S-1/A: AITX Files Amendment to S-1 Registration for Common Stock Resale by GHS Investments

Artificial Intelligence Technology Solutions Inc. files an amendment to its S-1 registration statement, covering the resale of up to 2.5 billion shares of common stock by GHS Investments, LLC.

Summary

• Artificial Intelligence Technology Solutions Inc. (AITX) has filed an amendment to its S-1 registration statement with the SEC.
• The registration statement pertains to the resale of up to 2,500,000,000 shares of common stock by the Selling Stockholder, GHS Investments, LLC.
• AITX will not receive proceeds from the sale of shares by GHS, but may receive up to $13.4 million from the sale of common stock registered to GHS pursuant to the March 22, 2023 Equity Financing Agreement.
• GHS will sell its Purchase Shares at prevailing market prices or in privately negotiated transactions.
• The document outlines various agreements, including an Equity Financing Agreement with GHS Investments, LLC, and a Securities Purchase Agreement with GHS.
• It also mentions a Placement Agent Agreement with JH Darbie & Company.
• The document details risk factors associated with the company's business and securities.
• The company had a net loss of $20,708,716 for the year ended February 29, 2024.
• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 4

Explanation: The document contains both positive and negative elements. Revenue growth and expansion of the dealer network are positive, but the significant net loss, auditor's concerns about going concern, and various risk factors contribute to a negative sentiment.

Positives

• Revenue for the year ended February 29, 2024, increased by $895,603 compared to the previous year.
• Rental activities increased by $872,071 or 116%, as the Company continues to grow its product line and customer base.
• The company has more than 40 authorized dealers across the United States, Canada, and the EU, with plans for continued expansion.
• The company grew monthly recurring revenue by approximately 4 times in fiscal year 2024.

Negatives

• The company had a net loss of $20,708,716 for the year ended February 29, 2024.
• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company has an accumulated deficit of $132,962,457 and negative working capital of $18,099,085 as of February 29, 2024.
• The company recognizes that conversion rate of opportunities remains low.
• The company has a backlog of 116 contracted and not deployed devices.

Risks

• The company's business is at an early stage, and it has not yet generated any profits.
• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company's financial results will fluctuate in the future, which makes them difficult to predict.
• The company has a limited number of deployments and its success depends on an unproven market.
• The company cannot assure you that it can effectively manage its growth.
• The loss of one or more of the company's key personnel, or its failure to attract and retain other highly qualified personnel in the future, could harm its business.
• If the company is unable to protect its intellectual property, the value of its brand and other intangible assets may be diminished and its business may be adversely affected.
• Economic factors generally may negatively affect the company's operations.
• The company's businesses may be materially adversely affected by the recent coronavirus (COVID-19) outbreak or the related market decline and volatility.
• The company's business is subject to data security risks, including security breaches.
• The company's business success depends on large part on the success of its efforts to lease its products through dealerships.
• The company currently faces competition and may face additional competition in the future; if it is unable to compete effectively, its business prospects and operations would be harmed.
• The company's ability to operate and collect digital information on behalf of its clients is dependent on the privacy laws of jurisdictions in which its machines operate, as well as the corporate policies of its clients, which may limit its ability to fully deploy its technologies in various markets.
• An investment in the company's securities is extremely speculative, and there can be no assurance of any return on the investment.
• The company's common stock shareholders do not have voting control over it due to the rights granted to holders of its Series E Convertible Preferred Stock.
• Because the company is a smaller reporting company, it may take advantage of certain scaled disclosures available to it, resulting in holders of its securities receiving less information than they would receive from a public company that is not a smaller reporting company.
• To fund its operations, the company may conduct further offerings in the future, in which case its common stock may be diluted.
• The trading price of the company's common stock may fluctuate significantly.
• Because the company is a small company with a limited operating history, holders of common stock may find it difficult to sell their stock in the public markets.
• The company's shares of common stock are subject to the SECs penny stock rules that limit trading activity in the market, which may make it more difficult for holders of common stock to sell their shares.
• FINRA sales practice requirements may also limit a stockholders ability to buy and sell the company's stock.
• The company does not anticipate paying dividends in the future.
• The company will continue to incur significant costs to ensure compliance with United States corporate governance and accounting requirements.
• Due to his ownership of Series E Preferred Stock, the company's Chief Executive Officer has voting rights equal to 66-2/3% of the voting rights held by all of its outstanding capital stock, giving him substantial control over its business and affairs and creating actual or potential conflicts of interests between his interests and the interests of the shareholders.
• Should GHS sell the shares being registered herein or some lesser material amount pursuant to the Equity Financing Agreement and/or the Securities Purchase Agreement, sales of the company's Shares into the open market may cause material decreases in its stock price and decrease the percentage ownership of shares held by its other shareholders.
• Funding from the Purchase Agreement and the Securities Purchase Agreement may be limited or insufficient to fund the company's operations or to implement its strategy.
• You may experience future dilution as a result of this offering or future equity offerings.
• The Selling Stockholder will pay less than the then-prevailing market price for the company's common stock.
• The company may use the net proceeds from sales of its common stock to GHS pursuant to the EFA in ways with which you may disagree.

