

Summary of Cash Flows		Nine Months Ended November 30, 2025				Nine Months Ended November 30, 2024
Net cash used in operating activities		$	(7,451,163	)		$	(8,894,284	)
Net cash used in investing activities		$	(12,861	)		$	(77,868	)
Net cash provided by financing activities		$	6,741,850			$	8,950,457

Net cash used in operating activities.

Net cash used in operating activities for the nine months ended November 30, 2025, was $7,451,163 which included a net loss of $8,561,753, non-cash activity such as the bad debts expense of $141,482, reduction of right of use asset of $104,585, accretion of lease liability $79,294, stock based compensation of $241,065,penalty added to face value of loan of $16,560, gain on settlement of debt of $3,740,185, change in operating assets and liabilities of $2,301,738, amortization of debt discount of $301,615, increase in related party accrued payroll and interest of $108,619 and depreciation and amortization of $1,555,817 to derive the uses of cash in operations.

Net cash used in investing activities.

Net cash used in investing activities for the nine months ended November 30, 2025, was $12,861 which was the purchase of fixed assets of $10,863, and $1,998 for acquisition of trademarks.

Net cash provided by financing activities.

Net cash provided by financing activities was $6,741,850 for the nine months ended November 30, 2025. This consisted of share proceeds net of issuance costs of 5,219,853, proceeds from loans payable of $2,375,671, reduced by repayments on loans payable of $728,604 and the redemption of Series C redeemable convertible preferred shares of $125,000.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended February 28, 2025, as filed on May 29, 2025.

Related Party Transactions

For both the three months and nine months ended November 30, 2025 and November 30, 2024, the Company had no repayments of net advances from its loan payable-related party. At November 30, 2025, the loan payable-related party was $437,984 and $329,635 at February 28, 2025. Included in the balance due to the related party at November 30, 2025 is $361,452 of deferred salary and interest, $239,600 of which bears interest at 12%. As of February 28, 2025, included in the balance due to the related party is $252,833 of deferred salary and interest, $190,013 of which bears interest at 12%. The accrued interest included in the loan at November 30, 2025, and February 28, 2025, was $70,689, and $51,575, respectively.

During the nine months ended November 30, 2025, the Company paid out gross payments to the CEO of $1,560,370 offset by a bonus accrual of $750,000, which yields a net change of $810,370 relating to deferred compensation for CEO. This was all in accordance with a December 2023 board action allowing for $1 million of annual discretionary compensation as well as a February 28, 2025, board action which provided an additional $1.5 million in compensation. The balance of deferred compensation for CEO was $1,392,230 and $2,202,600 at November 30, 2025, and February 28, 2025, respectively

For the three and nine months ended November 30, 2025, the Company accrued $0 (three and nine months ended November 30, 2024-$0) of incentive compensation plan payable to the CEO. This would be payable in Series G Preferred Shares which are redeemable at the Company's option at $1,000 per share. At November 30, 2025, and February 28, 2025, there was $4,000,000 and $4,000,000 of incentive compensation payable.

During the three months ended November 30, 2025, and 2024, the Company was charged $655,721 and $556,175, respectively for fees for research and development from a company partially owned by a principal shareholder.

During the nine months ended November 30, 2025, and 2024, the Company was charged $1,990,873 and $1,846,005, respectively for fees for research and development from a company partially owned by a principal shareholder. 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 both November 30, 2025, and February 28, 2025, the balance due to this company was $76,532.