{"url_path":"/sec/aitx/10-k/2026/item-15","section_key":"item-15","section_title":"Item 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-09","source_url":"https://www.sec.gov/Archives/edgar/data/1498148/0001493152-26-027796-index.html","accession_number":"0001493152-26-027796","cik":"0001498148","ticker":"AITX","issuer_name":"Artificial Intelligence Technology Solutions Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1498148/0001493152-26-027796-index.html","primary_entity_key":"0001498148","primary_entity_name":"Artificial Intelligence Technology Solutions Inc."},"word_count":23318,"has_tables":true,"body_markdown":"**ITEM\n15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**\n\n \n\n(a)(1)\nFinancial Statements\n\n \n\nThe\nconsolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements\nand Financial Statement Schedules on page F-1 and included on pages F-2 through F-36.\n\n \n\n(2)\nFinancial Statement Schedules\n\n \n\nAll\nschedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions,\nare not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included\nherein.\n\n \n\n-39-\n\n[Table of Contents](#toc_001)\n\n \n\n(3)\nExhibits.\n\n \n\n**Exhibit\nNo.**\n \n**Description\nof Document**\n\n2.1\n \n[Stock\nPurchase Agreement, dated August 28, 2017, by and among the registrant, Steve Reinharz and Robotic Assistance Devices Inc. (incorporated\nby reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Commission on August 31, 2017).](https://www.sec.gov/Archives/edgar/data/1498148/000116169717000387/exhibit_10-1.htm)\n\n \n \n \n\n3.1\n \n[Articles\nof Incorporation of the registrant filed with the Nevada Secretary of State on September 8, 2014. (incorporated by reference to Exhibit\n3.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018).](https://www.sec.gov/Archives/edgar/data/1498148/000116169718000118/ex_3-1.htm)\n\n \n \n \n\n3.2\n \n[Plan\nand Agreement of Merger of Artificial Intelligence Technology Solutions Inc. (a Florida corporation) and Artificial Intelligence\nTechnology Solutions Inc. (a Nevada corporation). (incorporated by reference to Exhibit 3.2 to the registrant’s transition\nreport on Form 10-KT filed with the Commission on March 12, 2018).](https://www.sec.gov/Archives/edgar/data/1498148/000116169718000118/ex_3-2.htm)\n\n \n \n \n\n3.3\n \n[Bylaws\nof the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form S-1 (File No.\n333-168530), filed with the Commission on August 4, 2010).](https://www.sec.gov/Archives/edgar/data/1498148/000116169710000728/ex_3-2.htm)\n\n \n \n \n\n3.4\n \n[Certificate\nof Designations filed with the Nevada Secretary of State on February 8, 2017. (incorporated by reference to Exhibit 3.4 to the registrant’s\ntransition report on Form 10-KT filed with the Commission on March 12, 2018).](https://www.sec.gov/Archives/edgar/data/1498148/000116169718000118/ex_3-4.htm)\n\n \n \n \n\n3.5\n \n[Certificate\nof Designations filed with the Nevada Secretary of State on May 3, 2017. (incorporated by reference to Exhibit 3.5 to the registrant’s\ntransition report on Form 10-KT filed with the Commission on March 12, 2018).](https://www.sec.gov/Archives/edgar/data/1498148/000116169718000118/ex_3-5.htm)\n\n \n \n \n\n3.6\n \n[Amendment\nto Certificate of Designations filed with the Nevada Secretary of State on May 3, 2017 (incorporated by reference to Exhibit 3.1\nto the registrant’s current report on Form 8-K filed with the Commission on May 12, 2017).](https://www.sec.gov/Archives/edgar/data/1498148/000116169717000238/exhibit_3-1.htm)\n\n \n \n \n\n10.1\n \n[Preferred\nStock Purchase Agreement dated January 31, 2017 and entered into between the Company and Capital Venture Holdings LLC. (incorporated\nby reference to Exhibit 10.1 to the registrant’s transition report on Form 10-KT filed with the Commission on March 12, 2018).](https://www.sec.gov/Archives/edgar/data/1498148/000116169718000118/ex_10-1.htm)\n\n \n \n \n\n14.1\n \n[Code\nof Ethics (incorporated by reference to Exhibit 14.1 to the registrant’s registrant statement on Form S-1 (File No. 333-168530),\nfiled with the Commission on August 4, 2010).](https://www.sec.gov/Archives/edgar/data/1498148/000116169710000728/ex_14-1.htm)\n\n \n \n \n\n21.1\n \n[List\nof Subsidiaries. *](ex21-1.htm)\n\n \n \n \n\n31.1\n \n[Rule\n13(a)-14(a)/15(d)-14(a) Certification of principal executive officer. *](ex31-1.htm)\n\n \n \n \n\n31.2\n \n[Rule\n13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer. *](ex31-2.htm)\n\n \n \n \n\n32.1\n \n[Section\n1350 Certification of principal executive officer. *](ex32-1.htm)\n\n \n \n \n\n32.2\n \n[Section\n1350 Certification of principal financial and accounting officer. *](ex32-2.htm)\n\n \n \n \n\n99.1\n \n[Insider\nTrading Policy. (incorporated by reference to Exhibit 99.1 to the registrant’s annual report on Form 10-K filed with the Commission\non May 28, 2021).](https://www.sec.gov/Archives/edgar/data/1498148/000116169721000289/ex_99-1.htm)\n\n \n \n \n\n101.INS\n \nInline\nXBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded\nwithin the Inline XBRL document. *\n\n101.SCH\n \nInline\nXBRL Taxonomy Extension Schema Document *\n\n101.CAL\n \nInline\nXBRL Taxonomy Extension Calculation Linkbase Document *\n\n101.DEF\n \nInline\nXBRL Taxonomy Extension Definition Linkbase Document *\n\n101.LAB\n \nInline\nXBRL Taxonomy Extension Label Linkbase Document *\n\n101.PRE\n \nInline\nXBRL Taxonomy Extension Presentation Linkbase Document *\n\n104\n \nCover\nPage Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *\n\n \n\n*\nFiled\nor furnished herewith.\n\n \n\n-40-\n\n[Table of Contents](#toc_001)\n\n \n\n**SIGNATURES**\n\n \n\nPursuant\nto the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed\non its behalf by the undersigned, thereunto duly authorized.\n\n \n\n \n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n \n \n \n\nDate:\nJune 8, 2026\nBy:\n*/s/\nSteven Reinharz*\n\n \n \nSteven\nReinharz\n\n \n \nPresident,\nChief Executive Officer\n\n \n \n \n\nDate:\nJune 8, 2026\nBy:\n*/s/\nAnthony Brenz*\n\n \n \nAnthony\nBrenz\n\n \n \nChief\nFinancial Officer (principal financial and accounting officer)\n\n \n\nPursuant\nto the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the\nregistrant and in the capacities and on the dates indicated.\n\n \n\n**Signature**\n \n**Title**\n \n**Date**\n\n \n \n \n \n \n\n*/s/\nSteven Reinharz*\n \nPresident,\nChief Executive Officer and Director (principal executive officer)\n \nJune\n8, 2026\n\nSteven\nReinharz\n \n \n \n \n\n \n \n \n \n \n\n*/s/\nAnthony Brenz*\n \nChief\nFinancial Officer (principal financial and accounting officer)\n \nJune\n8, 2026\n\nAnthony\nBrenz\n \n \n \n \n\n \n\n-41-\n\n[Table of Contents](#toc_001)\n\n** **\n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n****\n\n \n\n**INDEX\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n[Report of Independent Registered Public Accounting Firm](#SSS_001)\nF-2\n\n \n \n\n[Consolidated\nBalance Sheets](#ns_002)\nF-3\n\n \n \n\n[Consolidated\nStatements of Operations](#ns_003)\nF-4\n\n \n \n\n[Consolidated\nStatements of Stockholders’ Deficit](#ns_004)\nF-5\n\n \n \n\n[Consolidated\nStatements of Cash Flows](#ns_005)\nF-7\n\n \n \n\n[Notes\nto the Consolidated Financial Statements](#ns_006)\nF-8\n\n \n\nF-1\n\n[Table of Contents](#toc_002)\n\n \n\nREPORT\nOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\n \n\nTo\nthe Board of Directors and\n\nStockholders\nof Artificial Intelligence Technology Solutions, Inc.\n\n** **\n\n**Opinion\non the Financial Statements**\n\n \n\nWe\nhave audited the accompanying consolidated balance sheets of Artificial Intelligence Technology Solutions, Inc. and its subsidiaries\n(the “Company”) as of February 28, 2026 and February 28, 2025, and the related consolidated statements of operations, stockholders’\ndeficit, and cash flows for each of the years in the two-year period ended February 28, 2026, and the related notes (collectively referred\nto as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position\nof the Company as of February 28, 2026, and February 28, 2025, and the results of its operations and its cash flows for each of the years\nin the two-year period ended February 28, 2026, in conformity with accounting principles generally accepted in the United States of America.\n\n** **\n\n**Substantial\nDoubt about the Company’s Ability to Continue as a Going Concern**\n\n \n\nThe\naccompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note\n1 to the financial statements, the Company had negative cash flow from operating activities of approximately $9.3 million, an accumulated\ndeficit of approximately $171.1 million and negative working capital of approximately $17.0 million as of and for the year ended February\n28, 2026, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these\nmatters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this\nuncertainty.\n\n \n\n**Basis\nfor Opinion**\n\n** **\n\nThese\nfinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s\nfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board\n(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities\nlaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe\nconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company\nis not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,\nwe are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion\non the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur\naudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error\nor fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding\nthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant\nestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits\nprovide a reasonable basis for our opinion.\n\n** **\n\n**Critical\nAudit Matters**\n\n \n\nCritical\naudit matters are matters arising from the current period audit of the financial statements that were communicated or required to be\ncommunicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and\n(2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.\n\n \n\n/s/\nL J Soldinger Associates, LLC\n\n \n \n\nWe\nhave served as the Company’s auditor since 2019.\n\n \n \n\nDeer\nPark, Illinois\n\nPCAOB\nID: 318\n\nJune\n8, 2026\n \n\n \n\nF-2\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n \n\n**CONSOLIDATED\nBALANCE SHEETS**\n\n \n\n  \n\n**February\n28,**\n\n**2026**\n  \n\n**February\n28,**\n\n**2025**\n \n\nASSETS \n    \n   \n\nCurrent assets: \n    \n   \n\nCash \n$109,043  \n$865,975 \n\nAccounts receivable, net \n 1,004,201  \n 1,367,331 \n\nShare proceeds receivable \n —  \n 418,669 \n\nDevice parts inventory,\nnet \n 1,318,742  \n 1,583,726 \n\nPrepaid\nexpenses and deposits \n 503,017  \n 792,842 \n\nTotal current assets \n 2,935,003  \n 5,028,543 \n\nOperating lease asset \n 931,814  \n 1,010,545 \n\nRevenue earning devices,\nnet of accumulated depreciation of $3,257,668 and $2,292,172, respectively \n 5,097,627  \n 4,539,180 \n\nFixed assets, net of accumulated\ndepreciation of $540,426 and $491,186, respectively \n 183,185  \n 258,328 \n\nTrademarks \n 35,319  \n 33,321 \n\nInvestment at cost \n 100,000  \n 100,000 \n\nSecurity\ndeposit \n 19,280  \n 15,880 \n\nTotal\nassets \n$9,302,228  \n$10,985,797 \n\nLIABILITIES AND STOCKHOLDERS’\nDEFICIT \n    \n   \n\nCurrent liabilities: \n    \n   \n\nAccounts payable and accrued\nexpenses \n$3,007,270  \n$2,121,871 \n\nCustomer deposits \n 147,326  \n 91,578 \n\nCurrent operating lease\nliability \n 243,690  \n 197,349 \n\nCurrent portion of deferred\nvariable payment obligation \n 3,161,727  \n 1,901,258 \n\nLoan payable - related\nparty \n 461,633  \n 329,365 \n\nDeferred compensation for\nCEO \n 1,811,856  \n 2,202,600 \n\nCurrent portion of loans\npayable, net of discount of $635,774 and $0 \n 8,848,140  \n 519,105 \n\nCurrent\nportion of accrued interest payable \n 2,271,106  \n 213,555 \n\nTotal current liabilities \n 19,952,748  \n 7,576,681 \n\nNon-current operating lease\nliability \n 676,694  \n 810,513 \n\nLoans payable, net of discount\nof $0 and $360,163, respectively \n 24,188,380  \n 31,922,078 \n\nDeferred variable payment\nobligation \n 2,525,000  \n 2,525,000 \n\nIncentive compensation\nplan payable \n 5,500,000  \n 4,000,000 \n\nAccrued\ninterest payable \n 9,122,552  \n 13,680,453 \n\nTotal\nliabilities \n 61,965,374  \n 60,514,725 \n\n  \n    \n   \n\nSeries B Convertible, Redeemable Preferred\nStock. $0.001 par value; 8% cumulative dividend payable quarterly,$1,200 stated value, 5,000 shares authorized, no shares issued\nand outstanding at February 28, 2026 and February 28, 2025, respectively \n —  \n — \n\nSeries C Convertible, Redeemable Preferred\nStock. $0.001 par value; $1,200 stated value, redeemable at 109.5%, 12% dividend, 1,000 shares authorized, 417 and 306 shares issued\nand outstanding at February 28, 2026 and February 28, 2025, respectively \n 547,941  \n 402,084 \n\nConvertible, Redeemable Preferred\nStock, value \n 547,941  \n 402,084 \n\n  \n    \n   \n\nCommitments and Contingencies \n -   \n -  \n\nStockholders’ deficit: \n    \n   \n\nPreferred Stock, undesignated;\n15,534,000 shares authorized; no shares issued and outstanding at February 28, 2026 and February 28, 2025, respectively \n —  \n — \n\nSeries G Redeemable Preferred\nStock. $0.001 par value; 100,000 shares authorized, no shares issued and outstanding at February 28, 2026 and February 28, 2025,\nrespectively \n —  \n — \n\nSeries E Preferred Stock,\n$0.001 par value; 4,350,000 shares authorized; 3,350,000 and 3,350,000 shares issued and outstanding, respectively \n 3,350  \n 3,350 \n\nSeries F Convertible Preferred\nStock, $1.00 par value; 10,000 shares authorized; 2,513 and 2,513 shares issued and outstanding, respectively \n 2,513  \n 2,513 \n\nPreferred\nStock, value \n 2,513  \n 2,513 \n\nCommon Stock, $0.00001\npar value; 12,000,000,000 shares authorized 267,872,804 and 144,124,538 shares issued, issuable and outstanding, respectively \n 2,679  \n 1,441 \n\nAdditional paid-in capital \n 117,803,027  \n 106,459,528 \n\nPreferred stock to be issued \n 99,086  \n 99,086 \n\nAccumulated\ndeficit \n (171,121,742) \n (156,496,930)\n\nTotal\nstockholders’ deficit \n (53,211,087) \n (49,931,012)\n\nTotal\nliabilities and stockholders’ deficit \n$9,302,228  \n$10,985,797 \n\n \n\n**The\naccompanying notes are an integral part of these consolidated financial statements.**\n\n \n\nF-3\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**CONSOLIDATED\nSTATEMENTS OF OPERATIONS**\n\n \n\n  \nYear\nEnded\nFebruary 28,\n\n2026  \nYear\nEnded\nFebruary 28,\n\n2025 \n\n  \n   \n  \n\nRevenues \n$7,745,336  \n$6,130,886 \n\n  \n    \n   \n\nCost of goods sold \n 159,020  \n 1,334,824 \n\nDepreciation and Amortization \n 1,981,679  \n 1,051,498 \n\nLoss on disposal of revenue\nearning devices \n 70,937  \n - \n\nTotal\nCost of Goods Sold \n 2,211,636  \n 2,386,322 \n\n  \n    \n   \n\nGross Profit \n 5,533,700  \n 3,744,564 \n\n  \n    \n   \n\nOperating expenses: \n    \n   \n\nResearch and development\n(note 9) \n 4,128,155  \n 3,462,558 \n\nGeneral and administrative \n 12,933,696  \n 13,559,009 \n\nDepreciation and amortization \n 141,051  \n 429,139 \n\nLoss on disposal of fixed\nassets \n 22,312  \n — \n\nOperating\nlease cost and rent \n 251,883  \n 240,731 \n\nTotal\noperating expenses \n 17,477,097  \n 17,691,437 \n\n  \n    \n   \n\nLoss from operations \n (11,943,397) \n (13,946,873)\n\n  \n    \n   \n\nOther income (expense),\nnet: \n    \n   \n\nInterest expense \n (6,001,539) \n (5,456,981)\n\nGain\non settlement of debt \n 3,434,685  \n 468,262 \n\nTotal\nother income (expense), net \n (2,566,854) \n (4,988,719)\n\n  \n    \n   \n\nNet\nLoss \n$(14,510,251) \n$(18,935,592)\n\n  \n    \n   \n\nNet loss per share - basic \n$(0.07) \n$(0.16)\n\n  \n    \n   \n\nNet loss per share - diluted \n$(0.07) \n$(0.16)\n\n  \n    \n   \n\nWeighted average common\nshare outstanding – basic and diluted \n 202,908,578  \n 116,476,733 \n\n \n\n**The\naccompanying notes are an integral part of these consolidated financial statements.**\n\n \n\nF-4\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**CONSOLIDATED\nSTATEMENTS OF STOCKHOLDERS’ DEFICIT**\n\n**FOR\nTHE YEARS ENDED FEBRUARY 28, 2026 AND FEBRUARY 28, 2025**\n\n \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\n  \nTemporary\nEquity  \nShareholder’s\nDeficit \n\n  \nSeries B &\nC  \nSeries E  \nSeries F  \n   \n   \nAdditional  \n   \nTotal \n\n  \nPreferred\nStock  \nPreferred\nStock  \nPreferred\nStock  \nCommon\nStock  \nPaid-In  \nAccumulated  \nShareholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nDeficit  \nDeficit \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance at February 29, 2024 \n —  \n —  \n 3,350,000  \n$3,350  \n 2,533  \n$101,619  \n 92,387,510  \n$924  \n$92,656,977  \n$(132,962,427) \n$       (40,199,557)\n\nCumulative Effect Adjustment\nRFV discount per adoption of ASU 2020-06 at March 1, 2024 \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (4,175,535) \n (4,175,535)\n\nIssuance of shares, net of $701,565 issuance\ncosts \n —  \n —  \n —  \n —  \n —  \n —  \n 49,796,369  \n 498  \n 13,120,181  \n —  \n 13,120,679 \n\nDebt exchanged for common\nstock \n —  \n —  \n —  \n —  \n —  \n —  \n 1,940,659  \n 19  \n 561,981  \n —  \n 562,000 \n\nSeries F Preferred Shares\nexchanged for debt \n —  \n —  \n —  \n —  \n (20) \n (20) \n —  \n —  \n (65,793) \n (334,187) \n (400,000)\n\nIssuance of Series B Preferred\nShares \n 300  \n 360,000  \n —  \n —  \n —  \n —  \n —  \n —  \n (82,000) \n —  \n (82,000)\n\nSeries B Preferred Shares\nissued as commitment fee \n 20  \n 24,000  \n —  \n —  \n —  \n —  \n —  \n —  \n (24,000) \n —  \n (24,000)\n\nSeries B Preferred shares\nissued as dividend \n 4  \n 5,188  \n —  \n —  \n —  \n —  \n —  \n —  \n (5,188) \n —  \n (5,188)\n\nRedemption of Series B\nPreferred shares \n (324) \n (389,188) \n —  \n —  \n —  \n —  \n —  \n —  \n 89,189  \n (89,189) \n — \n\nIssuance of Series C Preferred\nShares \n 306  \n 402,084  \n —  \n —  \n —  \n —  \n —  \n —  \n (123,504) \n —  \n (123,504)\n\nStock based compensation \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n 331,685  \n —  \n 331,685 \n\nNet\nloss \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (18,935,592) \n (18,935,592)\n\nBalance at February\n28, 2025 \n 306  \n$402,084  \n 3,350,000  \n$3,350  \n 2,513  \n$101,599  \n 144,124,538  \n$1,441  \n$106,459,528  \n$(156,496,930) \n$(49,931,012)\n\n \n\n**The\naccompanying notes are an integral part of these consolidated financial statements.