AITX.OIDArtificial Intelligence Technology Solutions INC

10-Q: AITX Q3 2026: Revenue Up, Net Loss Widens Amid R&D Boost

Sentiment:

Quarterly Report 14 January 2026 4:00 PM

📋All filings for Artificial Intelligence Technology Solutions INC

Artificial Intelligence Technology Solutions Inc. reported increased revenue for Q3 and the nine months ended November 30, 2025, but faced a wider net loss for the quarter and significant working capital deficit, raising going concern doubts.

Delay expectedPayments on deferred variable payment obligations may be deferred for up to 12 months if they deplete available cash by more than 30%. As of November 30, 2025, $1,599,972 of these payments are in arrears.Promissory note (22) payments from August 2024 through August 2025 have not been made, and the note was not repaid at maturity. Management believes it will re-negotiate the maturity date.

Capital raiseThe company entered into an equity financing agreement in June 2025 to purchase up to $30,000,000 of common stock at a discount over a two-year period, with approximately $27,000,000 remaining to be issued.Management plans to continue funding operations through growing revenues, equity proceeds, and issuing non-convertible debt.Subsequent to November 30, 2025, the company issued several new promissory notes, including one convertible, redeemable note, raising additional capital.

Worse than expectedNet loss for the three months ended November 30, 2025, widened by 28% compared to the prior year.Working capital deficit significantly deteriorated to $(14,023,829) at November 30, 2025, from $(2,548,138) at February 28, 2025.Cash balance decreased substantially from $865,975 at February 28, 2025, to $143,801 at November 30, 2025.Operating expenses, particularly R&D, increased significantly, contributing to higher operating losses.The company explicitly states "substantial doubt about the Company's ability to continue as a going concern."

Summary

Total revenue for the three months ended November 30, 2025, increased by 15% to $2,010,158, driven by a 26% rise in device rental activities.
For the nine months ended November 30, 2025, total revenue grew by 34% to $5,753,744, primarily from a 48% increase in device rental activities.
Net loss for the three months ended November 30, 2025, widened by 28% to $(4,730,800) compared to the prior year.
Net loss for the nine months ended November 30, 2025, improved by 28% to $(8,561,753) from $(11,828,656) in the prior year, largely due to a gain on debt settlement.
Research and development expenses surged by 89% for the quarter and 64% for the nine-month period, reflecting continued investment in new hardware and software solutions.
The company reported a negative working capital of $(14,023,829) as of November 30, 2025, a significant deterioration from $(2,548,138) at February 28, 2025.
Cash balance decreased substantially to $143,801 at November 30, 2025, from $865,975 at February 28, 2025.
The company's ability to continue as a going concern is in substantial doubt due to negative cash flow from operations and accumulated deficit of $165,088,555.
Common shares outstanding increased significantly from 14,412,453,768 at February 28, 2025, to 23,287,834,008 at November 30, 2025, and further to 25,287,280,437 as of January 12, 2026.

Sentiment

Score: 3

Explanation: While revenue growth is positive, the significant increase in net loss for the quarter, severe working capital deficit, rapidly declining cash balance, substantial share dilution, and explicit going concern warning indicate a highly precarious financial position. The internal control weaknesses further compound the negative sentiment, despite management's stated confidence in future funding.

Positives

Revenue increased by 15% for the three months and 34% for the nine months ended November 30, 2025, primarily driven by device rental activities.
Gross profit increased by 11% for the three months and 36% for the nine months ended November 30, 2025.
Net loss for the nine months ended November 30, 2025, decreased by 28% year-over-year, largely due to a significant gain on settlement of debt.
Net cash used in operating activities decreased to $(7,451,163) for the nine months ended November 30, 2025, from $(8,894,284) in the prior year.
Management is committed to raise either non-dilutive funds or minimally dilutive funds and has an equity financing agreement for up to $30,000,000, with approximately $27,000,000 remaining.
Management believes the non-convertible debt on the balance sheet will be extended, citing past extensions and strong support from the primary debt holder.

Negatives

Net loss for the three months ended November 30, 2025, widened by 28% to $(4,730,800).
Working capital deficit significantly deteriorated to $(14,023,829) at November 30, 2025, from $(2,548,138) at February 28, 2025.
Cash balance decreased substantially from $865,975 at February 28, 2025, to $143,801 at November 30, 2025.
Significant increase in common shares outstanding, indicating substantial dilution.
Research and development expenses increased significantly by 89% for the quarter and 64% for the nine-month period, contributing to higher operating losses.
Other expenses increased by 50% for the three months ended November 30, 2025, due to higher interest expense and a loss on settlement of debt.
A substantial portion (96%) of loans payable are to companies controlled by one individual, raising concentration risk.
Several promissory notes are in default, although no notices have been sent.

