What changed in this filing

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Item 1. Business

2023-06-14 compared with 2022-05-27 · 315 added, 348 removed, 183 unchanged (78% of the section changed)

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In 2017, Robotic Assistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc.

(“RAD”), through the

issuance of 10,000 common shares to its sole shareholder.

Artificial Intelligence Technology Solutions Inc.

(formerly known as On the Move Systems Corp.) (“AITX”

or the “Company”) was incorporated in Florida on March 25,

(formerly known as On the Move Systems Corp.) (“AITX” or the “Company”) was incorporated in Florida on March 25,

2010, and reincorporated in Nevada on February 17, 2015.

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Intelligence Technology Solutions Inc.

(“AITX”).

In 2017, AITX acquired all the ownership and equity

interests in RAD (the “Acquisition”).

Before the Acquisition, AITX’s business focus had been transportation services,

interests in RAD (the “Acquisition”).

Before the Acquisition, AITX’s business focus had been transportation services,

and AITX was exploring the on-demand logistics market by developing a network of logistics partnerships.

After the Acquisition, AITX shifted

its business focus to align with RAD’s mission.

Since that time, AITX has been engaged in pursuing the delivery of artificial intelligence

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and integrate a variety of high-frequency security, concierge, and operational tasks.

Since substantially all of AITX’s operations

were disposed of with the transaction’s consummation, the Acquisition was treated as a reverse recapitalization effected by a share

Since substantially all of AITX’s operations

were disposed of with the transaction’s consummation, the Acquisition was treated as a reverse recapitalization effected by a share

exchange for financial accounting and reporting purposes.

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RAD had always been the reporting company.

RAD’s solutions are offered as a recurring monthly

subscription, typically with a minimum 12-month subscription contract.

RAD’s solutions are expected to earn over 75% gross margin

over the life of each deployed asset when under subscription.

RAD also sells units which generally limits gross margin to the 50% range.

Specifically, RAD provides workflow automation solutions delivered through a system of hardware, software and cloud services.

elements of hardware and software design offered by RAD are 100% designed, developed and owned by RAD.

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.

RAD’s solutions are generally offered as a recurring

monthly subscription, typically with a minimum 12-month subscription contract.

RAD also sells their units and the client that RAD has

had longest opts to do this.

RAD’s solutions are expected to earn over 75% gross margin over the life of each deployed asset when

under subscription and over 50% gross margin when sold.

Specifically, RAD provides workflow automation solutions delivered through a system

of hardware, software and cloud services.

All elements of hardware and software design offered by RAD are 100% designed, developed and

owned by RAD.

Company Strategies

We apply our Artificial Intelligence (AI) technology

to solve enterprise problems categorized as expensive, repetitive, difficult to staff, and outside of the core competencies of our client

or prospective client organizations.

A short list of basic examples include:

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Automation of common access control functions through technology utilizing facial recognition and machine vision, leapfrogging most legacy solutions in use today.

RAD’s first industry focus is the more than

$100 billion global security services market.

1 RAD’s current goal is to disrupt and capture a significant portion of

both the human security guard market (over $30 billion) 2 and “physical security”

(video surveillance, access control,

visitor management, etc.) market (over $20 billion) through its innovative RAD solution ecosystem.

1 RAD’s current goal is to disrupt

and capture a significant portion of both the human security guard market (over $30 billion) 2 and

“physical security” (video surveillance, access control, visitor management, etc.) market (over $20 billion) through its innovative

RAD solution ecosystem.

1 https://www.statista.com/statistics/323113/distribution-of-the-security-services-market-worldwide/

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The company holds the dealer and end-user contracts, employs all US employees, operates the California and Michigan facilities, and is the primary industry-facing entity of AITX.

RAD I owns all intellectual property related to RADSoC™, RAD Mobile SOC™, RADGuard™, and their core operating architecture.

RAD I owns everything related to AITX’s line of stationary devices and their manufacturing.

RAD I owns all intellectual property related to RADSoC™, RAD Mobile SOC™, RADGuard™, and their core operating architecture.

RAD I owns everything related to AITX’s line of stationary devices and their manufacturing.

RAD I also implements and services the devices.

This company’s primary website is radsecurity.com and is updated as developments occur.

Robotic Assistance Devices Group, Inc.

(RAD G) is RAD G is an AITX subsidiary, separate from RAD I and RAD M, created for the purposes of expected future sales through a channel that is incompatible and non-competitive with RAD I’s existing channel.

RAD G is focused on the development of advanced software and electronics solutions and hopes to have a solution in the marketplace by the end of 2022.

The Company expects that this first solution, which will be software-only, will be marketed through RAD I.

Additional solutions under development are likely to have a direct go-to-market strategy that complements RAD I’s strategy.

Development efforts for these entities are highly confidential and will remain so until marketable solutions are ready to launch.

RAD G is focused on the development of advanced software and electronics solutions and completed a ‘soft-launch’ of it’s ‘RADPACK’ board in December 2022.

This hardware is a RAD-designed circuit board designed to power all RAD devices.

The company will be working to sell it to other manufacturers that want to create security devices but need a hardware/software solution and want to leverage the investments and network that RAD Inc has built over the years.

The company has started to work with a commission-only sales person to start to share this solution in the electric vehicle charger industry.

Additional sales materials are under development and company is working to find it’s first adopter.