**\n\n \n\nF-5\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**CONSOLIDATED\nSTATEMENTS OF SHAREHOLDERS’ DEFICIT**\n\n \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\n  \nTemporary\nEquity  \nShareholder’s\nDeficit \n\n  \nSeries\nB & C  \nSeries\nE  \nSeries\nF  \n   \n   \nAdditional  \n   \nTotal \n\n  \nPreferred\nStock  \nPreferred\nStock  \nPreferred\nStock  \nCommon\nStock  \nPaid-In  \nAccumulated  \nShareholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nDeficit  \nDeficit \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance\nat February 28, 2025 \n 306  \n 402,084  \n 3,350,000  \n$3,350  \n 2,513  \n$101,599  \n 144,124,538  \n$1,441  \n$106,459,528  \n$(156,496,930) \n$      (49,931,012)\n\nIssuance\nof shares, net of $364,161 issuance costs \n —  \n —  \n —  \n —  \n —  \n —  \n 50,403,802  \n 504  \n 4,800,680  \n —  \n 4,801,184 \n\nIssuance\nof shares, net of issuance costs \n —  \n —  \n —  \n —  \n —  \n —  \n 50,403,802  \n 504  \n 4,800,680  \n —  \n 4,801,184 \n\nDebt\nexchanged for common stock \n —  \n —  \n —  \n —  \n —  \n —  \n 71,350,000  \n 714  \n 6,383,286  \n —  \n 6,384,000 \n\nConversion\nof Series C Preferred shares \n (85) \n (111,690) \n —  \n —  \n —  \n —  \n 1,994,464  \n 20  \n 196,360  \n (84,690) \n 111,690 \n\nCash\nredemption of Series C shares \n (95) \n (125,000) \n —  \n —  \n —  \n —  \n —  \n —  \n 29,871  \n (29,871) \n — \n\nSeries\nC Preferred shares issued as dividend \n 44  \n 58,100  \n —  \n —  \n —  \n —  \n —  \n —  \n (58,100) \n —  \n (58,100)\n\nPenalty\non failure to redeem Series C Preferred shares \n 114  \n 149,307  \n —  \n —  \n —  \n —  \n —  \n —  \n (149,307) \n —  \n (149,307)\n\nPenalty\non failure to convert Series C Preferred shares \n 133  \n 175,140  \n —  \n —  \n —  \n —  \n —  \n —  \n (175,140) \n —  \n (175,140)\n\nStock\nbased compensation \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n 315,849  \n —  \n 315,849 \n\nNet\nloss \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (14,510,251) \n (14,510,251)\n\nBalance\nat February 28, 2026 \n 417  \n$547,941  \n 3,350,000  \n$3,350  \n 2,513  \n$101,599  \n 267,872,804  \n$2,679  \n$117,803,027  \n$(171,121,742) \n$(53,211,087)\n\n \n\n**The\naccompanying notes are an integral part of these consolidated financial statements.**\n\n \n\nF-6\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**CONSOLIDATED\nSTATEMENTS OF CASH FLOWS**\n\n \n\n  \nYear\nEnded\nFebruary 28,\n\n2026  \nYear\nEnded\nFebruary 28,\n\n2025 \n\nCASH FLOWS FROM OPERATING\nACTIVITIES: \n    \n   \n\nNet loss \n$(14,510,251) \n$(18,935,592)\n\nAdjustments to reconcile net loss to net cash\nused in operating activities: \n    \n   \n\nDepreciation and amortization \n 2,122,730  \n 1,480,636 \n\nInventory provision (recovery) \n (290,000) \n (494,000)\n\nBad debts expense \n 138,405  \n 83,682 \n\nReduction of right of use\nasset \n 141,217  \n 119,151 \n\nAccretion of lease liability \n 103,956  \n 118,502 \n\nStock based compensation \n 1,815,848  \n 1,831,685 \n\nAmortization of debt discounts \n 536,078  \n 271,234 \n\nPenalty added to face value\nof the loan \n 24,510  \n — \n\nGain on settlement of debt \n (3,434,685) \n (468,262)\n\nLoss on disposal of revenue\nearning devices and fixed assets \n 93,249  \n — \n\nIncrease in related party\naccrued payroll and interest \n 132,268  \n 71,927 \n\nChanges in operating assets\nand liabilities: \n    \n   \n\nAccounts receivable \n 224,725  \n (694,929)\n\nPrepaid expenses \n 294,264  \n (160,393)\n\nDeposit on right of use\nasset \n (13,187) \n — \n\nSecurity deposit on operating\nlease \n (3,400) \n — \n\nDevice parts inventory \n (2,133,437) \n (2,464,468)\n\nAccounts payable and accrued\nexpenses \n 879,021  \n 505,068 \n\nDeferred compensation for\nCEO \n (390,744) \n 1,663,833 \n\nCustomer deposits \n 55,748  \n 17,876 \n\nOperating lease liability\npayments \n (238,792) \n (225,413)\n\nCurrent portion of deferred\nvariable payment obligations for Payments \n 1,260,469  \n 996,881 \n\nAccrued\ninterest payable \n 3,847,474  \n 4,086,194 \n\nNet\ncash used in operating activities \n (9,344,534) \n (12,196,388)\n\n  \n    \n   \n\nCASH FLOWS FROM INVESTING\nACTIVITIES: \n    \n   \n\nPurchase of fixed assets \n (10,863) \n (23,724)\n\nPurchase of trademarks \n (1,998) \n (6,241)\n\nPurchase\nof investment (convertible note receivable) \n —  \n (50,000)\n\nNet\ncash used in investing activities \n (12,861) \n (79,965)\n\n  \n    \n   \n\nCASH FLOWS FROM FINANCING\nACTIVITIES: \n    \n   \n\nShare proceeds net of issuance\ncosts \n 5,219,853  \n 12,702,010 \n\nProceeds on issuance of\nSeries B Preferred Shares \n —  \n 278,000 \n\nRedemption of Series B\nor Series C Preferred Shares \n (125,000) \n (389,188)\n\nProceeds on issuance of\nSeries C Preferred Shares \n —  \n 278,580 \n\nProceeds from loans payable \n 4,808,171  \n 350,000 \n\nRepayment\nof loans payable \n (1,302,561) \n (183,000)\n\nNet\ncash provided by financing activities \n 8,600,463  \n 13,036,402 \n\n  \n    \n   \n\nNet change in cash \n (756,932) \n 760,049 \n\n  \n    \n   \n\nCash, beginning of period \n 865,975  \n 105,926 \n\n  \n    \n   \n\nCash, end of period \n$109,043  \n$865,975 \n\n  \n    \n   \n\nSupplemental disclosure of cash and non-cash\ntransactions: \n    \n   \n\nCash\npaid for interest \n$188,993  \n$94,517 \n\nCash\npaid for income taxes \n$—  \n$— \n\n  \n    \n   \n\nNoncash investing and financing activities: \n    \n   \n\nCumulative\nEffect Adjustment RFV discount per adoption of ASU 2020-06 at March 1, 2024 \n$—  \n$4,175,535 \n\nRight\nof use asset for lease liability \n$53,739  \n$— \n\nTransfer\nfrom device parts inventory to fixed assets \n$2,688,421  \n$3,506,341 \n\nSeries\nC penalty shares issued \n$324,447  \n — \n\n  \n    \n   \n\nDiscount\napplied to face value of loans \n$811,689  \n$— \n\n  \n    \n   \n\nExchange\nof Series F Preferred Shares for loans payable \n$—  \n$400,000 \n\nExchange\nof loans payable and accrued interest for common shares \n$6,484,000  \n$562,000 \n\nConvertible\nnote receivable exchanged for investment at cost \n$—  \n$50,000 \n\nDividend\non Series B or Series C Preferred Shares paid in Series B or Series C Preferred Shares \n$58,100  \n$5,188 \n\n \n\n**The\naccompanying notes are an integral part of these consolidated financial statements.**\n\n \n\nF-7\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**1.\nGENERAL INFORMATION AND GOING CONCERN**\n\n \n\nArtificial\nIntelligence Technology Solutions Inc. (formerly known as On the Move Systems Corp.) (“AITX” or the “Company”)\nwas incorporated in Florida on March 25, 2010 and reincorporated in Nevada on February 17, 2015. On August 24, 2018, Artificial Intelligence\nTechnology Solutions Inc., changed its name from On the Move Systems Corp (“OMVS”).\n\n \n\nRobotic\nAssistance Devices, LLC (“RAD”), was incorporated in the State of Nevada on July 26, 2016 as a LLC. On July 25, 2017, Robotic\nAssistance Devices LLC converted to a C Corporation, Robotic Assistance Devices, Inc. through the issuance of 10,000 common shares to\nits sole shareholder.\n\n \n\nOn\nAugust 28, 2017, AITX completed the acquisition of RAD (the “Acquisition”), whereby AITX acquired all the ownership and equity\ninterest in RAD for 3,350,000 shares of AITX Series E Preferred Stock and 2,450 shares of Series F Convertible Preferred Stock. AITX’s\nprior business focus was transportation services, and AITX was exploring the on-demand logistics market by developing a network of logistics\npartnerships. As a result of the closing of the Acquisition, AITX has succeeded to the business of RAD, in which AITX purchased all of\nthe outstanding shares of capital stock of RAD. As a result, AITX’s business going forward will consist of one segment activity\nwhich is the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs.\n\n \n\nThe\nAcquisition was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since\nsubstantially all of AITX’s operations were disposed of as part of the consummation of the transaction. Therefore, no goodwill\nor other intangible assets were recorded by AITX as a result of the Acquisition. RAD is treated as the accounting acquirer as its stockholders\ncontrol the Company after the Acquisition, even though AITX was the legal acquirer. As a result, the assets and liabilities and the historical\noperations that are reflected in these financial statements are those of RAD as if RAD had always been the reporting company.\n\n \n\n**GOING\nCONCERN**\n\n \n\nThe\naccompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying\nfinancial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of\nassets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a\ngoing concern.\n\n \n\nFor\nthe year ended February 28, 2026, the Company had negative cash flow from operating activities of $9,344,534. As of February 28, 2026\nthe Company has an accumulated deficit of $171,121,742 and negative working capital of $17,017,745. Management does not anticipate having\npositive cash flow from operations in the near future. These factors raise substantial doubt about the Company’s ability to continue\nas a going concern for the twelve months following the issuance of these financial statements.\n\n \n\nThe\nCompany does not have the resources at this time to repay all its credit and debt obligations, make any payments in the form of dividends\nto its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.\nAt the same time management points to its successful history with maintaining Company operations and reminds all with reasonable confidence\nthis will continue. Management has plans to address the Company’s financial situation as follows:\n\n \n\nManagement\nis committed to raise funds either through convertible debt or equity financing.. There is no assurance that these funds will be able\nto be raised nor can we provide assurance that these possible raises may not have dilutive effects. In May 2026, the Company entered\ninto an equity financing agreement whereby an investor will purchase up to $10,000,000 of the Company’s common stock at a discount\nover a three-year period. There remains approximately $10 million left to issue under this arrangement. Management believes that it has\nthe necessary support to continue operations by continuing its funding methods in the following ways : growing revenues ,through equity\nproceeds, and issuing debt.\n\n \n\nF-8\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**2.\nACCOUNTING POLICIES**\n\n \n\n**Basis\nof Presentation and Consolidation**\n\n \n\nThe\naccompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States\n(“GAAP”) and in conformity with the instructions on Form 10-K of Regulation S-X and the related rules and regulations of\nthe Securities and Exchange Commission (“SEC”). The audited consolidated financial statements include the accounts of the\nCompany and its wholly owned subsidiaries, Robotic Assistance Devices, Inc., Robotic Assistance Devices Group, Inc, Robotic Assistance\nDevices Mobile, Inc., Robotic Assistance Devices Residential, Inc. All significant intercompany accounts and transactions have been eliminated\nin consolidation.\n\n \n\n**Use\nof Estimates**\n\n \n\nIn\norder to prepare financial statements in conformity with accounting principals generally accepted in the United States, management must\nmake estimates, judgements and assumptions that affect the amounts reported in the financial statements and determine whether contingent\nassets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates\nand assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements\nare based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions\nused to value equity instruments used in debt settlements, amendments and extensions.\n\n \n\n**Reclassifications**\n\n \n\nCertain\namounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period\npresentation. These reclassifications have not changed the results of operations of prior periods.\n\n \n\n**Concentrations\nof Loans Payable**\n\n \n\nAt\nFebruary 28, 2026 there were $33,672,294 loans payable, $32,178,506 or 96% of these loans to companies controlled by one individual.\nAt February 28, 2025 there were $32,801,345 loans payable, $28,581,506 or 87% of these loans to companies controlled by one individual..\n\n \n\n**Cash**\n\n \n\nThe\nCompany considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash\nequivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with\nhigh-quality, U.S. financial institutions which, at times, may exceed federally insured limits, and, to date has not experienced losses\non any of its balances.\n\n \n\nF-9\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Accounts\nReceivable**\n\n \n\nAccounts\nreceivable are comprised of balances due from customers, net of estimated allowances for credit losses. In determining collectability,\nhistorical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. There\nwas an allowance of $170,000 and $140,000 provided as of February 28, 2026 and February 28, 2025, respectively. For the year ended February\n28, 2026, two customer account for 31% of total accounts receivable . For the year ended February 28, 2025, one customer accounts for\n52% of total accounts receivable.\n\n** **\n\n**Device\nParts Inventory**\n\n \n\nDevice\nparts inventory is stated at the lower of cost or net realizable value using the weighted average cost method. The Company records a\nvaluation reserve for obsolete and slow-moving inventory, relying principally on specific identification of such inventory. The Company\nuses these device parts in the assembly of revenue earning devices (and demo devices) as well as research and development. Depending\non use, the Company will transfer the parts to the corresponding asset or expense if used in research and development. A charge to income\nis taken when factors that would result in a need for an increase in the valuation, such as excess or obsolete inventory, are noted.\nAt February 28, 2026 and at February 28, 2025 there was a valuation reserve of $175,000 and $465,000, respectively.\n\n \n\n**Revenue\nEarning Devices**\n\n \n\nRevenue\nearning devices are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of 48 months. The\nCompany continually evaluates revenue earning devices to determine whether events or changes in circumstances have occurred that may\nwarrant revision of the estimated useful life or whether the devices should be evaluated for possible impairment. The Company uses a\ncombination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired. The Company measures\nimpairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value.\n\n \n\n**Fixed\nAssets**\n\n \n\nFixed\nassets are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective\nassets which range from three to five years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs\nwhich do not improve or extend asset lives are expensed currently.\n\nSCHEDULE OF FIXED ASSETS STATED AT COST \n\nComputer\nequipment\n \n3\nyears\n\nFurniture\nand fixtures\n \n3\nyears\n\nOffice\nequipment\n \n4\nyears\n\nWarehouse\nequipment\n \n5\nyears\n\nDemo\nDevices\n \n4\nyears\n\nVehicles\n \n3\nyears\n\nLeasehold\nimprovements\n \n5\nyears, the life of the lease\n\n \n\nThe\nCompany periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying\namounts may not be recoverable. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are\nremoved from the accounts and the resulting gain or loss, if any, is recognized in income.\n\n \n\nF-10\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Research\nand Development**\n\n \n\nResearch\nand development costs are expensed in the period they are incurred in accordance with ASC 730, *Research and Development* unless\nthey meet specific criteria related to technical, market and financial feasibility, as determined by Management, including but not limited\nto the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.\nIf all criteria are met, the costs are deferred and amortized over the expected useful life or written off if a product is abandoned.\nAt February 28, 2026 and February 28, 2025, the Company had no deferred development costs.\n\n \n\n**Contingencies**\n\n \n\nOccasionally,\nthe Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision\nfor a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.\nIf these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated\nfinancial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments\nabout future events and can rely heavily on estimates and assumptions.