Risks

Going Concern: Substantial doubt exists about the company's ability to continue as a going concern for the next twelve months due to negative cash flow from operations and an accumulated deficit of $165,088,555.
Liquidity Risk: The company has a significant negative working capital of $(14,023,829) and a low cash balance of $143,801, indicating a need for additional funding.
Funding Uncertainty: No assurance that non-dilutive or minimally dilutive funds can be raised, and future raises may still have dilutive effects.
Debt Concentration: 96% of loans payable are owed to companies controlled by one individual, posing a significant concentration risk.
Default on Debt: Several promissory notes are in default, which could lead to accelerated repayment demands if lenders choose to act.
Internal Control Weaknesses: Material weaknesses in the control environment (lack of communicated accounting policies/procedures, no independent board members, no audit committee financial expert) and financial statement disclosure.
Share Dilution: Continued reliance on equity financing and debt-to-equity conversions leads to significant dilution for existing common shareholders.
Reliance on Key Customer: One customer accounted for 39% of total accounts receivable for the three months ended November 30, 2025, and 57% of total revenue for the nine months ended November 30, 2025, indicating customer concentration risk.

Future Outlook

Management anticipates continued losses in the immediate future and will require additional equity or debt financing to achieve profitability and positive cash flows from operating activities. They are committed to raising non-dilutive or minimally dilutive funds and believe non-convertible debt will be extended, but there is no assurance of successful funding or avoidance of dilutive effects.

Management Comments

Management does not anticipate having positive cash flow from operations in the near future.
Management is committed to raise either non-dilutive funds or minimally dilutive funds.
There is no assurance that these funds will be able to be raised, nor can we provide assurance that these possible raises may not have dilutive effects.
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.
Management has had many recent conversations with the Company's primary debt holder and believes that the non-convertible debt on the balance sheet will be extended.
Management notes that non-convertible debt on the books has been extended by this debt holder twice in the past and notes that this debt holder has been a strong supporter of the Company.
Management points to its successful history with maintaining Company operations and reminds all with reasonable confidence this will continue.

Industry Context

Artificial Intelligence Technology Solutions operates in the rapidly evolving AI and robotics security market, addressing enterprise needs for operational, security, and monitoring solutions. The company's focus on AI-driven autonomous responses and purpose-built hardware positions it within a growth sector, but it faces intense competition and high R&D costs typical of emerging technology industries. The significant R&D expenditure reflects the ongoing need to innovate and maintain a competitive edge in this dynamic market.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weakness	Did not maintain effective controls over the control environment, specifically lacking developed and communicated accounting policies and procedures, leading to inconsistent practices.	2025-11-30	Constitutes a material weakness with pervasive effects across the organization, increasing risk of financial misstatement.
Internal Control Weakness	Did not maintain effective controls over financial statement disclosure, failing to ensure all required disclosures were originally addressed in financial statements.	2025-11-30	Constitutes a material weakness, increasing risk of incomplete or inaccurate financial reporting.
Board Composition Deficiency	The Board of Directors does not currently have any independent members.	2025-11-30	Raises concerns about oversight independence and potential for conflicts of interest.
Audit Committee Expertise Deficiency	No director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.	2025-11-30	Weakens the board's ability to effectively oversee financial reporting and internal controls.

Legal Proceedings

A claim filed on September 24, 2024, by a prospective lender for alleged breach of a non-binding term sheet was settled in June 2025. The company paid $65,000 on August 1, 2025, with no admission of wrongdoing.

Related Party Transactions

At November 30, 2025, $26,801,006 (96%) of the total $27,795,672 loans payable were to companies controlled by one individual.
Loan payable to a related party was $437,984 at November 30, 2025, including $361,452 of deferred salary and interest for the CEO.
The CEO received gross payments of $1,560,370 during the nine months ended November 30, 2025, offset by a $750,000 bonus accrual, resulting in a net change of $810,370 in deferred compensation.
The company was charged $1,990,873 for research and development fees from a company partially owned by a principal shareholder during the nine months ended November 30, 2025.
An incentive compensation plan payable to the CEO, redeemable in Series G Preferred Shares, remained at $4,000,000 at November 30, 2025.

Stakeholder Impact

Shareholders: Significant dilution from increased common shares outstanding and potential future equity raises. The going concern warning and internal control weaknesses pose substantial risks to investment value.
Creditors: High concentration of debt with one individual, and several notes in default, could lead to renegotiations or demands for repayment.
Employees: Continued R&D investment suggests ongoing work, but the company's financial instability could impact job security or future compensation.
Customers: Increased device rental activities indicate continued service delivery, but financial instability could raise concerns about long-term support and product development.

Next Steps

Continue efforts to raise non-dilutive or minimally dilutive funds.
Negotiate extensions for defaulted or maturing promissory notes.
Address identified material weaknesses in internal control over financial reporting and disclosure controls.
Continue development of new hardware and software solutions (R&D).
Focus on growing revenues, particularly device rental activities.