It is expected that this market niche could take several years to develop and as such the company will be looking for clients in the security space and related markets.

The Company anticipates no revenues from RADG this fiscal year.

This company’s website is radgroup.ai and is updated as developments occur.

Robotic Assistance Devices Mobile, Inc.

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RAD M is focused on the development of autonomous mobile devices, both ground-based and airborne.

RAD M’s first solution, the ROAMEO™

unmanned ground vehicle, incorporates RAD M technologies related to the development of custom chassis, drive train, power management, perception, and prediction.

ROAMEO features technology from RAD I to perform its functions.

The Company believes that ROAMEO will bring the first outdoor, rugged, commercial security and facility robot to market.

This mobile solution will complement the stationary systems.

RAD M’s first solution, the ROAMEO™ unmanned ground vehicle, incorporates RAD M technologies related to the development of custom chassis, drive train, power management, perception, and prediction.

ROAMEO features technology from RAD I and RAD G to perform its functions.

The company believes that it’s developing suite of mobile devices will bring the interactive outdoor, indoor, rugged, commercial security and facility robots to the market.

These mobile solutions will complement the stationary systems.

The three solutions are the RADDOG™ linup of quadrupeds, ROAMEO as the outdoor long-running high visibility robot and a project that the company is naming ‘Mobile 3’ with details to be announced sometime this fiscal year.

ROAMEO is manufactured, implemented, and maintained by RAD I.

ROAMEO began serial production in RAD’s Michigan facility in July 2021.

ROAMEO version 2.0 completed a 9 device production run in RAD’s Michigan facility in 2022 and featured some deployments that have been running ever since.

However, for the ROAMEO vision to be fully realized special motors needed to be created and developed.

RAD M worked with a German motor manufacturer to create a customer ROAMEO motor.

Currently the focus on the RADDOG linup pushes the completion of ROAMEO 3.0 into later calendar year 2023.

RAD M will continue developing additional mobility solutions that RAD I will bring to market.

AITX’ main website is aitx.ai.

Company and investor

information can be found at this site and it is updated regularly.

Background - First Commercial Rugged Outdoor

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(SMP) and commercialized the SMP S5 Robot for the security market.

RAD’s commercialization

of the platform focused on integrating traditional security industry manufacturers’

solutions onto the robotics platform.

RAD’s commercialization

of the platform focused on integrating traditional security industry manufacturers’ solutions onto the robotics platform.

two paid proofs-of-concept for large utility companies (under NDA) and over 18 months of development and testing, RAD began deployments

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RAD now considers this phase of the

company ‘Phase 1’

into robotics.

Company ‘Phase 1’ into robotics.

The Company attempted over 40 deployments during this period.

RAD has had no contact with SMP Robotics since April

Much of RAD’s existing convertible debt was

acquired in support of the RAD/SMP robotics program.

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shown in these financial filings.

ROAMEO will deliver on AITX’s goal of bringing

the first outdoor, rugged, commercial security and facility robot to market.

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AITX already has operating in physical security applications serving customers in a wide range of environments.

Background –

RAD’s 2 nd

Generation Ecosystem

RAD’s primary strategy has always been to use

Background – RAD’s 2 nd Generation

RAD’s primary strategy has always been to use

AI technology and modern systems to transform the security industry.

Mobile robots, indoor and outdoor, are a part of that strategy.

to ultimately realize the delivery of these solutions, a set of “stationary robots”

required development.

to ultimately realize the delivery of these solutions, a set of “stationary robots” required development.

These stationary robots launched in April 2018 with

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response from the security market and industry accolades.

SCOT’s positive reception reinvigorated RAD, which accelerated the development

of the software and cloud services that support SCOT.

SCOT runs on the RAD Software Suite™.

This software suite is a cloud and mobile

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security event held in the United States, SCOT won three awards:

(1) The Security Industry Association’s (SIA) New Product Award

for Law Enforcement/Guarding 3 , (2) A 2018 Secure Campus Award from Campus Security and Life Safety Magazine, and (3) A ‘Govie’

award for government security solutions from Security Today Magazine.

(1) The Security Industry Association’s (SIA) New Product Award

for Law Enforcement/Guarding 3 , (2) A 2018 Secure Campus Award from Campus Security and Life

Safety Magazine, and (3) A ‘Govie’ award for government security solutions from Security Today Magazine.

RAD has since won numerous awards for its solutions,

RAD Light My Way ™

Secure Campus 2022 Awards, in the categories of ‘Security & Personal Safety Devices’

& ‘Artificial Intelligence’

3.0 with STAN ™

, Security Industry Association NPS Awards, in the

category of ‘Access Control Software, Hardware, Devices and Peripherals’

with RAD Light My Way, CBRE Innovation Challenge 2021, in the category of ‘Best Workplace Experience Solution Award’

ROSA 180 ™

American Security Today 2021 ASTORS Awards, in the categories of ‘Best Robotic Perimeter Protection’

& ‘Best Motion

Detection Solution’

RAD’s pivot to SCOT and its future derivatives

is complete, and RAD’s current facilities can produce a mix of up to 100 units per month with moderate additional investment in

equipment and manpower.

Introduction of RAD’s 3 rd Generation

On October 13, 2021, RAD presented it’s ‘3 rd

Generation’

of solutions at an investor’s open house event.

The event was held after market close, live streamed and made

available to any interested party.