\n\n \n\n**Sales\nof Future Revenues**\n\n \n\nThe\nCompany has entered into transactions, as more fully described in footnote 10, in which it has received funding from investors in exchange\nfor which it will make payments to those investors based on the level of sales of certain revenue categories, generally based on a percentage\nof sales for those certain revenues. The Company determines whether these agreements constitute sales of future revenues or are in substance\ndebt based on the facts and circumstances of each agreement, with the following primary criteria determinative of whether the agreement\nconstitutes a sale of future revenues or debt:\n\n \n\n \n●\nDoes\nthe agreement purport, in substance, to be a sale\n\n \n \n \n\n \n●\nDoes\nthe Company have continuing involvement in the generation of cash flows due the investor\n\n \n \n \n\n \n●\nIs\nthe transaction cancellable by either party through payment of a lump sum or other transfer of assets\n\n \n \n \n\n \n●\nIs\nthe investors rate of return implicitly limited by the terms of the agreement\n\n \n \n \n\n \n●\nDoes\nthe Company’s revenue for a reporting period underlying the agreement have only a minimal impact on the investor’s rate\nof return\n\n \n \n \n\n \n●\nDoes\nthe investor have recourse relating to payments due\n\n \n\nIn\nthe event a transaction is determined to be a sale of future revenues, it is recorded as deferred revenue and amortized using the sum-of-the-revenue\nmethod. In the event a transaction is determined to be debt, it is recorded as debt and amortized using the effective interest method.\nAs of the date of these financial statements, the Company has determined that all such agreements are debt.\n\n \n\nF-11\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Revenue\nRecognition**\n\n \n\nASU\n2014-09, *“Revenue from Contracts with Customers (Topic 606)”*, supersedes the revenue recognition requirements and\nindustry specific guidance under *Revenue Recognition (Topic 605)*. Topic 606 requires an entity to recognize revenue when it transfers\npromised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange\nfor those goods or services. Topic 606 defines a five-step process that must be evaluated and, in doing so, it is possible more judgment\nand estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted\nin the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the\namount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance\nobligation.. For the year ended February 28, 2026, two customers accounted for 55% of total revenue and for the year ended February 28,\n2025, one customer accounted for 55% of total revenue (see Note-3).\n\n \n\n**Income\nTaxes**\n\n \n\nIncome\ntaxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income\nand expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets\narise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax\nreturn prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset\ntax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before\nthe tax returns or when expenses are recognized in the tax return prior to the financial statements. Deferred tax assets and liabilities\nare measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected\nto be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the\nperiod that includes the enactment date.\n\n \n\nOn\nDecember 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires\ncompanies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects\nof changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued\nbased on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance,\nand any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward\nand valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial\nresults, including disclosures, for the Company’s fiscal year ending February 28, 2026, but the Company does not expect the Tax\nAct to have a material impact on the Company’s consolidated financial statements.\n\n \n\n**Leases**\n\n \n\nLease\nagreements are evaluated to determine if they are sales/finance leases meeting any of the following criteria at inception: (a) transfer\nof ownership of the underlying asset; (b) purchase option that is reasonably certain of being exercised; (c) the lease term is greater\nthan a major part of the remaining estimated economic life of the underlying asset; or (d) if the present value of the sum of lease payments\nand any residual value guaranteed by the lessee that has not already been included in lease payments in accordance with ASC 842-10-30-5(f)\nequals or exceeds substantially all of the fair value of the underlying asset.\n\n \n\nIf\nat its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a sales/finance; and\nif none of the four criteria are met, the lease is classified by the Company as an operating lease.\n\n \n\nF-12\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nOperating\nlease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount\nof rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally\nresults in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the\nlater years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.\n\n \n\n**Distinguishing\nLiabilities from Equity**\n\n \n\nThe\nCompany relies on the guidance provided by ASC Topic 480, *Distinguishing Liabilities from Equity*, to classify certain redeemable\nand/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The\nCompany will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument,\nother than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of\nits equity shares.\n\n \n\nOnce\nthe Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial\ninstrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”).\nThe Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the\nCompany (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.\n\n \n\nOur\nCEO and Chairman holds sufficient shares of the Company’s voting stock that give sufficient voting rights under the articles of\nincorporation and bylaws of the Company such that the CEO and Chairman can at any time unilaterally vote to increase the number of authorized\nshares of common stock of the Company without the need to call a general meeting of common shareholders of the Company.\n\n \n\n*Initial\nMeasurement*\n\n \n\nThe\nCompany records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value,\nor cash received.\n\n \n\n*Subsequent\nMeasurement – Financial Instruments Classified as Liabilities*\n\n \n\nThe\nCompany records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes\nin fair value of its financial instruments classified as liabilities are recorded as other income (expenses).\n\n \n\n**Fair\nValue of Financial Instruments**\n\n \n\nASC\nTopic 820, *Fair Value Measurements and Disclosures* (“ASC Topic 820”) provides a framework for measuring fair value\nin accordance with generally accepted accounting principles.\n\n \n\nASC\nTopic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction\nbetween market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1)\nmarket participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s\nown assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable\ninputs).\n\n \n\nF-13\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nThe\nfair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for\nidentical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value\nhierarchy under ASC Topic 820 are described as follows:\n\n \n\n \n●\nLevel\n1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.\n\n \n \n \n\n \n●\nLevel\n2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly\nor indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical\nor similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset\nor liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.\n\n \n \n \n\n \n●\nLevel\n3 – Inputs that are unobservable for the asset or liability.\n\n \n\n*Measured\non a Recurring Basis*\n\n \n\nThe\nfollowing table presents information about our assets and liabilities measured at fair value on a recurring basis, aggregated by the\nlevel in the fair value hierarchy within which those measurements fell:\n\nSCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE \n\n  \nAmount\nat  \nFair\nValue Measurement Using \n\n  \nFair\nValue  \nLevel\n1  \nLevel\n2  \nLevel\n3 \n\nFebruary 28, 2026 \n    \n    \n    \n   \n\nAssets \n    \n    \n    \n   \n\nInvestment\nat cost \n$100,000  \n$50,000  \n$—  \n$50,000 \n\nLiabilities \n    \n    \n    \n   \n\nIncentive\ncompensation plan payable – revaluation of equity awards payable in Series G shares \n$5,500,000  \n$—  \n$—  \n$5,500,000 \n\n  \n    \n    \n    \n   \n\nFebruary 28, 2025 \n    \n    \n    \n   \n\nLiabilities \n    \n    \n    \n   \n\nIncentive\ncompensation plan payable – revaluation of equity awards payable in Series G shares \n$4,000,000  \n$—  \n$—  \n$4,000,000 \n\n \n\nFor\nthe incentive compensation plan , the Company recorded stock based compensation of $1,500,000 and $1,500,000 for the years ended February\n28, 2026 and February 28, 2025 with corresponding adjustments to incentive compensation plan payable.\n\n \n\nThe\nmethod of valuation of the incentive compensation plan payable is based on the redemption value of the Series G Preferred Shares. The\nmethod of valuation of the Level 3 investment at cost is an independent third party valuation of the common share value of the investment.\n\n \n\nThe\ncarrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and advances,\naccounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.\n\n \n\n**Earnings\n(Loss) per Share**\n\n \n\nBasic\nearnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator)\nby the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential\ncommon shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.\nIn computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from\nthe exercise of stock options and/or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.\n\n \n\nF-14\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nBasic\nloss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share\nis computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to\ninclude all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments.\nDiluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in\nnature with regards to earnings per share.\n\n \n\n**Recently\nAdopted Accounting Pronouncements**\n\n** **\n\n**ASU\n2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures**\n\n \n\nIn\nNovember 2023, the FASB issued ASU 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*. The\namendments require enhanced disclosures about significant segment expenses and other segment items, require disclosure of the title and\nposition of the chief operating decision maker (“CODM”), explain how the CODM uses reported measures of segment profit or\nloss to assess performance and allocate resources, and expand interim disclosure requirements. The amendments apply to entities with\na single reportable segment as well as entities with multiple reportable segments.\n\n \n\nThe\nCompany adopted ASU 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*, during fiscal 2025.\nThe standard requires enhanced disclosures regarding segment expenses and CODM information and applies to entities with a single reportable\nsegment. Adoption of the standard impacted the Company’s segment reporting disclosures only and did not affect its consolidated\nfinancial position, results of operations, or cash flows.\n\n** **\n\n**Recently\nissued accounting pronouncement not yet effective**\n\n** **\n\n**ASU\n2024-04—Debt with Conversion and Other Options (Topic 470-20): Induced Conversions of Convertible Debt Instruments**\n\n \n\nIn\nNovember 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-04, *Debt with Conversion and Other Options\n(Subtopic 470-20): Induced Conversions of Convertible Debt Instruments*. The amendments clarify the requirements for determining whether\ncertain settlements of convertible debt instruments should be accounted for as induced conversions or as debt extinguishments. Under\nthe amended guidance, an induced conversion requires that the inducement offer provide the holder, at a minimum, the consideration issuable\nunder the existing conversion privileges of the instrument.\n\n \n\nThe\namendments are effective for annual reporting periods beginning after December 15, 2025, including interim reporting periods within those\nfiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on\nits consolidated financial statements and related disclosures.\n\n** **\n\n**ASU\n2025-05—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract\nAssets**\n\n \n\nIn\nJuly 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-05, *Financial Instruments—Credit Losses\n(Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets*. The amendments refine the guidance in ASC\n326 related to the measurement of expected credit losses for accounts receivable and contract assets arising from revenue transactions\naccounted for under ASC 606. The update clarifies the application of the current expected credit loss (“CECL”) model to such\nassets, including the use of practical expedients and considerations in estimating expected credit losses over the contractual term of\nthe asset.\n\n \n\nThe\namendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal\nyears, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-05 on its consolidated financial\nstatements and related disclosures.\n\n \n\n**3.\nREVENUE FROM CONTRACTS WITH CUSTOMERS**\n\n \n\nRevenue\nis earned primarily from two sources: 1) direct sales of goods or services and 2) short-term rentals. Direct sales of goods or services\nare accounted for under Topic 606, , and short-term rentals are accounted for under Topic 842 (which addresses lease accounting and was\nadopted on March 1, 2019).\n\n \n\nAs\ndisclosed in the revenue recognition section of Note 2 – Accounting Polices, the Company adopted Topic 606 in accordance with the\neffective date on March 1, 2018. Note 2 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s\nfinancial statements. Revenue is recognized on direct sales of goods or services when it transfers promised goods or services to customers\nin an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.\n\n \n\nF-15\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nAfter\nadopting Topic 842, also referred to above in Note 3, the Company is accounting for revenue earned from rental activities where an identified\nasset is transferred to the customer and the customer has the ability to control that asset. The Company recognizes revenue from its\ndevice rental activities when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction\nprice is fixed or determinable and collection is reasonably assured. Performance obligations associated with device rental transactions\nare satisfied over the rental period. Rental periods are short-term in nature. Therefore, the Company has elected to apply the practical\nexpedient which eliminates the requirement to disclose information about remaining performance obligations. Payments are due from customers\nat the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced\nand remain as accounts receivable until collected.\n\n \n\nThe\nfollowing table presents revenues from contracts with customers disaggregated by product/service:\n\nSCHEDULE OF REVENUES FROM CONTRACTS WITH CUSTOMERS \n\n  \nYear\nEnded\nFebruary 28,\n\n2026  \nYear\nEnded\nFebruary 28,\n\n2025 \n\nDevice rental activities \n$6,920,336  \n$5,050,255 \n\nDirect sales of goods\nand services \n 825,000  \n 1,080,631 \n\nRevenue \n$7,745,336  \n$6,130,886 \n\n \n\nThe\nCompany operates as one reportable segment The Chief Executive Officer (“CEO”) serves as the Chief Operating Decision Maker\n(“CODM”). The CODM evaluates the Company’s performance based on consolidated net income. This measure aligns with the\nCompany’s consolidated financial statements and serves as the basis for resource allocation and performance assessment. The measure\nof segment assets is reported on the balance sheet as total consolidated assets. The CODM monitors profitability and strategic growth\ninitiatives on a consolidated basis, without disaggregating profit or loss into separate operating segments. The Company determined there\nare no significant segment expenses that require a separate disclosure. The consolidated net income is used to assess overall company\nperformance, benchmark against industry standards, and identify profitability trends, which guides resource allocation and investment\nin expansion and program upgrades. The CODM also evaluates company performance using operating income. Operating income provides the\nCODM with a focused view of the Company’s profitability excluding the effects of financing activities, tax strategies, and other\nnon-operating items. This measure enables the CODM to assess operational efficiency, monitor performance trends, and evaluate the effectiveness\nof strategies aimed at revenue generation and cost management.\n\n \n\n**4.\nLEASES**\n\n \n\nWe\nlease certain warehouses, and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we\nrecognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed\nafter the adoption of Topic 842, we did not combine lease and non-lease components.\n\n \n\nThere\nis no lease renewal. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is\na transfer of title or purchase option reasonably certain of exercise.\n\n \n\nBelow\nis a summary of our lease assets and liabilities at February 28, 2026 and February 28, 2025.\n\nSCHEDULE OF LEASE ASSETS AND LIABILITIES \n\nLeases \nClassification \nFebruary\n28,\n\n2026  \nFebruary\n28,\n\n2025 \n\nAssets \n  \n    \n   \n\nOperating \nOperating\nLease Assets \n$931,814  \n$1,010,545 \n\nLiabilities \n  \n    \n   \n\nCurrent \n  \n    \n   \n\nOperating \nCurrent Operating Lease Liability \n$243,690  \n$197,349 \n\nNoncurrent \n  \n    \n   \n\nOperating \nNoncurrent Operating Lease\nLiabilities \n 676,694  \n 810,513 \n\nTotal lease liabilities \n  \n$920,384  \n$1,007,862 \n\n \n\nNote:\nAs most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 10% which for the leases noted above\nwas based on the information available at commencement date in determining the present value of lease payments. We compare against loans\nwe obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly\nhigher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM\ncharges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.