DERIVATIVE LIABILITY

6 Months Ended

Aug. 31, 2026

12. DERIVATIVE LIABILITY

As of August 31 ,2026 the Company revalued the fair value of all of the Company’s derivative liabilities associated with the conversion features on the convertible notes payable and warrants, and Preferred Series F warrants and determined that it had a total derivative liability of $3,890,582.

The Company estimated the initial fair value of the derivative liabilities from the embedded conversion feature and an August 19, 2026 warrant having a value of $2,206,434 using a Monte-Carlo simulation model using the following key assumptions during the six months ended August 31, 2026:

Strike price	$0.004 - $0.036
Fair value of Company common stock		$0.004 - $0.117
Dividend yield		0.00	%
Expected volatility		117.88% - 139.11%
Risk free interest rate		3.69% - 4.15%
Expected term (years)		0.31 -1.0

The Company estimated the initial fair value of the derivative liabilities on the Series F warrants having a value of $1,459,056 using the Monte-Carlo simulation model using the following key assumptions during the six months ended August 31, 2026:

Strike price	$0.0004 - $0.036
Fair value of Company common stock	$0.004 - $0.0078
Dividend yield	0.00	%
Expected volatility	167.99% - 168.1%
Risk free interest rate	4.69% -4.77%
Expected term (years)	10.34 - 10.42

The changes in the derivative liabilities (Level 3 financial instruments) measured at fair value on a recurring basis for the six months ended August 31, 2026 were as follows:

Balance as of March 1, 2026	$	-

Derivative discount on convertible notes including $11,742 warrant liability		1,745,452
Derivative discount on Preferred Series F warrants included with debt		650,000
Derivative liability loss		1,495,130
Balance as of August 31, 2026	$	3,890,582

For the six months ended August 31, 2026 the Company included a derivative liability loss of $1,495,130 which was comprised of the following:

SCHEDULE OF DERIVATIVE LIABILITY LOSS


Day-one derivative liability loss		1,270,038
Change in fair value of derivative liabilities		225,092
Total derivative liability loss at August 31, 2026	$	1,495,130

ARTIFICIAL INTELLIGENCE TECHNOLOGY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)