ROSA 3.0 –

RAD’s best selling device for a variety of intrusion detection, loitering, monitoring and response purposes.

New design, better lighting, communication, audio, uses RAD-G’s hardware.

AVA 3.0 - RAD’s guard-gate replacement device.

New design, better lighting, communication, audio, uses RAD-G’s hardware.

Uses RADGuard 3.x.

3 SIA’s New Product Showcase recognizes

innovative products, services and solutions in electronic physical security, and SCOT™’s award comes in the Law Enforcement/Guarding

Systems category.

Technologies within the program are used in the protection of life and property in residential, commercial, and institutional

settings, displaying SCOT™’s importance in long-range human detection and acting as a force multiplier for safety and defense

against outside threats.

SCOT 3.0 –

Designs shown.

Additional demand required for full production.

Will continue with 2.x until shells in stock are sold out.

Wally 3.0 - Designs shown.

Additional demand required for full production.

Will continue with 2.x until shells in stock are sold out.

‘Robotic Dogs’

Partnership with Ghost Robotics shown.

Additional details on RAD’s robotic dog solutions are expected to be presented in calendar year 2022.

RAD Light My Way –

RAD’s award winning personal safety software solution that utilizes RAD’s hardware.

Sales to begun March 1, 2022.

ROAMEO 2.1 –

Newest version of ROAMEO, RAD’s rugged outdoor autonomous robot.

RAD Light My Way™, Secure Campus 2022 Awards,

in the categories of ‘Security & Personal Safety Devices’ & ‘Artificial Intelligence’

AVA™ 3.0 with STAN™, Security Industry

Association NPS Awards, in the category of ‘Access Control Software, Hardware, Devices and Peripherals’

ROSA™ with RAD Light My Way, CBRE Innovation

Challenge 2021, in the category of ‘Best Workplace Experience Solution Award’

ROSA 180™, American Security Today 2021 ASTORS

Awards, in the categories of ‘Best Robotic Perimeter Protection’ & ‘Best Motion Detection Solution’

ROADMAP & Product Development

3 SIA’s New Product Showcase

recognizes innovative products, services and solutions in electronic physical security, and SCOT™’s award comes in the Law

Enforcement/Guarding Systems category.

Technologies within the program are used in the protection of life and property in residential,

commercial, and institutional settings, displaying SCOT™’s importance in long-range human detection and acting as a force

multiplier for safety and defense against outside threats.

RAD’s product line has continued to develop

with both new solutions being added and older solutions being phased out.

Specifically:

SCOT has been phased out of new sales with one notable exception.

This exception is an opportunity that is supposed to complete as an order in 2023.

However, SCOT itself is discontinued.

Although initial interest was high and several initial deployments continue to operate as intended the solution did not fulfill expected sales targets and as such it was decided not to upgrade it to the ‘3.x’ technology.

It has been removed from the price list.

Wally & Tom – Wally has been replaced with TOM (‘The Office Manager’) which has many but not all Wally features yet features stronger processing and related technology.

Wally’s are being removed and replaced with Toms throughout this calendar year although it is expected some Wally’s will continue to operate for a few more years.

Notably, the first Wally installation continues to operate, is expected to operate for more years and is not scheduled for replacement.

ROSA is at it’s version 3.1 at the time of this filing.

Version 3.2 should start being produced in August 2023 and will feature the ‘RADPack Millie Gen 2’ control board from RAD G.

This board is expected to significantly reduce assembly time because it requires a significantly less sophisticated wiring harness.

The board also allows for better fleet management functionality since the board is 100% designed, programmed by RAD and important features have been included by design.

ROSA has spawned two significant iterations:

‘RIO’ is a ROSA Independent Observatory, or in other terms, a solar powered trailer with 1 – 2 ROSA units on top.

The current market leader in this space is a company called LiveView, Inc.

The Company estimates this market at around 6,000 new trailer deployments per year and is looking to capture up to 10% - 20% of the market within 2 years.

As of the time of this writing approximately 10 RIO have been deployed for a variety of clients.

ROSA P version:

This version has 1 – 2 ROSA attached to a pre-existing pole and powered through that poles lighting power.

However, since the lights are generally only powered at night ROSA P has the ability to power the ROSA(s) and a battery pack while the lighting circuit is receiving power.

During daylight, when there is no lighting power, ROSA P provides battery power to the 1 – 2 ROSA.

As the time of this filing several ROSA P are deployed across three different clients.

AVA has evolved into it’s version 3.1 series.

This series features more responsive and much brighter touchscreen and a significantly improved 2 way audio system.

AVA deployments continue to be more ‘sticky’ than any other RAD deployment because it becomes an essential part of regular facility activity since it allows for vehicle ingress and in some cases egress.

AVA will evolve into version 3.2 after the completion of the RADPack Millie Gen 2 (alongside ROSA’s upgrade to version 3.2).

On the mobility side the Company has made significant

Specifically:

ROAMEO – version 2 units have been deployed across a number of clients and it was found that the motors are not satisfactory for 100% reliable use.

Notably one client has had a ROAMEO for many months, it’s solved their security issue and has achieved important milestones such as 16 hours of perfect autonomous patrols and months of perfect autonomous recharging.

However the Company has decided to shut the 2.x program in favor of the 3.x program for these reasons:

The new motors built for 3.x will give much improved performance across the board and this is the type of performance the Company wants to use in a high volume product.