\n\n \n\nF-16\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nOperating\nlease cost and rent was $251,883 and $240,731 for both the twelve months ended February 28, 2026 and February 28, 2025, respectively.\n\n \n\n**5.\nINVESTMENT**\n\n \n\nOn\nDecember 23, 2022 the Company entered into a Simple Agreement for Future Equity (SAFE) contract to invest $50,000 to acquire shares of\na company’s capital stock at a discount. On June 3, 2024 the Company acquired a $50,000 convertible note receivable from Nightingale\nIntelligent Systems, Inc., a private Delaware corporation that provides unmanned aerial vehicles\n(UAV) for commercial applications. On January 3, 2025 the Company exchanged it’s convertible note receivable for : 1,770,840 Series\nA preferred shares, 15,000 common shares and 165,000 common share warrants. On February 28, 2025, there was a 10 :1 split. The Company\nnow holds 177,084 Series A preferred shares, 1,500 common shares and 16,500 common share warrants (at a strike price of $0.80/share).\nThe Company values the Nightingale Intelligent Systems, Inc.’s shares and warrants\nat $50,000 bringing total investments at cost to $100,000 at February 28, 2026.\n\n \n\n**6.\nREVENUE EARNING DEVICES**\n\n \n\nRevenue\nearning devices (RED) consisted of the following:\n\n SCHEDULE OF REVENUE EARNING DEVICES \n\n  \nFebruary\n28,\n\n2026  \nFebruary\n28,\n\n2025 \n\nRevenue earning devices \n$8,355,295  \n$6,831,352 \n\nLess: Accumulated depreciation \n (3,257,668) \n (2,292,172)\n\nTotal \n$5,097,627  \n$4,539,180 \n\n \n\nDuring\nthe year ended February 28, 2026, the Company made total additions to revenue earning devices of $2,632,720 which were transferred from\ninventory. For the year ended February 28, 2026, the Company disposed of assets with a value $1,108,776 and related accumulated depreciation\n$1,037,839 with a net book value of $70,937 for zero net proceeds..\n\n \n\nDuring\nthe year ended February 28, 2025, the Company made total additions to revenue earning devices of $3,398,505 which were transferred from\ninventory. There was no permanent impairment on revenue earning services for the year ended February 28, 2025.\n\n \n\nDepreciation\nand amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:\n\n SCHEDULE OF DEPRECIATION AND AMORTIZATION\n\nDepreciation\nand Amortization RED \nYear\nEnded\n\nFebruary 28,\n\n2026  \nYear\nEnded\n\nFebruary 28,\n\n2025 \n\n  \n   \n  \n\nCost of Goods Sold \n$1,981,679  \n$1,051,498 \n\nOperating expenses \n 91,811  \n 287,830 \n\nTotal Depreciation and\nAmortization RED \n$2,073,490  \n$1,339,328 \n\n \n\nF-17\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**7.\nFIXED ASSETS**\n\n \n\nFixed\nassets consisted of the following:\n\n  SCHEDULE OF FIXED ASSETS\n\n  \nFebruary\n28,\n\n2026  \nFebruary\n28,\n\n2025 \n\nAutomobile \n$74,237  \n$74,237 \n\nDemo devices \n 265,421  \n 302,186 \n\nTooling \n 107,020  \n 107,020 \n\nMachinery and equipment \n 17,246  \n 8,825 \n\nComputer equipment \n 157,448  \n 157,448 \n\nOffice equipment \n 15,312  \n 15,312 \n\nFurniture and fixtures \n 21,225  \n 21,225 \n\nWarehouse equipment \n 38,746  \n 36,305 \n\nLeasehold improvements \n 26,956  \n 26,956 \n\nFixed assets gross \n 723,611  \n 749,514 \n\nLess: Accumulated depreciation \n (540,426) \n (491,186)\n\nFixed assets, net of\naccumulated depreciation \n$183,185  \n$258,328 \n\n \n\nDuring\nthe year ended February 28, 2026, the Company made additions to fixed assets of $10,863 and also additions through inventory transfers\nof $55,701. For the year ended February 28, 2026, the Company disposed of assets with a value $92,466 and related accumulated depreciation\n$70,154 with a net book value of $22,312 for zero net proceeds.\n\n \n\nDuring\nthe year ended February 28, 2025, the Company made additions to fixed assets of $23,724 and also additions through inventory transfers\nof $107,836.\n\n \n\nDepreciation\nand amortization for the years ended February 28, 2026, and February 28, 2025, are as follows:\n\n \n\nSCHEDULE OF DEPRECIATION AND AMORTIZATION IN OPERATING EXPENSES\n\nDepreciation\nand Amortization \nYear\nEnded\n\nFebruary 28,\n\n2026  \nYear\nEnded\n\nFebruary 28,\n\n2025 \n\n  \n   \n  \n\nFixed assets \n$49,240  \n$141,309 \n\nRevenue earning devices \n 91,811  \n 287,830 \n\nTotal Depreciation and\nAmortization included in operating expenses \n$141,051  \n$429,139 \n\n \n\n \n\nF-18\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**8.\nDEFERRED VARIABLE PAYMENT OBLIGATION**\n\n \n\nOn\nFebruary 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 in exchange for\na perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses\nfrom financial instruments (Revenues). At February 29, 2020 the investor has advanced the full $900,000.\n\n \n\nOn\nMay 9, 2019 the Company entered into two similar arrangements with two investors:\n\n \n\n \n(1)\nThe\ninvestor would pay up to $400,000 in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues.\nAt February 29, 2020, $400,000 has been paid to the Company.\n\n \n \n \n\n \n(2)\nThe\ninvestor would pay up to $50,000 in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues.\nAt February 29, 2020, $50,000 has been paid to the Company.\n\n \n\nThese\nvariable payments (Payments) are to be made 30 days after the end of each fiscal quarter. If the Payments would deplete RAD’s available\ncash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum\non the unpaid amount.\n\n \n\nIn\nthe event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market\nvalue (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors.\nThe FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments\nassociated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect\na change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of\nthe share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments.\n\n \n\nOn\nNovember 18, 2019 the Company entered into another similar arrangement with the (February 1, 2019) investor above whereby the investor\nwould advance up to $225,000 in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues (commencing on\nquarter ending May 31, 2020). At February 29, 2020 the investor has advanced $109,000 and the investor advanced the $116,000 remainder\nas of May 2020.\n\n \n\nOn\nDecember 30, 2019 the Company entered into another similar arrangement with a new investor whereby the investor would advance up to $100,000\nin exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues (commencing quarter ended November 30, 2020).\nAt February 29, 2020 the investor has advanced $50,000 with the remainder to be advanced no later than June 30, 2020. If the total investor\nadvances turns out to be less than $100,000, this would not constitute a breach of the agreement, rather the 1.00% rate would be adjusted\non a pro-rata basis.\n\n \n\nOn\nApril 22, 2020 the Company entered into another similar arrangement with the (first May 9, 2019) investor above whereby the investor\nwould advance up to $100,000 in exchange for a perpetual 1.00% rate Payment on the Company’s quarterly Revenues. At May 31, 2020\nthe investor has fully funded this commitment.\n\n \n\nOn\nJuly 1, 2020 the Company entered into a similar agreement with the first investor whereby the investor would pay up to $800,000 in exchange\nfor a perpetual 2.75% rate payment (Payment) on the Company’s reported quarterly revenue. These Payments are to be made 90 days\nafter the fiscal quarter with the first payment being due no later than May 31, 2021. If the Payments would deplete RAD’s available\ncash by more than 20%, the payment may be deferred. The investor had agreed to pay $100,000 per month over an 8 month period with the\nfirst payment due July 2020 and the final payment no later than February 28, 2021. As at August 31, 2020 the investor had fully funded\nthe $800,000 commitment\n\n \n\nF-19\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nOn\nAugust 27, 2020 the Company and the first investor referred to above consolidated the three separate agreements of February 1, 2019 for\n$900,000, November 18, 2019 for $225,000 and July 1, 2020 for $800,000 into a new agreement for a total of $1,925,000. This new agreement\nis for similar terms as the above agreements save for the following: the rate payment is revised to 14.25% payable on revenues commencing\nthe quarter ended August 31, 2020 and the Payments are secured by the assets of the Company. This interest may be secured by UCC filing\nbut is subordinated to equipment financing on the products the Company leases to its customers.\n\n \n\nIn\nsummary of all agreements mentioned above if in the event that at least 10% of the assets of the Company are sold by the Company, the\ninvestors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an\nindependent valuator to be chosen by the investors. The FMV cannot exceed 43.77% of the total asset disposition price defined as the\ntotal price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares\nare sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments\nin one lump payment. The FMV cannot exceed 43.77% of the share disposition price defined as the total price the third party paid for\nthe shares plus the total value of all future Payments. As of March 1, 2021 as a result of the amendment with the first investor noted\nbelow. This aggregate asset disposition % was reduced from 43.77 % to 33.77%\n\n \n\nThe\nPayments will first become payable on June 30, 2019 (unless otherwise indicated) based on the quarterly Revenues for the quarter ended\nMay 31, 2019 and will accrue every quarter thereafter. As of February 28, 2026, the Company has accrued approximately $3,161,727 in Payments,\nof which $1,901,259 is in arrears. As of February 28, 2025, the Company has accrued approximately $1,901,258 in Payments, of which $904,377\nis in arrears No notices have been received by the Company.\n\n \n\nOn\nMarch 1, 2021 the first investor referred to above whose aggregate investment is $1,925,000 revised his agreements as follows:\n\n \n\n \n1)\nThe\nrate payment was reduced from 14.25 % to 9.65 %\n\n \n2)\nThe\nasset disposition % (see below) was reduced from 31 % to 21%\n\n \n\nIn\nconsideration for the above changes, the investor received 40 Series F Convertible Preferred Stock and a warrant to purchase 367 shares\nof its Series F Convertible Preferred Stock with a five5-year term and an exercise price of $1.00. During the three months ended May 31,\n2021 the warrant holder exercised warrants to acquire 38 shares of Series F Convertible Preferred Stock. The company attributed a fair\nvalue based on recent transactions for the Series F Preferred stock and warrants of $33,015,214 and recorded a loss on settlement of\ndebt with a corresponding adjustment to paid in capital.\n\n \n\nThe\nCompany retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be\nmade to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements.\nAs of February 28, 2026, and February 28, 2025, the long-term balances other than Payments already owed is the cash received of $2,525,000\nand $2,525,000, respectively.\n\n \n\nFor\nboth the years ended February 28, 2026 and February 28, 2025, the Company has received $0 related to the deferred payment obligation\nas the balance remains $2,525,000 at both February 28, 2026 and February 28, 2025.\n\n \n\nF-20\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**9.\nRELATED PARTY TRANSACTIONS**\n\n \n\nFor\nthe years ended February 28, 2026, and February 28, 2025, the Company had net (advances) repayments of ($132,268) and ($71,927), respectively,\nto its loan payable-related party. At February 28, 2026, the loan payable-related party was $461,633 and $329,365 at February 28, 2025.\nAs of February 28, 2026, included in the balance due to the related party is $285,638 of deferred salary all of which bears interest\nat 12%. As of February 28, 2025, included in the balance due to the related party is $190,013 of deferred salary all of which bears interest\nat 12%. The accrued interest included at February 28, 2026, was $79,268 (February 28, 2025- $51,575).\n\n \n\nDuring\nthe year ended February 28, 2026, the Company a net repayment of $390,744 in deferred compensation for the CEO. This would bring his\nannual bonus for the year ended February 28, 2026, to $1.0 million. For the fiscal year ended February 28, 2025, the Company paid out\n$1,390,744 to the CEO. During the year ended February 28, 2025, the Company a net accrual of $1,663,833 in deferred compensation for\nthe CEO. This would bring his annual bonus for the year ended February 28, 2025, to $2.5 million. For the fiscal year ended February\n28, 2025, the Company paid out $836,167 to the CEO. This was all in accordance with a December 2023 board action allowing for $1 million\nof discretionary compensation.\n\n \n\nDuring\nthe years ended February 28, 2026, and February 28, 2025, the Company accrued 1,500 Series G shares to be issued totaling $1,500,000\nand 1,500 Series G preferred shares to be issued totaling $1,500,000, respectively, both per Company resolution. The Series G preferred\nshares are redeemable at $1,000 per share and will be issued by the Company at the appropriate time. The balance of Incentive Compensation\nPlan Payable at February 28, 2026, was $5,500,000 and the balance February 28, 2025, was $4,000,000.\n\n \n\nDuring\nthe years ended February 28, 2026, and February 28, 2025, the Company was charged $2,576,111 and $2,541,180, respectively in consulting\nfees for research and development to a company partially owned by a principal shareholder included in research and development expenses.\nThe principal shareholder received no compensation from this partially owned research and development company and the fees were spent\non core development projects. As at February 28, 2026, and February 28, 2025, the balance due to this company was $160,557 and $76,532,\nrespectively.\n\n \n\nF-21\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**10.\nLOANS PAYABLE**\n\n \n\nLoans\npayable at February 28, 2026 consisted of the following:\n\nSCHEDULE OF LOANS PAYABLE \n\nDate \nMaturity \nDescription\n  \nPrincipal  \nInterest\nRate \n\nJuly 18, 2016 \nJuly 18, 2017 \nPromissory note\n(1)* \n$3,500  \n 22%\n\nDecember 10, 2020 \nMarch 1, 2027 \nPromissory note\n(2) \n 3,921,168  \n 12%\n\nDecember 10, 2020 \nMarch 1, 2027 \nPromissory note\n(3) \n 2,754,338  \n 12%\n\nDecember 10, 2020 \nDecember 10, 2024 \nPromissory note\n(4) \n —  \n 12%\n\nDecember 14, 2020 \nMarch 1, 2027 \nPromissory note\n(5) \n 310,375  \n 12%\n\nDecember 30, 2020 \nMarch 1, 2027 \nPromissory note\n(6) \n 350,000  \n 12%\n\nJanuary 1, 2021 \nMarch 1, 2027 \nPromissory note\n(7) \n 25,000  \n 12%\n\nJanuary 1, 2021 \nMarch 1, 2027 \nPromissory note\n(8) \n 145,000  \n 12%\n\nJanuary 14, 2021 \nMarch 1, 2027 \nPromissory note\n(9) \n 237,500  \n 12%\n\nFebruary 22, 2021 \nMarch 1, 2027 \nPromissory note\n(10) \n 1,650,000  \n 12%\n\nMarch 1, 2021 \nMarch 1, 2027 \nPromissory note\n(11) \n 6,000,000  \n 12%\n\nJune 8, 2021 \nJune 8, 2027 \nPromissory note\n(12) \n 2,750,000  \n 12%\n\nJuly 12, 2021 \nJuly 26, 2026 \nPromissory note\n(13) \n —  \n 7%\n\nSeptember 14, 2021 \nSeptember 14, 2027 \nPromissory note\n(14) \n 1,650,000  \n 12%\n\nJuly 28, 2022 \nMarch 1, 2027 \nPromissory note\n(15) \n 170,000  \n 15%\n\nAugust 30, 2022 \nAugust 30,2027 \nPromissory note\n(16) \n 3,000,000  \n 15%\n\nSeptember 7, 2022 \nMarch 1, 2027 \nPromissory note\n(17) \n 400,000  \n 15%\n\nSeptember 8, 2022 \nMarch 1, 2027 \nPromissory note\n(18) \n 475,000  \n 15%\n\nOctober 13, 2022 \nMarch 1, 2027 \nPromissory note\n(19) \n 350,000  \n 15%\n\nOctober 28, 2022 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nNovember 9, 2022 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nNovember 10, 2022 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nNovember 15, 2022 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nJanuary 11, 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nFebruary 6, 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nApril 5. 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nApril 20, 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nMay 11, 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nOctober 27, 2023 \nOctober 31, 2026 \nPromissory note\n(20) \n 400,000  \n 15%\n\nNovember 30, 2023 \nApril 30, 2027 \nPurchase Agreement\n(21) \n 203,000  \n 15%\n\nMarch 8, 2024 \nAugust 8, 2027 \nPurchase Agreement\n(22) \n 350,000  \n 15%\n\nJuly 26, 2025 \nJuly 26, 2026 \nPromissory note\n(23) \n 165,000  \n 15%\n\nAugust 7,2025 \nAugust 7,2026 \nPromissory note\n(24) \n 245,000  \n 15%\n\nAugust 25, 2025 \nAugust 25, 2026 \nPromissory note\n(25) \n 137,500  \n 15%\n\nAugust 25, 2025 \nMay 6, 2026 \nFuture Receivables Purchase and Sale Agreement\n(26) \n 189,951  \n 108%\n\nSeptember 25, 2025 \nSeptember 25, 2026 \nPromissory note\n(27) \n 550,000  \n 15%\n\nOctober 30. 2025 \nOctober 30. 2026 \nPromissory note\n(28) \n 200,000  \n 15%\n\nNovember 6, 2025 \nNovember 6, 2026 \nPromissory note\n(29) \n 275,000  \n 15%\n\nNovember 24, 2025 \nNovember 24, 2026 \nPromissory note\n(30) \n 450,000  \n 15%\n\nDecember 9, 2025 \nDecember 9, 2026 \nPromissory note\n(31) \n 450,000  \n 15%\n\nDecember 17, 2025 \nSeptember 23, 2026 \nBusiness loan\n(32) \n 329,962  \n 65%\n\nDecember 22, 2025 \nDecember 22, 2026 \nConvertible note\n(33) \n 495,000  \n 12%\n\nDecember 27, 2025 \nDecember 27, 2026 \nPromissory note\n(34) \n 275,000  \n 15%\n\nJanuary 12, 2026 \nJanuary 12, 2027 \nPromissory note\n(35) \n 330,000  \n 15%\n\nJanuary 27, 2026 \nJanuary 27, 2027 \nPromissory note\n(36) \n 170,000  \n 15%\n\nFebruary 2, 2026 \nFebruary 2, 2027 \nPromissory note\n(37) \n 330,000  \n 15%\n\nFebruary 19, 2026 \nFebruary 19, 2027 \nConvertible note\n(38) \n 165,000  \n 12%\n\n  \n  \n \n  \n    \n   \n\nFebruary 24, 2026 \nFebruary 24, 2027 \nPromissory note\n(39) \n 170,000  \n 15%\n\n  \n  \n \n  \n$33,672,294  \n   \n\n  \n  \n \n  \n    \n   \n\nLess: current portion of loans\npayable\n  \n (9,483,914) \n   \n\nLess: discount\non non-current loans payable\n  \n -  \n   \n\nNon-current\nloans payable, net of discount\n  \n$24,188,380  \n   \n\n  \n  \n \n  \n    \n   \n\nCurrent portion of loans payable\n  \n$9,483,914  \n   \n\nLess: discount\non current portion of loans payable\n  \n (635,774) \n   \n\nCurrent\nportion of loans payable, net of discount\n  \n$8,848,140  \n   \n\n \n\n*\nIn\ndefault\n\n \n\nAs\nof February 28, 2026 , all long term debt matures in the fiscal year ending February 29, 2028.