Future Outlook

Management expects continued increasing demand for our solutions and expects between 800-1,200 additional RAD Inc devices to be contracted this fiscal year. Additionally the company expects to sell up to 20,000 of its RADCAM product from its RAD R subsidiary.

Management Comments

• Management expects that as volume production grows, starting with ROSA, the company can achieve significant improvements in cost of goods sold.
• Management has registered a portfolio of Trademarks.
• Management may, depending on budget and finance, seek to acquire utility patents for a few innovations that the Company feels desire patent protection and are easily defensible.
• Management suggests that revenue from device monitoring from RAD partners could, over time, become up to 15% of company revenues.
• Management feels that the labor problem is going to increase in severity as inflationary pressures continue to drive up employee wages (making guard services more expensive) and reduce economic activity (presumably forcing companies to search out lower cost solutions to existing problems).
• Management, based on daily conversations with clients, dealers and prospects, feels very strongly that there will be continued increasing demand for our solutions.

Industry Context

The document positions RAD as a disruptor in the global security services market, specifically targeting the human security guard and physical security markets. It highlights RAD's unique solutions, including AI-driven autonomous responses, purpose-built hardware, and RAD-developed software and cloud services. The document also mentions Knightscope and Cobalt Robotics as competitors in the mobile security robotics market.

Comparison to Industry Standards

• The document positions ROAMEO as a near-competitor to Knightscope, a Palo Alto based robotics company.
• The document states that RAD's approach is different from Knightscope's on many elements of technology.
• The document claims that no other company operating in the physical security space has the solutions, distribution channel, reputation, sales or support model to rival RAD in the near term.

Related Party Transactions

• For the years ended February 29, 2024 and February 28, 2023, the Company made net repayments of $ 54,179 and $ 0 , respectively , to its loan payable-related party.
• During the year ended February 28, 2023 pursuant to the amended Employment Agreement with its Chief Executive Officer the Company accrued $ 1,521,000 as incentive compensation plan payable with a corresponding recognition of stock based compensation due to the expectation of additional awards being met.
• During the year ended February 29, 2024, the Company accrued $ 538,767 in deferred compensation for the CEO.
• During the years ended February 29, 2024 and February 28, 2023, the Company was charged $ 2,810,839 and $ 3,578,981 , respectively in consulting fees for research and development to a company partially owned by a principal shareholder included in research and development expenses.

Stakeholder Impact

• Shareholders may experience dilution due to the potential sale of shares by GHS.
• The company's ability to continue as a going concern is uncertain, which could impact stakeholders.
• The company's performance and future prospects are subject to various risks, which could affect stakeholders.

Next Steps

• GHS will sell its Purchase Shares at prevailing market prices or in privately negotiated transactions.
• The company will continue to focus on the creation and support of a strong dealer channel.
• Management is committed to raise either non-dilutive funds or minimally dilutive funds.
• Management believes that it has the necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,through equity proceeds, and issuing non-convertible debt.

Key Dates

Keywords

common stock, securities, registration statement, GHS Investments, equity financing, AITX, preferred stock, Robotic Assistance Devices, financial results, risk factors