Specifically the motors allow for minute operation as a stepper motor, allow for fast speeds, have an integrated safety brake and are suited for safety certifications (critical).

Production costs of ROAMEO 3.x are expected to be 50% of 2.0 which was considerably expensive and made it impossible to achieve required profit margins.

The sensor package and user payload on 3.0 is refined and focused for reliability.

ROAMEO 3.x prototype 1 is 80% at the time of this filing although resources are primarily focused on RADDOG development.

At this moment the Company has achieved sophisticated autonomous navigation for ROAMEO and other important technical milestones.

A sales funnel for this product lines exists and the Company looks forward to producing ROAMEO 3.0 by the of this fiscal year.

RADDOG 2LE – This version launched June 6, 2023, and it’s ‘LE’ denotes that it is specifically designed for law enforcement applications.

Additional information can be found at raddog.ai.

It is expected that the Company will deliver 20-120 of these RADDOG versions in this current fiscal year.

‘Mobile 3’ is current code name for a mobility project that has begun development but shares it’s development teams with RADDOG and is therefore being developed slowly.

It is expected that the details of this autonomous robot are revealed this year.

It is complementary to RADDOG and ROAMEO and continues to fill out AITX’ line of mobile devices.

Software Solutions

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software solutions to power its ecosystem.

RADGUARD is customer-facing software (on the touchscreens of RAD’s field devices), and

management solutions include RADSOC (Security Operations Center) and RADPMC (Property Management Center).

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and other applications itself instead of seeking to partner with legacy manufacturers.

It is RAD’s opinion that the legacy paradigm

in the physical space underserves the markets in terms of cost, functionality, and integration.

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into RADSOC, delivering a fully integrated solution that facilitates robust security and property management capabilities.

The Company believes that RAD’s ability to deliver

easy-to-use, easy-to-obtain, and easy-to-support software, combined with custom workflow-automation applications, is key to the Company’s

Towards the end of the prior fiscal year the company

announced ‘ROSS’ which is the company’s video management system.

This allows non-RAD cameras to be managed by RADSOC alongside

RAD stationary and mobile devices.

It further allows for RADSOC’s analytics and communication features to be accessible and applied

to these non-RAD cameras.

RAD launched it’s Fire Arm Detection (‘FAD’)

analytic last fiscal year and closed it’s first ROSS/FAD/ROSA project with Rosenbaum Yeshiva in New Jersey.

The company has built

a modest sales funnel for similar opportunities.

The Company believes that RAD’s ability to deliver

easy-to-use, easy-to-obtain, and easy-to-support software, combined with custom workflow-automation applications, is key to the company’s

The company believes that the R&D work it has

completed makes AITX’ vision for a single all encompassing security and property technology platform complete.

With the addition

of the stationary and mobile solutions, plus the ability to integrate existing cameras into the system, RAD can now provide solutions

in almost every situation at a cost less than most others.

Manufacturing & Assembly

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for raw material procurement and machining of the required plastic and metal pieces that build RAD devices.

RAD’s sourcing has redundancy

through use of multiple machine shops producing the same products for RAD.

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from a choice of suppliers.

RAD’s margins are based on current small batch

production and assembly.

The Company expects that economies of scale will drive greater gross margin as quantities and efficiencies increase.

RAD expects to introduce new products and updates

to several products during the remainder of 2022 and early 2023, including the following:

1) ROAMEO 3.0.

This release will

have an updated physical design inline with the general ‘RAD 3.0 look’

as well as feature several custom components that will

significantly improve the robot’s long term autonomy.

Further details

to be released throughout the fiscal year.

3) ‘ROI’, RAD’s

entry into an existing market that we value between $ 250 million and $ 500million per year.

The unit is in stealth mode and will be debuted

at our before the GSX trade show in Atlanta in September 2022.

RAD’s hardware and software have benefited from

continuous significant improvements and to date has over 1,500,000 paid operating hours.

Team and Culture

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growth and development.

RAD’s governing philosophy centers around the principles of “Emotional Intelligence.

Self-awareness,

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tight deadlines, volunteered to make financial sacrifices, and assisted wherever and however they can.

We believe that RAD’s high-EQ work culture creates

productive, motivated employees that has allowed the Company to weather the difficult period of robot deployments and our transition to

2 nd generation solutions.

Subsequent to the end of fiscal year ending February

28, 2023, the Company completed two Reduction In Force events that brought headcount from 92 full time equivalent employees to 69.

Company largely cut development teams working on future solutions, reduced engineering staff and trimmed other positions for cost control

Additionally, the Company instituted cost control methods revolving around tasks such as freight and purchasing processes.

efforts will take full effect in July 2023 and are expect to save the Company between $ 200,000 to $ 300,000/month between reduced labor

costs in addition to other efficiencies.

The Company is focused on sequential product development

while sales grow in order to get close to positive cash flow.

Market Environment

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RAD in the near term.

In addition, the Company expects that the launch of RAD’s mobile solutions will significantly increase the

gap between it and would-be competitors.

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devices and systems.

RAD’s technology model includes a “new

paradigm”

for the security industry:

RAD’s technology model includes a “new

paradigm” for the security industry:

Security in a Box.

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for AI processing, usage analytics, cloud-sided video, communications interface, audit logs, and much more.