\n\n \n\nF-22\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n(1)\nThis\nnote was transferred from convertible notes payable because in August 2022 it was no longer convertible due to restrictions placed\non the lender.\n\n \n \n\n(2)\nThis\npromissory note was issued as part of a debt settlement whereby $2,683,357 in convertible notes and associated accrued interest of\n$1,237,811 totaling $3,921,168 was exchanged for this promissory note of $3,921,168, and a warrant to purchase 450,000,000 shares\nat an exercise price of $.002 per share and a three-year maturity having a relative fair value of $990,000. This note is secured\nby a general security charging all of the Company’s present and after-acquired property. On November 28, 2023, the parties\nextended the maturity date from December 10, 2023, to March 1, 2025, with all other terms and conditions remaining the same. On April\n16, 2025, the parties again extended the maturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions\nremaining the same.\n\n \n \n\n(3)\nThis\npromissory note was issued as part of a debt settlement whereby $1,460,794 in convertible notes and associated accrued interest of\n$1,593,544 totaling $3,054,338 was exchanged for this promissory note of $3,054,338, and a warrant to purchase 250,000,000 shares\nat an exercise price of $0.002 per share and a three-year maturity having a relative fair value of $550,000. This note is secured\nby a general security charging all of the Company’s present and after-acquired property. $300,000 has been repaid during the\nyear ended February 29, 2024. On November 28, 2023, the parties extended the maturity date from December 10, 2023, to March 1, 2025,\nwith all other terms and conditions remaining the same. On April 16, 2025, the parties again extended the maturity date from March\n1, 2025, to March 1, 2027, with all other terms and conditions remaining the same. On November 24, 2025, the Company entered into\nan exchange agreement where the holder can exchange all or part of the principal and interest of the note into common shares at an\nexchange amount of 90% of the previous 5 day’s lowest bid price. On February 8, 2026, the holder exchanged $192,000 in accrued\ninterest for 8,000,000 common shares at fair value of $320,000 with a loss on settlement of $128,000.\n\n \n \n\n(4)\nThis\npromissory note was issued as part of a debt settlement whereby $103,180 in convertible notes and associated accrued interest of\n$62,425 totaling $165,605 was exchanged for this promissory note of $165,605, and a warrant to purchase 80,000,000 shares at an exercise\nprice of $.002 per share and a three-year maturity having a fair value of $176,000.The maturity date was extended from December 10,\n2023 to December 10, 2024 on February 29, 2024 and a fee of $22,958 was paid and charged to interest expense. The Company was charged\na penalty of $24,510 which it added the loan with a corresponding adjustment to interest expense. The Company repaid the loan in\nfull $190,155 with accrued interest of $104,046.\n\n \n \n\n(5)\n\nThis\npromissory note was issued as part of a debt settlement whereby $235,000 in convertible notes\nand associated accrued interest of $75,375 totaling $310,375 was exchanged for this promissory\nnote of $310,375, and a warrant to purchase 25,000,000 shares at an exercise price of $.002\nper share and a three-year maturity having a fair value of $182,500. On December 14, 2023,\nthe parties extended the maturity date from December 14. 2023 date to March 1,2027.\n\n \n \n\n(6)\nThe\nnote, with an original principal amount of $350,000, may be pre-payable at any time. The note balance includes an original issue\ndiscount of $35,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a 3-year\nterm and having a relative fair value of $271,250. The discounts are being amortized over the term of the loan. After allocating\nthese charges to debt and equity according to their respective values, a debt discount of $271,250 with a corresponding adjustment\nto paid in capital for the relative fair value of the warrant. On March 1, 2024, the unamortized relative fair value discount of\n$65,092 was removed with a corresponding adjustment to accumulated deficit. A $8,399 unamortized discount remained. On November 28,\n2023, the parties extended the maturity date from December 10, 2023, to March 1, 2025, with all other terms and conditions remaining\nthe same. On April 16, 2025, the parties again extended the maturity date from March 1, 2025, to March 1, 2027, with all other terms\nand conditions remaining the same. For the year ended February 28, 2026, the Company recorded amortization expense of $138, with\nan unamortized discount of $0 at February 28, 2026.The loan is fully amortized.\n\n \n \n\n(7)\nThis\npromissory note was issued as part of a debt settlement whereby $9,200 in convertible notes and associated accrued interest of $6,944\ntotaling $16,144 was exchanged for this promissory note of $25,000. This note is secured by a general security charging all of the\nCompany’s present and after-acquired property. On November 28, 2023, the parties extended the maturity date from January 1,\n2024, to March 1, 2025, with all other terms and conditions remaining the same. On April 16, 2025, the parties again extended the\nmaturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions remaining the same.\n\n \n \n\n(8)\nThis\npromissory note was issued as part of a debt settlement whereby $79,500 in convertible notes and associated accrued interest of $28,925\ntotaling $108,425 was exchanged for this promissory note of $145,000. This note is secured by a general security charging all of\nthe Company’s present and after-acquired property. On November 28, 2023, the parties extended the maturity date from January\n1, 2024, to March 1, 2025, with all other terms and conditions remaining the same. On April 16, 2025, the parties again extended\nthe maturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions remaining the same.\n\n \n\nF-23\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n(9)\nThe\nnote, with an original principal amount of $550,000, may be pre-payable at any time. The note balance includes an original issue\ndiscount of $250,000 and was issued with a warrant to purchase 50,000,000 shares at an exercise price of $0.025 per share with a\n3-year term and having a relative fair value of $380,174. The discounts are being amortized over the term of the loan. After allocating\nthese charges to debt and equity according to their respective values, a debt discount of $380,174 with a corresponding adjustment\nto paid in capital. On March 1, 2024, the unamortized relative fair value discount of $80,284 was removed with a corresponding adjustment\nto accumulated deficit. A $10,559 unamortized discount remained. On November 28, 2023, the parties extended the maturity date from\nJanuary 14, 2024, to March 1, 2025, with all other terms and Conditions remaining the same. On April 16, 2025, the parties again\nextended the maturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions remaining the same. For the\nyear ended February 28, 2026, the Company recorded amortization expense of $144, with an unamortized discount of $0 at February 28,\n2026.The loan is fully amortized. Through an exchange agreement on February 11, 2025, the Company repaid $162,000 in principal st\nthrough the issuance of 600,000 common shares. On March 28, 2025 the Company entered into an exchange agreement where the holder\ncan exchange all or part of the principal and interest of the note into common shares at an exchange amount of 90% of the previous\n5 day’s lowest VWAP price. On March 5, 2025 the Company repaid $150,500 in loan principal as well as $275,000 in accrued interest\n(all totaling $425,500) was repaid on March 5, 2025 through the issuance of 1,850,000 common shares at a fair value of $444,000 with\na loss on settlement of $18,500.\n\n \n \n\n(10)\nThe\nnote, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue\ndiscount of $150,000 and was issued with a warrant to purchase 100,000,000 shares at an exercise price of $0.135 per share with a\n3-year term and having a relative fair value of $1,342,857. The discount and warrant are being amortized over the term of the loan.\nAfter allocating these charges to debt and equity according to their respective values, a debt discount of $1,342,857 with a corresponding\nadjustment to paid in capital for the relative fair value of the warrant. The maturity date was extended from February 22, 2022,\nto February 22, 2024, on February 28, 2022, in exchange for warrants to purchase 50,000,000 at an exercise price of $.0164 and a\n3-year term. These warrants have a fair value of $950,000 recorded as interest expense with a corresponding adjustment to paid in\ncapital recorded in the year ended February 28, 2022. On November 28, 2023, the parties extended the maturity date from February\n22, 2024, to March 1, 2025, with all other terms and conditions remaining the same. On March 1, 2024, the unamortized relative fair\nvalue discount of $497,614 was removed with a corresponding adjustment to accumulated deficit. A $55,585 unamortized discount remained.\nOn April 16, 2025, the parties again extended the maturity date from March 1, 2025, to March 1, 2027, with all other terms and conditions\nremaining the same. For the year ended February 28, 2026, the Company recorded amortization expense of $700, with an unamortized\ndiscount of $0 at February 28, 2026. The loan is fully amortized. On November 24, 2025, the Company entered into an exchange agreement\nwhere the holder can exchange all or part of the principal and interest of the note into common shares at an exchange amount of 90%\nof the previous 5 day’s lowest bid price.\n\n \n \n\n(11)\nThe\nunsecured note may be pre-payable at any time. Cash proceeds of $5,400,000 were received. The note balance of $6,000,000 includes\nan original issue discount of $600,000 and was issued with a warrant to purchase 300,000,000 shares at an exercise price of $0.135\nper share with a 3-year term and having a relative fair value of $4,749,005 using Black-Scholes with assumptions described in note\n13. The discounts are being amortized over the term of the loan. After allocating these charges to debt and equity according to their\nrespective values, a debt discount of $4,749,005 with a corresponding adjustment to paid in capital for the relative value of the\nwarrant. The maturity was extended from March 1, 2022 to March 1, 2024 on February 28, 2022 in exchange for warrants to purchase\n150,000,000 shares of common stock at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $2,850,000\nrecorded as interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. This\nnote has been fully amortized. This note was again extended to March 1, 2025. On April 16, 2025, the parties again extended the maturity\ndate from March 1, 2025, to March 1, 2027, with all other terms and conditions remaining the same. On March 28, 2025 the Company\nentered into an exchange agreement where the holder can exchange all or part of the principal and interest of the note into common\nshares at an exchange amount of 90% of the previous 5 day’s lowest VWAP price. For the year ended February 28, 2026, the Company\nhas issued 36,500,000 common shares at fair market value of $4,365,500 to repay $3,840,500 in accrued interest with a loss on settlement\nof debt of $525,000.\n\n \n \n\n(12)\nThe\nnote, with an original principal balance of $2,750,000, may be pre-payable at any time. The note balance includes an original issue\ndiscount of $50,000 and was issued with a warrant to purchase 170,000,000 shares at an exercise price of $0.064 per share with a\n3-year term and having a relative fair value of $2,035,033. The discounts are being amortized over the term of the loan. After allocating\nthese charges to debt and equity according to their respective values, a debt discount of $2,035,033 with a corresponding adjustment\nto paid in capital. The maturity date was extended from June 8, 2022 to June 8, 2024 on February 28, 2022 in exchange for warrants\nto purchase 85,000,000 at an exercise price of $.0164 and a 3 year term. These warrants have a fair value of $1,615,000 recorded\nas interest expense with a corresponding adjustment to paid in capital recorded in the year ended February 28, 2022. This note was\nextended to June 8, 2025. On March 1, 2024, the unamortized relative fair value discount of $33,547 was removed with a corresponding\nadjustment to accumulated deficit. A $4,121 unamortized discount remained. For the year ended February 28, 2026, the Company recorded\namortization expense of $964, with an unamortized discount of $0 at February 28, 2026. The loan is fully amortized On April 16, 2025,\nthe parties again extended the maturity date from June 8, 2025, to June 8, 2027, with all other terms and conditions remaining the\nsame. On November 24, 2025, the Company entered into an exchange agreement where the holder can exchange all or part of price the\nprincipal and interest of the note into common shares at an exchange amount of 90% of the previous 5 day’s lowest bid price.\nDuring the period the holder exchanged $1,416,000 in accrued interest for 25,000,000 common shares at a fair value of $1,680,000\nwith a loss on settlement of $264,000.\n\n \n\nF-24\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n(13)\nThis\nloan, with an original principal balance of $4,000,160, was in exchange for 184 Series F preferred shares from a former director.\nThe interest and principal are payable at maturity. The loan is unsecured. During the six months ended August 31, 2025 the Company\nrepaid $420,000 as part of a settlement with the estate of the lender. A settlement agreement was entered into on April 25,2025 between\nthe Company and the Estate of the lender whereby the Company will repay a total of $420,000 to fully discharge the outstanding loan\nbalance and accrued interest which totaled $4,790,185. This settlement agreement was approved by the court on June 5, 2025. Upon\nsettlement in August 2025, the Company recorded a gain on settlement of debt of $4,370,185. At February 28, 2026 the outstanding\nprincipal and interest was $0.\n\n \n \n\n(14)\nThe\nnote, with an original principal balance of $1,650,000, may be pre-payable at any time. The note balance includes an original issue\ndiscount of $150,000 and was issued with a warrant to purchase 250,000,000 shares at an exercise price of $0.037 per share with a\n3-year term and having a relative fair value of $1,284,783, The discounts are being amortized over the term of the loan. After allocating\nthese charges to debt and equity according to their respective values, a debt discount of $1,284,783 with a corresponding adjustment\nto paid in capital. On March 1, 2024, the unamortized relative fair value discount of $572,549 was removed with a corresponding adjustment\nto accumulated deficit. A $66,846 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization\nexpense of $8,856, with an unamortized discount of $16,325 at February 28, 2026. On April 16, 2025, the parties again extended the\nmaturity date from September 14, 2025, to September 14, 2027, with all other terms and conditions remaining the same. On November\n24, 2025, the Company entered into an exchange agreement where the holder can exchange all or part of the principal and interest\nof the note into common shares at an exchange amount of 90% of the previous 5 day’s lowest bid price.\n\n \n \n\n(15)\nOriginal\n$170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $20,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. On November 29, 2023,\nthe parties extended the maturity date from July 28, 2023, to March 1, 2025, with all other terms and conditions remaining the same.\nThis note has been fully amortized. On April 16, 2025, the parties again extended the maturity date from March 1, 2025, to March\n1, 2027, with all other terms and conditions remaining the same.\n\n \n \n\n(16)\nA\nwarrant holder exchanged 955,000,000 warrants for a promissory note of $3,000,000, bearing interest at 15% with a two year maturity.\nThe fair value of the warrants was determined to be $2,960,500 with a corresponding adjustment to paid-in capital and a debt discount\nof $39,500 which will be amortized over the term of the loan. Principal and interest due at maturity. On March 1, 2024, the unamortized\nrelative fair value discount of $11,535 was removed with a corresponding adjustment to accumulated deficit. This note has been fully\namortized. This note was extended to August 30, 2025. On April 16, 2025, the parties again extended the maturity date from August\n30, 2025, to August 30, 2027, with all other terms and conditions remaining the same. On November 24, 2025, the Company entered into\nan exchange agreement where the holder can exchange all or part of the principal and interest of the note into common shares at an\nexchange amount of 90% of the previous 5 day’s lowest bid price.