Key Dates

Date	Description
2010-03-25	Artificial Intelligence Technology Solutions Inc. (AITX) incorporated in Florida.
2015-02-17	AITX reincorporated in Nevada.
2016-07-26	Robotic Assistance Devices, LLC (RAD) incorporated in Nevada.
2017-07-25	Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc.
2017-08-28	AITX completed the acquisition of RAD, becoming the accounting acquirer.
2018-03-01	Company adopted Topic 606 (Revenue from Contracts with Customers).
2019-02-01	Company entered into a deferred variable payment obligation agreement with an investor for $900,000.
2019-03-01	Company adopted Topic 842 (Lease Accounting).
2019-05-09	Company entered into two similar deferred variable payment obligation agreements with two investors for $400,000 and $50,000.
2019-11-18	Company entered into another deferred variable payment obligation agreement with an investor for $225,000.
2019-12-30	Company entered into another similar deferred variable payment obligation agreement with a new investor for $100,000.
2020-04-22	Company entered into another similar deferred variable payment obligation agreement with an investor for $100,000.
2020-07-01	Company entered into a similar agreement with the first investor for $800,000.
2020-08-27	Company consolidated three separate deferred variable payment agreements into a new agreement for $1,925,000.
2021-03-01	First investor revised deferred variable payment agreements, reducing rate payment and asset disposition percentage.
2021-03-10	Company entered into a 10-year lease agreement for a manufacturing facility.
2022-12-23	Company entered into a Simple Agreement for Future Equity (SAFE) contract to invest $50,000.
2023-12-01	Board action allowing for $1 million of annual discretionary compensation for the CEO.
2024-02-05	Company entered into a 3-year lease agreement for a vehicle.
2024-06-03	Company acquired a $50,000 convertible note receivable from Nightingale Intelligent Systems, Inc.
2024-09-24	A prospective lender filed a claim against the Company for alleged breach of a non-binding term sheet.
2025-01-03	Company exchanged its convertible note receivable for Series A preferred shares, common shares, and common share warrants in Nightingale Intelligent Systems, Inc.
2025-02-10	Company created a new class of Series C Convertible Redeemable Preferred Stock and issued 306 shares.
2025-02-28	Board action provided an additional $1.5 million in compensation for the CEO.
2025-03-11	Company entered into a 3-year lease agreement for a vehicle.
2025-04-25	Settlement agreement entered into with the Estate of a lender to repay $420,000 to fully discharge a $4,790,185 loan balance and accrued interest.
2025-05-10	Company issued 9.19 Series C shares as a 12% quarterly dividend.
2025-06-01	Company entered into an equity financing agreement to purchase up to $30,000,000 of common stock over two years.
2025-06-05	Court approved the settlement agreement with the Estate of the lender.
2025-08-01	Company paid $65,000 to settle a legal claim.
2025-08-09	Company issued 9.46 Series C shares as a 12% quarterly dividend and recorded a 35% penalty due to not redeeming shares at the redemption date.
2025-08-25	Company redeemed 95 Series C shares for $125,000.
2025-08-25	Company entered into Future Receivables Purchase and Sale Agreement for $555,671 net proceeds.
2025-09-22	Company recorded a penalty for not converting 96 Series C shares.
2025-10-15	Company's board of directors voted to increase authorized common shares from 23,000,000,000 to 27,500,000,000.
2025-11-07	Company issued 10.3 Series C shares as a 12% quarterly dividend.
2025-11-30	End of the reporting period for this 10-Q.
2025-12-05	Series C preferred shareholder converted 84 Series C shares for 199,446,429 common shares; rescinded previous penalty.
2025-12-09	Company issued a promissory note to a lender for $450,000 with cash proceeds of $400,000.
2025-12-17	Company issued a promissory note to a lender for $275,000 with cash proceeds of $250,000.
2025-12-22	Company issued a convertible, redeemable note to a lender for $495,000 with cash proceeds of $450,000.
2026-01-12	25,287,280,437 shares of common stock were issued and outstanding.
2026-01-14	Filing date of the 10-Q report.

Recommendation

strong sell

Despite revenue growth, the company's financial health is severely distressed, evidenced by a widening quarterly net loss, a rapidly deteriorating working capital deficit, and a critically low cash balance. The explicit 'going concern' warning, coupled with significant share dilution, a high concentration of debt with a single related party, and identified material weaknesses in internal controls, paints a dire picture. The reliance on future, uncertain capital raises and the default status of several loans further amplify the risk. A seasoned investor would view these factors as overwhelmingly negative, indicating a high probability of further value erosion and significant operational challenges.

Keywords

Artificial Intelligence, Robotics, Security Solutions, AI Technology, SEC Filing, 10-Q, Financial Results, Quarterly Report, Going Concern, Liquidity, Debt, Share Dilution, Corporate Governance, R&D, Device Rental, Autonomous Security

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