Positive market reception for RAD solutions is due

to the following conditions:

The security guard industry is characterized by poor customer satisfaction and industry consolidation.

It’s self-described to be a “race to the bottom”

to provide the lowest cost to end-users who require at least some level of security services for crime deterrence and insurance purposes.

There are 1.1 million security guards in the United States and the security guard industry represents over $20 billion in annual sales.

The average security guard hourly rate is $20 per hour.

Enterprise organizations’

security divisions/groups are continuously challenged to reduce cost.

For example, Universal Parcel Service (UPS) spends over $120 million per year in security guard services, Lockheed Martin over $60 million per year, and NBC Universal over $25 million per/year.

The security guard industry has not had any significant disruption or innovation since its inception.

Guard companies struggle to offer quality service at a reasonable price.

Security organizations are eagerly receptive to solutions that improve performance and reduce cost.

Guard companies are facing a worker shortage, to the point that they are turning away customers.

There is a glut of low-wage jobs available, and compared to opportunities in the retail and service sector, guard positions are undesirable.

The work is lonely and boring, and there is little or no room for career growth.

Security companies have two alternatives;

drastically increase hourly pay to attract more candidates, or automate their processes to require fewer workers who perform more interesting jobs.

The former option is expected to increase the cost of services to the end-user;

the latter option is expected to reduce the price while delivering security services that may equal or exceed the quality of services performed by individual guards.

RAD is uniquely positioned to facilitate this second model, thereby helping to eliminate the staffing crisis for guard companies who embrace RAD’s solutions.

RAD’s device rental model delivers significantly lower operating costs.

With RAD’s current stationary solutions retailing from under $1/hour to $5/hour, customers immediately benefit from substantial savings and more comprehensive security.

RAD’s services options allow end-users to incorporate or fully replace their existing Security Operation Centers with RAD solutions.

RAD’s “Solutions-As-A-Service”

Rental Program offers customized options to help organizations achieve operational and security goals.

The above conditions speak to the historical lack

of innovation in the guarding market.

RAD upends this tradition by approaching security challenges through a truly revolutionary approach.

The market is now positioned for major disruption with the application of AI-based solutions, as lead by RAD.

As such, the interest in

RAD solutions has been overwhelming.

Major companies, including the largest U.S.

guarding company, are aligning with RAD to offer these

services to their customer base.

Prospective ROAMEO Impact

The Company’s release of ROAMEO positions it

as a near-competitor to Knightscope, a Palo Alto based robotics company in business since 2012.

RAD’s approach is different from

Knightscope’s on many elements of technology.

RAD expects that a small number of expected ROAMEO

orders will make a substantial impact on RAD’s financial performance and create momentum for significant adoption of the entire

Customer Acceptance of RAD Solutions

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the Company will be profitable.

RAD’s batch production of SCOTs & WALLYs

have all been committed prior to the completion of the production cycle, with an average delivery time of 45 days.

RAD has set a goal,

predicated on steady demand, to reduce delivery time to 15 days.

RAD Industry Leadership Role

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for AI and change in the security industry.

He has lectured and participated in several panels for some of the security industry’s

largest events and organizations.

Reinharz sits on the SIA’s Autonomous Working Group committee, which is dedicated to helping

shape the industry and support progressive legislation.

Reinharz chairs Security Industry Association’s Autonomous Working Group committee, which

is dedicated to helping shape the industry and support progressive legislation.

Most recently, Mr.

Reinharz provided a lecture to NYC’s ASIS CPP group that

qualified as a continuing education credit.

Reinharz provided a lecture to NYC’s

ASIS CPP group that qualified as a continuing education credit.

In March 2023 Steve Reinharz was elected to a Board

seat for Security Industry Association, Inc (SIA).

SIA is the foremost security group steering policy, lobbying various governments and

promoting education within the security industry.

It is expected that Mr.

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Go To Market Strategy

RAD’s strategy continues to focus on the creation

RAD’s strategy has been to focus on the creation

and support of a strong dealer channel.

This approach affords multiple benefits to RAD with few downsides.

RAD has successfully integrated

through the largest U.S.

guarding company and recently signed another top-three guarding company as a RAD dealer.

Furthermore, RAD has

been signing up and developing mid-sized and smaller dealers.

RAD is on track to establish a focused group of dealers, most of whom will

exclusively represent RAD solutions.

Supplemental to nurturing a solid dealer channel,

RAD will, under certain circumstances, accept subscriptions directly from end-users.

These situations are largely characterized by the

end-user not having a guarding company, having a guarding company that RAD does not want as a dealer, or other extenuating circumstances.

RAD has no desired ratio of dealer vs.

direct subscriptions.

Dealer subscriptions remain the primary focus.

RAD has no direct competition save for one immediate

competitor and one potential competitor.

RAD is considered part of the “drones”

category of the security industry, although at RAD we consider ourselves to be in the workflow automation industry.

RAD deliberately restricts information that is public

for three main reasons:

Usually, activities are covered by mutual non-disclosure agreements and RAD generally will not ask for permission to publicize customer activities.

These are generally security applications, and most companies prefer not to advertise the details of their security systems.

Until RAD hits the “tipping point,”

we prefer to keep our solutions somewhat stealth so as not to give our would-be competitors ideas to copy.

We anticipate that, eventually, some competition may

enter the market.