\n\n \n \n\n(17)\nOriginal\n$400,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. On November 29, 2023,\nthe parties extended the maturity date from September 7, 2023, to March 1, 2025, with all other terms and conditions remaining the\nsame. This note has been fully amortized. On April 16, 2025, the parties again extended the maturity date from March 1, 2025, to\nMarch 1, 2027, with all other terms and conditions remaining the same.\n\n \n \n\n(18)\nOriginal\n$475,000 note may be pre-payable at any time. The note balance includes an original issue discount of $75,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. On November 29, 2023,\nthe parties extended the maturity date from September 8, 2023, to March 1, 2025, with all other terms and conditions remaining the\nsame. This note has been fully amortized. On April 16, 2025, the parties again extended the maturity date from March 1, 2025, to\nMarch 1, 2027, with all other terms and conditions remaining the same.\n\n \n\nF-25\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n(19)\nOriginal\n$350,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest\ndue at maturity. Secured by a general security charging all of the Company’s present and after-acquired property. On November\n29, 2023, the parties extended the maturity date from October 13, 2023, to March 1, 2025, with all other terms and conditions remaining\nthe same. This note has been fully amortized. On April 16, 2025, the parties again extended the maturity date from March 1, 2025,\nto March 1, 2027, with all other terms and conditions remaining the same.\n\n \n \n\n(20)\nOn\nOctober 28, 2022, the Company entered into as secured loan agreement with a lender for up to $4,000,000 including an original issue\ndiscount of $500,000. In exchange the Company will issue one series F Preferred Share, extended 329 series F warrants with a March\n1, 2026 maturity to a new October 31, 2033 maturity, and issue up to 10 tranches with each tranche of $400,000, with cash proceeds\nof $350,000 an original issue discount of $50,000, October 31, 2026 maturity, and 61 Series F warrants with a October 31, 2033 maturity.\nSecured by a general security charging all of the Company’s present and after-acquired property. On November 24, 2025, the\nCompany entered into an exchange agreement where the holder can exchange all or part of the principal and interest of this secured\nloan agreement into common shares at an exchange amount of 90% of the previous 5 day’s lowest bid price. At February 29, 2024\nthe Company has issued all 10 tranches totaling $ 4,000,000 as follows:\n\n \n \n\n \nOctober\n28, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants and 1 Series F Preferred Share\nhaving a relative fair value of $299,399. On March 1, 2024, the unamortized relative fair value discount of $286,775 was removed\nwith a corresponding adjustment to accumulated deficit. A $47,892 unamortized discount remained. For the year ended February 28,\n2026, the Company recorded amortization expense of $18,483, with an unamortized discount of $14,428 at February 28, 2026.\n\n \n \n\n \nNovember\n9, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of\n$299,750. On March 1, 2024, the unamortized relative fair value discount of $288,513 was removed with a corresponding adjustment\nto accumulated deficit. A $48,126 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization\nexpense of $18,573, with an unamortized discount of $14,502 at February 28, 2026.\n\n \n\nNovember\n10, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $302,020.\nOn March 1, 2024, the unamortized relative fair value discount of $291,694 was removed with a corresponding adjustment to accumulated\ndeficit. A $48,290 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,637, with an unamortized discount of $18,647 at February 28, 2026.\n\n \n\nNovember\n15, 2022, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959.\nOn March 1, 2024, the unamortized relative fair value discount of $287,814 was removed with a corresponding adjustment to accumulated\ndeficit. A $47,976 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,515, with an unamortized discount of $14,456 at February 28, 2026.\n\n \n\nJanuary\n11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959.\nOn March 1, 2024, the unamortized relative fair value discount of $286,813 was removed with a corresponding adjustment to accumulated\ndeficit. A $48,124 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,573, with an unamortized discount of $14,502 at February 28, 2026.\n\n \n\nFebruary\n6, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $299,959.\nOn March 1, 2024, the unamortized relative fair value discount of $288,342 was removed with a corresponding adjustment to accumulated\ndeficit. A $48,294 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,638, with an unamortized discount of $14,557 at February 28, 2026.\n\n \n\nF-26\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nApril\n5, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $296,245.\nOn March 1, 2024, the unamortized relative fair value discount of $286,821 was removed with a corresponding adjustment to accumulated\ndeficit. A $48,409 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,683, with an unamortized discount of $14,594 at February 28, 2026.\n\n \n\nApril\n20, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $302,219.\nOn March 1, 2024, the unamortized relative fair value discount of $294,824 was removed with a corresponding adjustment to accumulated\ndeficit. A $48,777 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,824, with an unamortized discount of $14,711 at February 28, 2026.\n\n \n\nMay\n11, 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $348,983.\nOn March 1, 2024, the unamortized relative fair value discount of $348,831 was removed with a corresponding adjustment to accumulated\ndeficit. A $49,978 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$19,288, with an unamortized discount of $15,096 at February 28, 2026.\n\n \n\nOctober\n27 2023, $400,000 loan, original issue discount of $50,000, 61 Series F Preferred Share warrants having a relative fair value of $261,759.\nOn March 1, 2024, the unamortized relative fair value discount of $254,487 was removed with six a corresponding adjustment to accumulated\ndeficit. A $48,611 unamortized discount remained. For the year ended February 28, 2026, the Company recorded amortization expense of\n$18,761, with an unamortized discount of $14,657 at February 28, 2026.\n\n \n\n(21)\n\nOn\nNovember 30, 2023, the Company entered into an agreement where the lender will pay the Company\n$350,000 in exchange for thirteen future monthly payments of $36,750 commencing on April\n30,2024 through to April 30, 2025 totaling $477,750. The effective interest rate is 35% per\nannum. Secured by a general security charging all of RAD’s present and after-acquired\nproperty. Default rate of 15% per annum calculated daily on any missed monthly payment and\nafter original maturity. The Company has repaid $147,000 and $53,000 in accrued interest\nin July to account for the missed April through to August 2024 payments in agreement with\nthe lender. The Company have missed the subsequent monthly payments. On April 16, 2025, the\nparties extended the maturity date from April 30, 2025, to April 30, 2026, with all other\nterms and conditions remaining the same. On April 30,2026, the parties extended the\nmaturity to April 30, 2027, with the default rate still applicable after April 30, 2025.\n\n \n\n(22)\nOn\nMarch 8, 2024, the Company entered into another agreement where the lender will pay the Company $350,000 in exchange for thirteen\nfuture monthly payments of $36,750 commencing on August 8, 2024 through to August 8, 2025 totaling $477,750. The effective interest\nrate is 35% per annum. Secured by a general security charging all of RAD’s present and after- acquired property. Default rate\nof 15% per annum calculated daily on any missed monthly payment and after original maturity. The August 2024 through to August 2025\npayments have not been made and the note was not repaid at original maturity. On August 8, 2025 the parties extended the maturity\nto August 8, 2027 , with the default rate still applicable after August 8, 2025.\n\n \n \n\n(23)\nOriginal\n$165,000 note may be pre-payable at any time. The note balance includes an original issue discount of $15,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The discount was\nexpensed.\n\n \n \n\n(24)\nOriginal\n$245,000 note may be pre-payable at any time. The note balance includes an original issue discount of $25,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The discount was\nexpensed.\n\n \n \n\n(25)\nOriginal\n$137,500 note may be pre-payable at any time. The note balance includes an original issue discount of $12,500. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. The discount was\nexpensed.\n\n \n \n\n(26)\nOn\nAugust 25, 2025, the Company entered into Future Receivables Purchase and Sale Agreement secured by a general security charging all\nof RAD’s present and after- acquired property. The Company received net proceeds of $555,671 after fees of $29,329 and a financing\nfee of $222,300 for total fees of $251,629. The Company must repay $807,300, in weekly payments of 7% of estimated receipts from\naccounts receivables. The estimated monthly payments will be approximately $99,725. For the year ended February 28, 2026, the Company\nrecorded amortization expense of $192,422, with an unamortized discount of $59,207 at February 28, 2026. For the year ended February\n28, 2026, the Company has repaid $617,348.\n\n \n \n\n(27)\nOriginal\n$550,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $19,988, with an unamortized discount of $30,012 at February 28,\n2026.\n\n \n \n\n(28)\nOriginal\n$200,000 note may be pre-payable at any time. The note balance includes an original issue discount of $25,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $7,665, with an unamortized discount of $17,335 at February 28, 2026.\n\n \n \n\n(29)\nOriginal\n$275,000 note may be pre-payable at any time. The note balance includes an original issue discount of $25,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $7,229, with an unamortized discount of $17,771 at February 28, 2026.\n\n \n \n\n(30)\nOriginal\n$450,000 note may be pre-payable at any time. The note balance includes an original issue discount of $50,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $10,704, with an unamortized discount of $39,296 at February 28,\n2026.\n\n \n\nF-27\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n** **\n\n(31)\n\n \n\nOriginal\n$450,000 note may be pre-payable at any time. The note balance includes an original issue\ndiscount of $50,000. Principal and interest due at maturity. Secured by a general security\ncharging all of RAD’s present and after-acquired property. For the year ended February\n28, 2026, the Company recorded amortization expense of $10,410, with an unamortized discount\nof $39,590 at February 28, 2026.\n\n \n \n\n(32)\n\nOn\nDecember 17, 2025, the Company entered into a business loan secured by a general security\ncharging all of RAD’s present and after- acquired property. The Company received net\nproceeds of $300,000 after fees of $14,000 and a financing fee of $91,060 for total fees\nof $105,060. The Company must repay $405,060, in 4 weekly payments of $2,276.50 and 36 weekly\npayments of $10,998.72. The loan is personally guaranteed by the CEO. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $19,478 with an unamortized\ndiscount of $85,582 at February 28, 2026. For the year ended February 28, 2026, the Company\nhas repaid $75,098.\n\n \n \n\n(33)\n\n$495,000\nconvertible note that may be redeemed at a premium at any time. The Company received proceeds of $440,000, with fees of $10,000 and\nan original issue discount of $45,000. Principal and interest due at maturity. For the year ended February 28, 2026, the Company\nrecorded amortization expense of $9,705, with an unamortized discount of $45,295 at February 28, 2026. After 180 days , the note\nand interest is convertible at a conversion price of 80% of the lowest traded price in the 15 prior trading days.\n\n \n \n\n(34)\nOriginal\n$275,000\nnote may be pre-payable at any time. The note balance includes an original issue discount of $25,000.\nPrincipal and interest due at maturity. Secured by a general security charging all of RAD’s present and after-acquired\nproperty. For the year ended February 28, 2026, the Company recorded amortization expense of $4,122,\nwith an unamortized discount of $20,878\nat February 28, 2026.\n\n** **\n\n(35)\n\nOriginal\n$330,000 note may be pre-payable at any time. The note balance includes an original issue\ndiscount of $30,000. Principal and interest due at maturity. Secured by a general security\ncharging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $3,864, with an unamortized\ndiscount of $26,136 at February 28, 2026.\n\n \n\n(36)\nOriginal\n$170,000 note may be pre-payable at any time. The note balance includes an original issue discount of $20,000. Principal and interest\ndue at maturity. Secured by a general security charging all of RAD’s present and after-acquired property. For the year\nended February 28, 2026, the Company recorded amortization expense of $1,769, with an unamortized discount of $18,231 at February\n28, 2026.\n\n** **\n\n(37)\n\nOriginal\n$330,000 note may be pre-payable at any time. The note balance includes an original issue\ndiscount of $30,000. Principal and interest due at maturity. Secured by a general security\ncharging all of RAD’s present and after-acquired property. For the year ended\nFebruary 28, 2026, the Company recorded amortization expense of $1,863, with an unamortized\ndiscount of $28,137 at February 28, 2026.\n\n \n\n(38)\n\n$165,000\nconvertible note that may be redeemed at a premium at any time. The Company received proceeds of $142,500, with fees of $7,500 and\nan original issue discount of $15,000. Principal and interest due at maturity. For the year ended February 28, 2026, the Company\nrecorded amortization expense of $484, with an unamortized discount of $22,016 at February 28, 2026. After 180 days , the note and\ninterest is convertible at a conversion price of 80% of the lowest traded price in the 15 prior trading days.\n\n** **\n\n(39)\n\nOriginal\n$170,000 note may be pre-payable at any time. The note balance includes an original issue\ndiscount of $20,000. Principal and interest due at maturity. Secured by a general security\ncharging all of RAD’s present and after-acquired property. For the nine months ended\nFebruary 28, 2026, the Company recorded amortization expense of $188, with an unamortized\ndiscount of $19,812 at February 28, 2026.\n\n \n\n \n\nF-28\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n** **\n\n**11.\nSTOCKHOLDERS’ DEFICIT**\n\n \n\n**Preferred\nStock:**The Company is authorized to issue up to 20,000,000 shares of $0.001 par value preferred stock. The board of directors is\nauthorized to designate any series of preferred stock up to the total authorized number of shares.\n\n \n\n**Series\nB Convertible, Redeemable Preferred Stock**\n\n \n\nThe\nboard of directors has designated 5,000 shares of Series B Convertible, Redeemable Preferred Stock with a par value of $0.001 per share.\nAs of February 28, 2026 , there are no shares of Series B Preferred Stock outstanding. The Series B Convertible Preferred Stock are redeemable\nat $1,200 per share, rank in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights\non a converted basis and receives quarterly dividends of 8%. Each holder may, at any time and from time to time convert all, but not\nless than all, of their shares of Series B Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares\nof common stock determined by dividing the redemption value by the Conversion Price. The Conversion price is equal to the lower of (1)\na fixed price equaling the closing bid price of the Common Stock on the trading day immediately preceding the date of the acquisition\nof the shares and (2) the lowest traded price of the Common Stock during the ten (10) calendar days immediately preceding, but not including,\nthe Conversion Date. Following an event of default,” as defined in the Purchase Agreement, the Conversion price shall equal the\nlower of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty five percent (85%) of the lowest traded\nprice for the Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion\nDate. Each share of Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of eight percent\n(8%) per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share\nhas been converted or redeemed. Dividends may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any dividends\nthat are not paid a shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14% per annum or\nthe lesser rate permitted by applicable law which shall accrue and compound daily from the dividend payment date through and including\nthe date of actual payment in full. On the thirtieth day following the issue date of this Preferred Stock the Company shall have the\nobligation to redeem one-third of the Preferred Stock outstanding for a redemption price equal to the redemption value of each such share\nof Preferred Stock, plus any accrued but unpaid dividends, plus all other amounts due to the Holder including, but not limited to Late\nFees, liquidated damages and the legal fees and expenses of the Holder’s counsel. On the sixtieth (60th) calendar day\nfollowing the date Preferred Stock is issued, the Corporation shall have the obligation to redeem one-half of the Preferred Stock then\noutstanding for the redemption price. On the ninetieth (90th) calendar day following the date Preferred Stock is issued, the\nCorporation shall have the obligation to redeem all of the Preferred Stock then outstanding for the redemption price. From the date of\nissuance until the date no shares of Series B Preferred Stock are issued and outstanding, unless Holders of at least 75% in Stated Value\nof the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall\nnot permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create, incur, assume,\nguarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect\nto any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (b) other\nthan Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property\nor assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend its charter documents,\nincluding, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely affects any rights\nof the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common Stock, Common Stock\nEquivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction Documents: (e)\npay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate of the\nCorporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length\nbasis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required\nfor board approval); or(g) enter into any agreement with respect to any of the foregoing.\n\n \n\nF-29\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Series\nC Convertible, Redeemable Preferred Stock**\n\n \n\nThe\nboard of directors has designated 1,000\nshares of Series C Convertible, Redeemable Preferred Stock with a par value of $0.001\nper share. As of the February 28, 2026, there are 417\nshares of Series C Preferred Stock outstanding. The Series C Convertible Preferred Stock are redeemable at $1,200\nper share, rank in priority to common stock and common stock equivalents upon liquidation of the Company, have voting rights on a\nconverted basis and receives quarterly dividends of 12%.\nEach holder may, after 180 days after issuance, at any time and from time to time convert all, but not less than all, of their\nshares of Series C Convertible, Redeemable Preferred Stock into a number of fully paid and nonassessable shares of common stock\ndetermined by dividing the redemption value by the Conversion Price. The\nConversion price is equal to the lower of (1) a fixed price equaling the closing bid price of the Common Stock on the trading day\nimmediately preceding the date of the acquisition of the shares and (2) the lowest traded price of the Common Stock during the ten\n(10) calendar days immediately preceding, but not including, the Conversion Date. Following an event of default,” as defined\nin the Purchase Agreement, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price\nper share equaling ninety percent (90%) of the lowest traded price for the Company’s common stock during the ten (10) Trading\nDays immediately preceding, but not including, the Conversion Date. Each\nshare of Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of twelve percent (12%)\nper annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share has\nbeen converted or redeemed. Dividends may be paid in cash or in shares of Preferred Stock at the discretion of the Company. Any\ndividends that are not paid a shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 14%\nper annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the dividend payment date\nthrough and including the date of actual payment in full. On the one hundred eightieth day following the issue date of this\nPreferred Stock the Company shall have the obligation to redeem all outstanding Series Preferred Shares for one hundred nine and one\nhalf percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts due to the Holder pursuant\nto the Certificate of Designation and/or any Transaction Documents (“Redemption Date”). Prior to the Redemption Date,\nthe Company at its discretion and on three (3) Trading Days’ written notice, may redeem all outstanding Preferred Shares for\none hundred nine and one half percent (109.5%) of the stated value, plus any accrued but unpaid dividends, plus all other amounts\ndue to the Holder pursuant to the Certificate of Designation and/or any Transaction Documents.\n\n \n\nFrom\nthe date of issuance until the date no shares of Series C Preferred Stock are issued and outstanding, unless Holders of at least 75%\nin Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall\nnot, and shall not permit any of the Subsidiaries to, directly or indirectly: (a) other than Permitted Indebtedness, enter into, create,\nincur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee,\non or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits\ntherefrom; (b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect\nto any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; (c) amend\nits charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely\naffects any rights of the Holder; (d) repay, repurchase or offer to repay, repurchase or otherwise acquire of any shares of its Common\nStock, Common Stock Equivalents or Junior Securities, other than as to the Conversion Shares as permitted or required under the Transaction\nDocuments: (e) pay cash dividends or distributions on Junior Securities of the Corporation; f) enter into any transaction with any Affiliate\nof the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made\non an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than\na quorum otherwise required for board approval); or(g) enter into any agreement with respect to any of the foregoing.\n\n \n\nF-30\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Series\nE Preferred Stock**\n\n \n\nThe\nboard of directors has designated 4,350,000 shares of Series E Preferred Stock. As of February 28, 2026, there are 3,350,000 shares of\nSeries E Preferred Stock outstanding. The Series E Preferred Stock ranks subordinate to the Company’s common stock as to distributions\nof assets upon liquidation, dissolution or winding up of the Corporation. The Series E preferred stock is non-redeemable, does not have\nrights upon liquidation of the Company and does not receive dividends. The outstanding shares of Series E Preferred Stock have the right\nto take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of\nequity instruments with voting rights. As a result, the holder of Series E Preferred Stock has 2/3rds of the voting power of all shareholders\nat any time corporate action requires a vote of shareholders.\n\n \n\n**Series\nF Convertible Preferred Stock**\n\n \n\nThe\nboard of directors has designated 10,000 shares of Series F Convertible Preferred Stock with a par value of $1.00 per share. As of February\n28, 2026 , there are 2,513 shares of Series F Convertible Preferred Stock outstanding. The Series F Convertible Preferred Stock is non-redeemable,\ndoes not have rights upon liquidation of the Company, does not have voting rights and does not receive dividends. Each holder may, at\nany time and from time to time convert all, but not less than all, of their shares of Series F Convertible Preferred Stock into a number\nof fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common\nstock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis. So long as any shares of Series F Convertible\nPreferred Stock are outstanding, the Company shall not, without first obtaining the approval of the majority of the holders: (a) alter\nor change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series F convertible\npreferred stock; (b) create any Senior Securities; (c) create any pari passu Securities; (d) do any act or thing not authorized or contemplated\nby the Certificate of Designation which would result in any taxation with respect to the Series F Convertible Preferred Stock under Section\n305 of the Internal Revenue Code of 1986, as amended, or any comparable provision of the Internal Revenue Code as hereafter from time\nto time amended, (or otherwise suffer to exist any such taxation as a result thereof).\n\n \n\n**Series\nG Preferred Stock**\n\n \n\nThe\nboard of directors has designated 100,000 shares of Series G Preferred Stock. As of the date of this report, there are no shares of Series\nG Preferred Stock outstanding. The series G shares are redeemable at $1,000 per share The Series G preferred stock does not have voting\nrights, does not have rights upon liquidation of the Company and does not receive dividends.\n\n \n\n**Summary\nof Preferred Stock Activity**\n\n \n\nF-31\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Series\nC Convertible, Redeemable Preferred Stock (Temporary Equity)**\n\n \n\nOn\nFebruary 10, 2025, in connection with a Share Purchase Agreement the Company created a new class of Series C Convertible Redeemable with\n1,000 authorized shares.\n\n \n\nIn\nexchange for 306 Series C Convertible Redeemable Preferred Shares (“Series C”), the Company received gross proceeds of $306,000\nwith net proceeds of $278,580 after paying $6,000 in legal fees and $21,420 in broker fees both charged against paid in capital. The\nCompany must redeem the shares at stated capital of 1,200 per share and a 1.095 premium at 180 days after issuance. The Company recorded\nthe 306 outstanding shares at its redemption value of $402,084 at February 28, 2025, with the offsetting adjustment to paid in capital.\nDuring the year the Company issued 12% quarterly dividends in 44 Series C shares with a value of $58,100. The Company failed to redeem\nthe Series C shares on the August 9, 2025 redemption date and a penalty of 114 Series C shares with a value of $149,307 was recorded.\nIn August 2025 the Company redeemed 95 Series C shares for $125,000 including a deemed dividend of $29,871. In September 2025 the Company\nfailed to convert a conversion notice of 96 shares. This conversion was withdrawn inI December 2025 and a new conversion for 85 Series\nC shares with a value of $111,690 including a dividend of $84,690 with a corresponding adjustment to paid in capital .In exchange for\nthe converted Series C shares , the Company issued 1,994,464 common shares. In January 2026, the Company failed to convert a conversion\nnotice of 80 shares. On March 19, 2026 the Company entered into an agreement with the investor whereby the parties agreed to reduce the\npenalty on the September 2025 and January 2026 failed conversion to 133 Series C shares at a value of $175,140 ( The penalty was reduced\nfrom 345 Series C shares to 133 Series C shares) . The parties agreed on the Series C share balance at February 28, 2026 to be 417 series\nC shares. In addition the parties agreed to issue an additional 222 Series C shares for proceeds of $200,000 and fees of $22,000. These\nshares have a redemption value of $291.708. Also on March 19, 2026 ,the parties agreed to convert 165 Series C shares at a value of $198,000\nfor 13,550,625 common shares. At February 28, 2026 and February 28, 2025 there are 417 and 306 outstanding Series C shares.\n\n** **\n\n**Series\nF Convertible Preferred Stock**\n\n \n\nEach\nholder of Series F Convertible Preferred Shares may, at any time and from time to time convert all, but not less than all, of their shares\ninto a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares\nof common stock of the Company on the date of conversion by three and 45 100ths (3.45) on a pro rata basis.\n\n \n\nOn\nApril 30, 2024 the Company increased authorized shares to 10,000 Series F Preferred Shares.\n\n \n\n**Series\nF Preferred Stock Activity:**\n\n \n\nDuring\nthe year ended February 28, 2026 Series F shareholders there was no activity.\n\n \n\nDuring\nthe year ended February 28, 2025 Series F shareholders had the following activity:\n\n \n\n \n—\nA\nSeries F preferred shareholder exchanged 20 Series F preferred shares for a $400,000 note payable. (see Note 11). The Company record\nan adjustment to the par value of the shares of $20, paid -in capital for the carrying value of the shares of $65,793 with the remaining\namount of $334,187 a deemed dividend.\n\n \n\nAt\nboth February 28, 2026 and February 28, 2025 there are 2513 outstanding Series F preferred stock.\n\n** **\n\n**Unissued\nSeries F Preferred Stock**\n\n \n\nAt\nboth February 28, 2026 and February 28, 2025 there remains 46 issuable Series F preferred stock at a value of $99,086.\n\n \n\n**Summary\nof Preferred Stock Warrant Activity**\n\n SUMMARY OF PREFERRED STOCK WARRANT ACTIVITY\n\n  \nNumber\nof\n\nSeries F\n\nPreferred\n\nWarrants  \n\n**Weighted**\n\n**Average\nExercise Price**\n  \n\n**Weighted**\n\n**Average\nRemaining\nYears**\n \n\nOutstanding at March 1, 2025 \n 939  \n$1.00  \n 8.5 \n\nIssued \n —  \n —  \n — \n\nExercised \n —  \n —  \n — \n\nForfeited and cancelled \n —  \n —  \n — \n\nOutstanding at February 28, 2026 \n 939  \n$1.00  \n 7.5 \n\n \n\nF-32\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Summary\nof Common Stock Activity**\n\n \n\nThe\nCompany increased authorized common shares from 5,000,000,000 to 6,000,000,000 on July 8, 2022, from 6,000,000,000 to 7,225,000,000 on\nMarch 19, 2023 from 7,225,000,000 to 10,000,000,000 on August 30, 2023, from 10,000,000,000 to 12,500,000,000 on March 22, 2024., from\n12,500,000,000 to 15,000,000,000 on October 4, 2024 from 15,000,000,000 to 20,000,000,000 on February 21, 2025, from 20,000,000,000 to\n23,000,000,000 on July 25, 2025 and from 23,000,000,000 to 27,500,000,000 on October 15, 2025.\n\n \n\nThe\nCompany decreased authorized common shares from 27,500,000,000 to 12,000,000,000 on March 19, 2026.\n\n \n\nOn\nFebruary 5, 2026, the holders of a majority of the voting power of the Company’s outstanding voting securities executed the written\nconsent approving a reverse stock split of the Company’s issued and outstanding Common Stock at a ratio of 1-for-100. The common\nshares have been adjusted to reflect this reverse stock split.\n\n \n\n**Summary\nof Common Stock Activity**\n\n \n\nDuring\nthe year ended, February 28, 2026, common shareholders had the following activity:\n\n \n\n \n—\nthe\nCompany issued 50,403,802 common shares with gross proceeds of $5,185,344 and net proceeds of $4,801,184 after paid issuance costs\nof $274,161. Included in these common shares was a commitment fee of $90,000 on the issuance of 1,354,167 shares bringing total fees\nto $364,161.\n\n \n \n \n\n \n—\nthe\nCompany issued 71,350,000 common shares in gross proceeds of $6,384,000 to repay $5,411,000 loans payable and $37,500 in accrued\ninterest with loss on settlement of $935,500 .\n\n \n \n \n\n \n—\n\nthe\nCompany issued 1,994,464 common shares in gross proceeds of $111,690 on the conversion of\n85 Series C Preferred Shares. A dividend of $84,690 was recorded with a corresponding adjustment\nto paid -in capital.\n\n \n\nDuring\nthe year ended, February 28, 2025, common shareholders had the following activity:\n\n \n\n \n—\nthe\nCompany issued 49,796,369 common shares with gross proceeds of $13,697,245 and net proceeds of $13,120,679 after paid issuance costs\nof $576,565. Included in the net proceeds are $418,669 in share proceeds receivable received after year end. Included in these common\nshares was a commitment fee of $125,000 on the issuance of 43,859,650 shares bringing total fees to $701,565.\n\n \n \n \n\n \n—\nthe\nCompany issued 1,940,659 common shares to repay $562,000 loans payable from two different lenders.\n\n \n\n**Summary\nof Warrant and Stock Option Activity**\n\n SUMMARY OF WARRANT AND STOCK OPTION ACTIVITY\n\n  \nNumber\nof\nWarrants  \nWeighted\nAverage\nExercise Price  \nWeighted\nAverage\nRemaining Years \n\nOutstanding at February 29, 2024 \n 3,005,957  \n$0.30  \n 1.00 \n\nIssued \n —  \n —  \n — \n\nExercised \n —  \n —  \n — \n\nForfeited and cancelled \n (2,533,243) \n (0.30) \n — \n\nOutstanding at February 28, 2025 \n 472,714  \n$0.30  \n 2.44 \n\nIssued \n —  \n —  \n — \n\nExercised \n —  \n —  \n — \n\nForfeited and cancelled \n (2,714) \n (0.04) \n — \n\nOutstanding at February 28, 2026 \n 470,000  \n$0.04  \n 1.44 \n\n \n\nDuring\nthe year ended February 28, 2026 warrant holders had the following activity:\n\n \n\n \n—\nDuring\nthe year warrants to acquire 2,714 shares expired.\n\n \n\nDuring\nthe year ended February 28, 2025 warrant holders had the following activity:\n\n \n\n \n—\nDuring\nthe year warrants to acquire 2,533,243 shares expired.\n\n \n\nF-33\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nFor\nthe years ended February 28, 2026 and February 29, 2025, the Company recorded a total of $0 and $0, respectively on stock-based payments\nfor warrants with a corresponding adjustment to additional paid-in capital.\n\n \n\nFor\nthe years ended February 28, 2026 and February 28, 2025 the Company recorded a total of $315,848 and $331,685 respectively, to stock-based\ncompensation for options and shares with a corresponding adjustment to additional paid-in capital. In addition for both the years ended\nFebruary 28, 2026 and February 28, 2025 the Company recorded other stock based compensation of $0 payable in Series G Preferred shares\nwhich have not yet been issued.\n\n \n\n**Summary\nof Common Stock Option Activity**\n\n \n\nOn\nApril 14, 2021, the Shareholders of Series E Preferred Stock and the Board of Directors of our Company (“Board”) approved\nand adopted the 2021 Incentive Stock Plan (the “2021 Plan”). On August 11, 2022 the Company amended the 2021 Plan increasing\nthe maximum number of shares applicable to the 2021 Plan from 50,000 to 1,000,0000 On August 14, 2023 the Company further amended the\nplan increasing the maximum shares to 2,000,000.