RAD seeks to maintain a 2+ year competitive advantage through a broad line of hardware solutions, the fastest and smoothest

user interface, and the strongest feature set with the most mature back-end.

Furthermore, RAD seeks to expand its sales staff and become

the dominant incumbent in this new market that it has created.

COVID-19 Impact

The Company had little COVID-19 impact until the release

of the 3.0 line.

The little COVID-19 impact was due to early purchasing and inventory build up in anticipation of the supply chain disruptions.

The 3.0 lineup uses a variety of new equipment that

we could not accumulate.

The Company is presently experiencing issues caused by the ongoing supply chain constraints on these new components

and pieces of equipment.

Furthermore, shipping delays have impacted the timeliness of parts deliveries.

Additionally shipping and component

costs have been increasing.

These facts put negative pressure on our gross margins

and add delays between the time an order is received and the time that order can be implemented and start generating revenue.

The greatest impact of COVID-19 remains it’s

affect on labor.

Namely the reduction of available workers for both the security industry –

which is spurring demand for RAD solutions

and the increasing costs and reduction in availability of RAD staff in the software development and assembly areas.

pandemic’s long term impact will be generally positive as customers gravitate towards our solutions.

Additionally the higher wages

we are paying our team members help assure continuation of our high employee retention rate.

As of May 25, 2022, we have 83 employees, including

full-time global contract employees.

RAD has successfully executed this strategy and has added over 60 qualified dealers to our dealer

The expectations were that this approach affords multiple benefits to RAD with few downsides and almost all dealers exclusively

represent RAD solutions in the area of ai-enabled autonomous devices.

However, over the past year it’s become clear

that the dealer channel has exceptional benefits with a limited number of dealers.

Forward-thinking dealers that invest the time and energy

into RAD have the ability to be successful.

Unfortunately many dealers are happy to sign up and continue their normal business operations

without giving proper efforts to promote RAD solutions to their client bases.

As such the company has about 20 active dealers with the

rest being more opportunistic.

As such the Company has been increasingly focusing on a limited number of dealers, including a strong and

growing relationship with the world’s largest security company, Allied Universal Inc.

AUS and RAD are working on a large

roll out to all integration offices as this report is filed.

Furthermore the Company is devoting more time to direct sales, an area of

effort that gives the Company more control over the sales process.

It is expected that going forward the relationship with active dealers

will strengthen while continuing to strengthen direct sales.

We may be subject to competition by competitors that

have greater operating histories, cash and operational resources than we do.

As of March 23, 2023, we have a headcount of 90 fully

dedicated full-time equivalents, including 42 RAD Inc.

employees, 18 overseas contractors, and 30 employees of a Canadian research and

development company.

None of our employees are represented by a union.

We consider our employee relations to be excellent.

AITX is rolling out its approved (April 2021 8-K) ESOP to all employees during the summer of 2022.

principle shareholder owns a minority interest in the Canadian research and develop company but has not received any compensation of any

kind from that company to date.

Since the close of the year the Company completed

two Reduction In Force events that brought the team size to 69 people and added one additional sale focused employee for a headcount of

70 full time equivalent employees as of June 12, 2023.

Accomplishments & Highlights

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accomplishments over the past 12 months include:

SOC 2 Compliance

The SOC 2 Report has become a benchmark standard,

and now an often-specified requirement, in the software procurement process.

Established by the American Institute of Certified Public

Accountants (AICPA), criteria and reporting principles are outlined as a means for organizations to create a documented framework of policies

and procedures to prove how they manage and secure data in the cloud and ensure protection of customer privacy and ensure internal communications

are suitably handled.

This achievement reflects the Company’s stated goals of best-in-class data protection and internal processes.

Implementation of ERP (enterprise resource planning) System

During the fiscal year the Company made a strategic

investment in state-of-the-art ERP software to optimize its business process management, production capabilities and to better serve customers.

The Company expects to have greater visibility on sales activities, trends, lead management and sales forecasting utilizing the new ERP.

Announced Strategic Alliances and Partnerships

The Company took steps to integrate its technology

portfolio with other tech companies, working to bring solutions to market in a faster, more financially efficient manner.

Announced alliances

March 24, 2021 - RAD to Integrate EAGL Gunshot Detection

Technology into All Security Devices

https://radsecurity.com/robotic-assistance-devices-to-integrate-eagl-gunshot-detection-technology-into-all-security-devices/

August 19, 2021 - AITX Announces Details of Strategic

Relationship with Ghost Robotics Corporation

https://radsecurity.com/aitx-announces-details-of-strategic-relationship-with-ghost-robotics-corporation/

Cyber and data protection and compliance

The Company continues it’s focus on delivery

of safe and secure software and systems to its clients.

As such, last year the Company achieved SOC 2 Report status.

The SOC 2 Report

has become a benchmark standard, and now an often-specified requirement, in the software procurement process.

Established by the American

Institute of Certified Public Accountants (AICPA), criteria and reporting principles are outlined as a means for organizations to create

a documented framework of policies and procedures to prove how they manage and secure data in the cloud and ensure protection of customer

privacy and ensure internal communications are suitably handled.

This achievement reflects the Company’s stated goals of best-in-class

data protection and internal processes.

The Company has subsequently maintained SOC 2 Type

2 status and has achieved a cyber certification from a Fortune Five company which was more difficult to obtain than either SOC certifications.

Due to non-disclosure agreements with the Fortune Five company AITX can not disclose who it is from.

Implementation of ERP (enterprise resource planning)

System - Update

The Company’s implementation of NetSuite ERP

continued through the year with a successful transition to all accounting and human resources now fully functionality.

Sales is using

some of the CRM features of the ERP but still using a non-ERP platform for management of the sales funnel.

Production’s use of the

ERP significantly increased over the course of the year.

There remain some challenges for full production implementation related to change

Management expects full implementation of the ERP to complete this fiscal year.

The will allow realization of efficiencies

in purchasing, kitting and production.

Authorized Dealers Added to Dealer Network

RAD has more than 40 authorized dealers across the

United States, Canada, and the EU, with plans for continued expansion.

Dealers include the largest security companies in the world, including

Allied Universal and Securitas.

The ongoing addition of authorized dealers introduces and delivers RAD products to new markets.

announcement and highlights include:

March 5, 2021 - RAD Announces Dealer Agreement with

Moritz Security Services

https://radsecurity.com/robotic-assistance-devices-announces-dealer-agreement-with-st-moritz-security-services/

March 11, 2021 - RAD Announces Dealer Agreement with

https://radsecurity.com/rad-announces-dealer-agreement-with-dsi/

May 24, 2021 - RAD Secures New Orders, Signs Two New

Dealers, Pro Security Group and a Canadian Dealer

https://radsecurity.com/robotic-assistance-devices-secures-new-orders-signs-two-new-dealers/

June 17, 2021 - RAD Signs L&P Global Security

as a New Dealer with Initial Unit Commitment

https://radsecurity.com/robotic-assistance-devices-signs-lp-global-security-as-a-new-dealer-with-initial-unit-commitment/

August 4, 2021 - RAD Announces Dealer Agreement with

BSN Security, LLC

https://radsecurity.com/rad-announces-dealer-agreement-with-bsn-security-llc/

December 2, 2021 - RAD Signs EPIC Security Works as

New Dealer and Receives 4 Unit ROSA Order

https://radsecurity.com/rad-signs-epic-security-works-as-new-dealer-and-receives-4-unit-rosa-order/

December 17, 2021 - RAD Receives Order for 10 ROSA

Stationary Security Robots from Recently Signed Dealer Vista Security Group

https://radsecurity.com/rad-receives-order-for-10-rosa-stationary-security-robots-from-recently-signed-dealer-vista-security-group/

February 1, 2022 - RAD Signs SekurCorp as New Dealer

and Receives AVA Order

https://radsecurity.com/rad-signs-sekurcorp-as-new-dealer-and-receives-ava-order/

February 18, 2022 - RAD Signs New Dealer and Receives

ROSA Order with Additional Units Expected

https://radsecurity.com/rad-signs-new-dealer-and-receives-rosa-order-with-additional-units-expected/

February 22, 2022 - RAD Receives 5 Unit ROSA Order

from Recently Signed Dealer Cancom Security Services

https://radsecurity.com/rad-receives-5-unit-rosa-order-from-recently-signed-dealer-cancom-security-services/

February 24, 2022 - RAD Signs Apex3 Systems as New

Dealer and Receives ROSA Order with Additional Units Expected

https://radsecurity.com/rad-signs-apex3-systems-as-new-dealer-and-receives-rosa-order-with-additional-units-expected/

Return to Industry Conferences and Trade Shows

During the period, as COVID-19 concerns retreated,

RAD returned to attending and exhibiting at several regional conferences and national trade shows.

At these conferences, it is common

for several from RAD’s sales team attend and conduct meeting with dealers, prospective clients and existing clients.

RAD's participation

during FY 2022 included:

ISC West 2021, the security industry’s premier trade show and conference, Las Vegas, NV, July 2021

NCS⁴, The National Center for Spectator Sports Safety and Security, Phoenix, AZ, November 2021

IAAPA (International Association of Amusement Parks and Attractions) 2021, the amusement and attractions industry’s leading show, Orlando, FL, November 2021

RAD will continue to attend conferences in FY 2023

within the security industry as well as targeted vertical markets where RAD solutions are in demand.

At the end of FY 2023 RAD has more than 57 authorized

dealers, up from 32 at the beginning of the fiscal year.

These dealers are located across the United States, Canada, and the EU, with

plans for continued expansion.

Dealers include the largest security companies in the world, including Allied Universal and GardaWorld,

which are respectively the largest and 3 rd largest guarding companies in the world.

The ongoing addition of authorized dealers

introduces and delivers RAD products to new markets.

Discussion on Sales

The sales funnel has grown significantly over the

course of this fiscal year.

During the second half of the year the sales group increased substantially to five full time sales people

lead by a sr VP of sales.

The first few months of any new employee are focused on training and results sometimes take 6 months from date

In the fiscal year RAD added 311 sales opportunities

course of this fiscal year although expectations and goals were not fully achieved.

The sales team has matured and stabilized with a Senior

Vice President of Sales with three full time direct sales reports.

There was no salesperson turnover in this fiscal year.

Additional sales

drivers are RAD’s President as well as AITX’ CEO.

Furthermore operations team members are instrumental in encouraging clients

to expand existing systems.

In the fiscal year ended February 28, 2022 RAD added 311 sales opportunities

to the sales funnel.

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and has reached the point in the sales process where they have a quote they can sign.