\n\n \n\nThe\npurpose of the 2021 Plan is to promote the success of the Company by authorizing incentive awards to retain Directors, executives, selected\nEmployees and Consultants, and reward participants for making major contributions to the success of the Company. The 2021 Plan authorizes\nthe granting of stock options, restricted stock, restricted stock units, stock appreciation rights and stock awards. A total of two million\n(2,000,000) shares of common stock may be issued under the 2021 Plan. All awards under the 2021 Plan, whether vested or unvested, are\nsubject to the terms of any recoupment, clawback or similar policy of the Company in effect from time to time, as well as any similar\nprovisions of applicable law, which could in certain circumstances require repayment or forfeiture of awards or any shares of stock or\nother cash or property received with respect to the awards, including any value received from a disposition of the shares acquired upon\npayment of the awards. The 2021 Plan will be administered by the Board or any Committee authorized by the Board, if applicable, which\nwill have the sole authority to, among other things: construe and interpret the 2021 Plan; make rules and regulations relating to the\nadministration of the 2021 Plan; select participants; and establish the terms and conditions of awards, all in accordance with the terms\nof the 2021 Plan. The 2021 Plan will remain in effect until April 14, 2031, unless sooner terminated by the Board. Termination will not\naffect awards then outstanding.\n\n \n\nDuring\nthe year ended February 28, 2026 the Company had the following common stock option activity:\n\n \n\n—\nOn\nthe original 2021 plan, options to purchase 33,000 shares were forfeited due to employee terminations. On the 2023 plan (see below)\n57,160 options to purchase shares were forfeited due to employee terminations.\n\n \n\nDuring\nthe year ended February 28, 2025 the Company had the following common stock option activity:\n\n \n\n—\nOn\nthe original 2021 plan, options to purchase 24,750 shares were forfeited due to employee terminations. On the 2023 plan (see below)\n39,639 options to purchase shares were forfeited due to employee terminations.\n\n \n\nF-34\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Summary\nof Common Stock Option Activity**\n\n** **SUMMARY OF COMMON STOCK OPTION ACTIVITY\n\n  \nNumber\nof\n\nOptions  \n\n**Weighted**\n\n**Average\nExercise Price**\n  \nWeighted\nAverage\n\nRemaining\n\nYears \n\nOutstanding at March 1, 2024 \n 1,886,670  \n$2.00  \n 4.10 \n\nIssued \n —  \n —  \n — \n\nExercised \n —  \n —  \n — \n\nForfeited, extinguished\nand cancelled \n (64,389) \n$2.00  \n (3.50)\n\nOutstanding at February 28, 2025 \n 1,822,281  \n$2.00  \n 3.10 \n\n \n\n  \nNumber\nof\n\nOptions  \n\n**Weighted**\n\n**Average\nExercise Price**\n  \nWeighted\nAverage\n\nRemaining\n\nYears \n\nOutstanding at March 1, 2025 \n 1,822,281  \n$2.00  \n 3.10 \n\nIssued \n —  \n —  \n — \n\nExercised \n —  \n —  \n — \n\nForfeited, extinguished\nand cancelled \n (90,160) \n$2.00  \n (2.60)\n\nOutstanding at February 28, 2026 \n 1,732,121  \n$2.00  \n 2.10 \n\n \n\n**12.\nCOMMITMENTS AND CONTINGENCIES**\n\n \n\n**Litigation**\n\n \n\nOccasionally,\nthe Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision\nfor a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated.\nIf these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed\nconsolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series\nof complex judgments about future events and can rely heavily on estimates and assumptions.\n\n \n\nThe\nrelated legal costs are expensed as incurred.\n\n \n\nOn\nSeptember 24, 2024, a prospective lender filed a claim against the Company for an alleged breach of a non-binding term sheet made on\nJune 7, 2024. The Company and its counsel believe the claim is without merit however the courts have mandated mediation. After consideration\nof business factors the parties executed a settlement agreement in June 2025 with the Company agreeing to pay $65,000 with no admission\nof wrongdoing. The Company paid the $65,000 on August 1, 2025.\n\n \n\nF-35\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**Operating\nLease**\n\n \n\nOn\nMarch 10, 2021, the Company entered into a 10 year lease agreement for a manufacturing facility at 10800 Galaxie Avenue, Ferndale, Michigan,\n48220, commencing on May 1, 2021 through to April 30, 2031 with a minimum base rent of $15,880 per month. The base rent increase by 3%\nper annum commencing May 1, 2024. The Company paid a security deposit of $15,880.\n\n \n\nOn\nFebruary 5, 2024, the Company entered into a 3-year lease agreement for a vehicle commencing February 5, 2024 through to February 5,\n2027 with a minimum base rent of $1,223 per month. The Company paid a down payment of $9,357.\n\n \n\nOn\nMarch 11, 2025, the Company entered into a 3-year lease agreement for a vehicle commencing March 11, 2025 through to March 11, 2028 with\na minimum base rent of $1,286 per month. The Company paid a down payment of $13,188. The Company recorded the right of use asset of $53,739\nwith a corresponding adjustment to operating lease liability.\n\n \n\nThe\nCompany’s leases are accounted for as operating leases. The weighted average discount rate used was 10% and the weighted average\nremaining lease term at February 28, 2026 was 4.93 years. Rent expense and operating lease cost are recorded over the lease terms on\na straight-line basis. Rent expense and operating lease cost was $251,883 and $240,731 for the years ended February 28, 2026 and February\n28, 2025, respectively.\n\n SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES\n\nMaturity of\nLease Liabilities \nOperating\n\nLeases \n\nFebruary 28, 2027 \n$243,690 \n\nFebruary 28, 2028 \n 227,383 \n\nFebruary 29, 2029 \n 207,558 \n\nFebruary 28, 2030 \n 207,558 \n\nFebruary 28, 2031 \n 207,558 \n\nFebruary 28, 2032 and after \n 34,593 \n\nTotal lease payments \n 1,128,340 \n\nLess: Interest \n (207,956)\n\nPresent value of lease liabilities \n$920,384 \n\n \n\nF-36\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**13.\nLOSS PER SHARE**\n\n \n\nThe\nnet loss per common share amounts were determined as follows:\n\n SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE\n\n  \n2026  \n2025 \n\n  \nFor\nthe Year Ended \n\n  \nFebruary 28,  \nFebruary 28, \n\n  \n2026  \n2025 \n\nNumerator: \n    \n   \n\nNet loss available to common shareholders \n$(14,510,251) \n$(18,935,592)\n\n  \n    \n   \n\nEffect of common stock equivalents \n    \n   \n\nLess redemption dividend\nto Series F and Series B preferred shareholders \n (114,561) \n (423,476)\n\nNet loss adjusted for common stock equivalents \n (14,624,812) \n (19,358,968)\n\n  \n    \n   \n\nDenominator: \n    \n   \n\nWeighted average shares - basic \n 202,908,578  \n 116,476,733 \n\n  \n    \n   \n\nNet loss per share – basic \n$(0.07) \n$(0.16)\n\n  \n    \n   \n\nDenominator: \n    \n   \n\nWeighted average shares – diluted \n 202,908,578  \n 116,476,733 \n\n  \n    \n   \n\nNet loss per share – diluted \n$(0.07) \n$(0.16)\n\n \n\nThe\nanti-dilutive shares of common stock equivalents for the years ended February 28, 2026 and February 28, 2025 were as follows:\n\n SCHEDULE OF ANTI-DILUTIVE SHARES OF COMMON STOCK EQUIVALENTS\n\n  \n2026  \n2025 \n\n  \nFor\nthe Year Ended \n\n  \nFebruary 28,  \nFebruary 28, \n\n  \n2026  \n2025 \n\nConvertible Series F Preferred\nShares \n 924,161,175  \n 497,229,655 \n\nConvertible Series C Preferred Shares \n 22,830,847  \n 1,718,308 \n\nConvertible and exchangeable debt \n 1,095,380,027  \n — \n\nStock options and warrants \n 2,202,121  \n 2,294,996 \n\nTotal \n 2,044,574,170  \n 501,242,959 \n\n \n\nF-37\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**14.\nINCOME TAXES**\n\n \n\nThe\nCompany has adopted ASC 740-10, “*Income Taxes”*, which requires the use of the liability method in the computation\nof income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation\nallowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.\n\n \n\nThe\nincome tax expense (benefit) consisted of the following for the fiscal years ended February 28, 2026 and ended February 28, 2025:\n\n SCHEDULE OF INCOME TAX EXPENSES (BENEFIT)\n\n  \n **February\n28,\n2026**  \n **February\n28,\n2025** \n\nTotal current \n$—  \n$— \n\nTotal deferred \n —  \n — \n\nTotal \n$—  \n$— \n\n \n\nDeferred\nincome taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial\nreporting purposes and the amounts used for income tax purposes.\n\n \n\nThe\nfollowing is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal\nyears ended February 28, 2026 and February 28, 2025:\n\n SCHEDULE OF EXPECTED STATUTORY FEDERAL INCOME TAX PROVISION\n\n  \nFebruary\n28,\n\n2026 \n\nFederal statutory rate \n$(2,900,000)\n\nState income tax benefit, net of federal benefit \n (660,000)\n\nNon deductible interest \n 500,000 \n\nNon deductible stock based compensation \n 334,000 \n\nChange in valuation allowance \n 2,726,000 \n\nTotal \n$— \n\n \n\n  \nFebruary\n28,\n\n2025 \n\nFederal statutory rate \n$(4,000,000)\n\nState income tax benefit, net of federal benefit \n (900,000)\n\nNon deductible interest \n 500,000 \n\nNon deductible stock based compensation \n 322,000 \n\nChange in valuation allowance \n 4,078,000 \n\nTotal \n$— \n\n \n\nFor\nthe years ended February 28, 2026 and February 28, 2025, the expected tax benefit, temporary timing differences and long-term timing\ndifferences are calculated at the 21% statutory rate.\n\n \n\nF-38\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\nSignificant\ncomponents of the Company’s deferred tax assets and liabilities were as follows for the fiscal years February 28, 2026 and February\n28, 2025:\n\n SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES\n\n  \nFebruary\n28,\n\n2026  \nFebruary\n28,\n\n2025 \n\nDeferred tax assets: \n    \n   \n\nNet operating loss carryforwards \n$22,726,000  \n$20,000,000 \n\n  \n    \n   \n\nDeferred tax liabilities: \n    \n   \n\nDepreciation \n —  \n — \n\nDeferred revenue \n —  \n — \n\nTotal deferred tax liabilities \n —  \n — \n\n  \n    \n   \n\nNet deferred tax assets: \n    \n   \n\nLess valuation allowance \n (22,726,000) \n (20,000,000)\n\nNet deferred tax\nassets (liabilities) \n$—  \n$— \n\n \n\nThe\nCompany has incurred losses since inception, therefore, the Company has no federal tax liability. Additionally there are limitations\nimposed by certain transactions which are deemed to be ownership changes which occurred in the Company on August 28, 2017. The net deferred\ntax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward was approximately\n$90,000,000 at February 28, 2026 and $76,973,800 at February 28, 2025, that is available for carryforward for federal income tax purposes\nand begin to expire in 2030.\n\n \n\nAlthough\nthe Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration. Accordingly, the future income\ntax asset amounts have been fully reserved by a valuation allowance.\n\n \n\nThe\nCompany has maintained a full valuation allowance against its deferred tax assets at February 28, 2026 and February 28, 2025. A valuation\nallowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not\nbe realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided.\n\n \n\nThe\nCompany does not have any uncertain tax positions at February 28, 2026 and February 28, 2025 that would affect its effective tax rate.\nThe Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because\nthe Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax\nauthorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and\npenalties as part of income tax expense.\n\n \n\nThe\nCompany’s tax returns for the years ended February 28, 2025 and February 29, 2024, and February 28, 2023 are open for examination\nunder Federal statute of limitations.\n\n \n\nF-39\n\n[Table of Contents](#toc_002)\n\n \n\n**ARTIFICIAL\nINTELLIGENCE TECHNOLOGY SOLUTIONS INC.**\n\n**NOTES\nTO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**15.\nSUBSEQUENT EVENTS**\n\n \n\nSubsequent\nto February 28, 2026 through to filing date,\n\n \n\n—\nthe Company issued 36,786,492 common shares pursuant to a share purchase agreement for gross proceeds of $900,871, issuance costs of\n$77,391 and cash proceeds of $823,480.\n\n \n\n—the\nCompany issued 39,000,000 shares to a lender to settle $745,900, pursuant to exchange agreements\nwith the lender.\n\n \n\n—the\nSeries C Preferred Shareholder converted 298 Series C preferred shares at a value of $391,572\nfor 24,473,250 common shares\n\n \n\n—on\nMay 4 2026 the Company entered into an Equity Financing Agreement whereby an investor shall\ninvest up to $10,000,000 over the course of thirty-six (36) month at a purchase price of\neighty-seven percent (87%) of the average of the three lowest bid trade price in the 10 day\npreceding period. In conjunction with the above agreement, the Company entered into a Registration\nRights Agreement.\n\n \n\n—on\nMarch 12, 2026 the Company issued a promissory note to a lender for $170,000 with cash proceeds\nof $150,000 and an original issue discount of $20,000. The loan bears interest at 15% compounding\nannually, matures in 1 year and has a general security charging all of the Company’s\npresent and after-acquired property.\n\n \n\n—on\nMarch 19, 2026 the Company entered into a memorandum of understanding whereby the outstanding\nSeries C Preferred Shares were adjusted to 417 Series C Preferred Shares. The memorandum\nreduced penalties that were added after the Company refused conversions . The reduction amounted\nto 212.16 Series C Preferred Shares or a stated value of $254,492. In exchange, the Company\nagreed to proceed with the present conversion of 165 Series C Preferred shares for 13,550,625\ncommon shares and issue 222 new Series C shares with a redemption value of $291,708 in exchange\nfor net proceeds of $200,000.\n\n \n\n—on\nMarch 25, 2026, the Company issued a convertible, redeemable note to a lender for $110,000\nwith cash proceeds of $95,000, an original issue discount of $10,000, and $5,000 for fees.\nThe loan bears interest at 12%, the note is redeemable by the Company at any time subject\nto a premium ranging from 110% to 140% if redeemed within the first 180 days of the note\n. The note matures in 1 year and converts after 180 days at 80% of the lowest trading price\n15 trading days prior to the conversion date.\n\n \n\n—on\nMarch 25, 2026, the Company issued a convertible, redeemable note to a lender for $630,000\nwith cash proceeds of $595,000, an original issue discount of $30,000, and $5,000 for fees.\nThe loan bears interest at 12%, the note is redeemable by the Company at any time subject\nto a premium ranging from 110% to 140% if redeemed within the first 180 days of the note.\nThe note matures in 1 year and converts after 180 days at 20% of the lowest trading price\n15 trading days prior to the conversion date. A refundable commitment fee of 14.1 million\ncommon shares was issued, but is returnable if the loan plus accrued interest is paid back\nby May 5, 2026. On May 5, 2026, the Company repaid in full, principal and interest of $638,492\nand the 14.1 million commitment fee shares were returned.\n\n \n\n—on\nApril 20, 2026, the Company issued a convertible note to a lender for $277,778 with cash\nproceeds of $250,000, an original issue discount of $27,778, and $5,000 for fees. The loan\nbears interest at 12%, and the note matures in 1 year. If the loan is prepaid, one year’s\nfull interest of $ 33,333 is due. The note converts at any time at 75% of the lowest closing\ntrading price 10 trading days prior to the conversion date. Interest is payable in common\nshares at either the redemption date or maturity. A commitment fee of 5million common shares\nat a fair value of $164,500 was issued.\n\n \n\n—on\nApril 20, 2026, the Company issued a convertible, redeemable note to a lender for $257,000\nwith cash proceeds of $250,000 and $7,000 for fees. The loan bears interest at 10%, the note\nis redeemable by the Company at any time subject to a premium ranging from 120% to 125% if\nredeemed within the first 180 days of the note. The note matures on January 15, 2027, and\nconverts after 180 days at 65% of the lowest trading price 10 trading days prior to the conversion\ndate.\n\n \n\n—on\nMay 1, 2026, the Company issued a convertible, redeemable note to a lender for $157,000 with\ncash proceeds of $150,000 and $7,000 for fees. The loan bears interest at 10%, the note is\nredeemable by the Company at any time subject to a premium ranging from 120% to 125% if redeemed\nwithin the first 180 days of the note. The note matures on January 15, 2027, and converts\nafter 180 days at 65% of the lowest trading price 10 trading days prior to the conversion\ndate.\n\n \n\n—on\nMay 4, 2026, the Company issued a convertible, redeemable note to a lender for $700,000 with\ncash proceeds of $630,000 and an original issue discount of $70,000. The loan bears interest\nat 12%, and the note matures in 1 year. The note must be redeemed in monthly instalments\nof 10% of outstanding principal plus accrued interest commencing 60 days after issuance.\nThe note is convertible after 180 days at 65% of the lowest closing trading price 10 trading\ndays prior to the conversion date. A commitment fee of 1.25 million common shares at a fair\nvalue of $28,750 was issued.\n\n   \n\n —on\nMay 29, 2026 the Company issued a promissory note to a lender for $225,000 with cash proceeds\nof $200,000 and an original issue discount of $25,000. The loan bears interest at 15% compounding\nannually, matures in 1 year and has a general security charging all of the Company’s\npresent and after-acquired property.\n\n \n\n—on\nJune 3, 2026, the Company issued a convertible, redeemable note to a lender for $230,000\nwith cash proceeds of $200,000 an original issue discount of $23,000 and $7,000 for fees.\nThe loan bears interest at 6%, the note is redeemable by the Company at any time subject\nto a premium ranging from 105% to 140% if redeemed within the first 180 days of the note.\nThe note matures on June 3, 2027, and converts after 180 days at 65% of the lowest trading\nprice 20 trading days prior to the conversion date, including the conversion date.\n\n \n\nF-40"}