In the fiscal year that ended February 28, 2023

sales activity skyrocketed with the Company issuing approximately 840 quotes for various opportunities.

Of those 840 quotes at least 120

are in the final stages of customer acceptance and sign off.

Management has identified that conversion of accounts

from opportunities to clients is low and has identified some of the reasons for the low conversion rate:

Buyer fear of deploying new technology and the perceived risks associated with trying something new

Compliance questionnaires can take up 18 months, slowing down final approvals

Slow adoption of structural changes to Dealers sales processes and internal compensation programs

Despite this the sales funnel continues to grow in

size and quality.

Management continues to ‘chip away’

at these change-related obstacles to sales by taking a high profile

approach to existing client success, continuously improving the hardware and software to continue to increase the value of our solutions

to end users.

Management expects device count deployments may be

between 250 and 1250 devices this fiscal year.

As of May 2022 total devices deployed is approximately 250.

Uniformly end users and dealers report significant

problems with recruiting and retaining manned labor.

This fact is the primary driver of clients’

and dealers interest in RAD solutions.

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 the Company’s solutions.

from opportunities to clients is low and has identified some of the reasons for the low conversion rate as well as new tactics to break

through these obstacles.

Advanced new technology sales often involve multiple decision-makers and require a skilled and passionate internal

The security industry breeds risk-averse personnel.

The Company is pressing several initiatives to change the industry to create

an environment where trying new things in the norm as opposed to the exception.

An example of these efforts are the Security Industry

Association’s (SIA) upcoming Town Hall where three Fortune 500 security practitioners that have implemented new technologies will

share their tips for successful internal selling.

AITX will be putting more emphasis on these efforts this year.

Subsequent to the close this fiscal year the Company’s

largest dealer has accelerated RAD device sales roll out to all of it’s branches.

The Company expects this relationship and roll

out will drive significantly more sales than the Company has experienced to date.

Management projects that RIO’s introduction

will drive higher gross sales and greater RAD adoption of unique software functions such as RAD Light My Way and Fire Arm Detection.

is further expected that the Company’s first RAD Light My Way client will be public in the summer of 2023 and will drive significant

sales in healthcare.

RAD’s first Fire Arm Detection client, the Rosenbaum Yeshiva in New Jersey, will complete it’s installation

in the summer of 2023 and is expected to drive additional system sales.

Between a maturing hardware and software line up,

an increasing number of deployments/case studies/success stories, management is excited for the next year’s sales.

Management feels

that ironing out technical and production challenges are well in hand and clearing the way for a greater volume of deployments.

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:

News - AITX - Artificial Intelligence Technology Solutions

Awards and Industry Recognition

During the period, RAD solutions were honored with

six security industry awards, primarily for ROSA 3.0, AVA 3.0 and RAD Light My Way.

ROSA 3.0 was also selected for a ‘Good Design’

award for its stylish design and high-performance features.

Trade Shows and Conferences

As in previous years, RAD attended several large security

industry events including ISC West, GSX, plus dozens of regional conferences with the purpose of presenting the Company’s solutions

to a buying audience and continually loading the sales pipeline with new opportunities.

RAD often utilizes the events for speaking engagements

or panel discussions to propel the Company’s ‘thought leadership’ regarding its AI-powered security and safety solutions.

Additional Points of Interest

Management expects that as volume production grows,

starting with ROSA, the company can achieve significant improvements in cost of goods sold.

Part of these savings will be passed to the

market in the form of reduced costs.

Timing is dependent on parts costs reduction and timing of improvement of production efficiencies.

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.

There is little to no cost associated with this revenue stream.

This fiscal year was significant for stabilization

of technology, better understanding of the sales process and related challenges, positioning as a true leader in the industry and the

achievement of several high profile deployments.

The Company continues its focus on sales, efficiencies with the goal of achieving

positive cash flow within 18 months.

Technology reliability issues caused some slower sales adoption in the

As a response the Company has concentrated on it’s next-generation system ‘brain’ called the RADPack Millie

As of June 14 the final prototype was technically approved and is going in production.

This will drive the ‘3.2’ series

of devices that production is scheduled for in the August/September timeframe.

This new board allows quicker production, full on and off

board peripheral control, advanced fleet management and automated maintenance and reporting.

This board is expected to significantly reduce

and/or eliminate various ongoing technical challenges and allow the operations team to accelerate the quantity of system deployments without

increasing the size of the deployment team.

Management, based on regular conversations with

the Company’s largest debt holder, expects no issues regarding pushing out debt deadlines as it has done so in years past.

Management confirms the support of this lender and notes the most recent non-convertible $4M loan facility.

As of June 13, 2023, $3.2M of that facility has been used.

Management reiterates that the plan continues to be to grow revenues, achieve

positive cash flow, reduce debt and prepare for an uplist to Nasdaq.

Management estimates this timeline to be in the two to four year

On June 14, 2023 the company extended it’s ‘No Reverse Split’ policy by 12 months, to now end January 1, 2025.

It is expected the company will continue 1 year extensions until the conditions merit an uplist to Nasdaq or NYSE.

Legal Proceedings

See Item 3 - Legal Proceedings.

Pursuant to Item 305(e) of Regulation

229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,”

Pursuant to Item 305(e) of Regulation S-K (§

229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,”

as defined by Rule 229.10(f)(1).

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business