What changed in this filing

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Item 1. Financial Statements

2023-10-18 compared with 2023-07-24 · 426 added, 374 removed, 241 unchanged (77% of the section changed)

20 unchanged sentences

Operating lease liability, current portion

Warrant derivative liability

Derivative warrant liability

Total current liabilities

1 unchanged sentence

Note payable-related party, non-current portion

Operating lease liability, non-current portion

Operating lease liability

Total liabilities

4 unchanged sentences

150,000,000 shares authorized;

97,234,708 and 94,648,346 issued and outstanding at May 31, 2023 and February 28, 2023, respectively.

99,525,617 and 94,648,346 issued and outstanding at August 31, 2023 and February 28, 2023, respectively.

Additional paid-in capital

7 unchanged sentences

Three-Months Ended

Six-Months Ended

(amounts in thousands, except share and per share data)

Cost of goods sold

Cost of goods sold (includes inventory write-down of $ 58 for the three and six months ended August 31, 2023)

Operating expenses

Engineering, research and development (including $ 36 , $ 35 , $ 52 and $ 34 to related party, respectively)

Selling, general and administration

Selling, general & administration

Total operating expenses

1 unchanged sentence

Other income (expense):

Interest expense, net

Interest expense, net (including $ 319 , $ 40 , $ 781 and $ 125 to related parties, respectively)

Change in fair value of derivative warrant liability

4 unchanged sentences

CONDENSED STATEMENTS OF SHAREHOLDERS’

thousands, except share data)

and Six Months Ended August 31, 2023

(amounts in thousands, except share data)

Shareholders’

2 unchanged sentences

Common shares issued for cash

Fair value of warrants issued for note settlement

Balance, May 31, 2022 (unaudited)

Balance, May 31, 2023

Common shares issued for cash

Balance, August 31, 2023 (unaudited)

$ ( 477,035 )

and Six Months Ended August 31, 2022

(amounts in thousands, except share data)

Shareholders’

Balance, February 28, 2022

1 unchanged sentence

Common shares issued for cash

Balance, May 31, 2023 (unaudited)

Fair value of warrants issued for note settlement

Balance, May 31, 2022

Common shares issued for cash

Balance, August 31, 2022 (unaudited)

$ ( 472,682 )

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(amounts in thousands)

1 unchanged sentence

Depreciation and amortization

Inventory write-down

Change in fair value of derivative warrant liability

4 unchanged sentences

Accrued interest on notes payable

Customer advances

Operating lease liability

29 unchanged sentences

The accompanying unaudited condensed financial

statements as of and for the three months ended May 31, 2023 and 2022, have been prepared have been prepared in conformity with accounting

principles generally accepted in the United States of America (“U.S.

GAAP”) and the applicable rules and regulations of the

Securities and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures

normally included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules

and regulations.

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring

nature that are necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as

of February 28, 2023, was derived from the Company’s audited Financial Statements as of February 28, 2023, included in the Company’s

Annual Report on Form 10-K filed with the SEC on May 26, 2023.

statements as of and for the three and six months ended August 31, 2023 and 2022, have been prepared in conformity with accounting principles

generally accepted in the United States of America (“U.S.

GAAP”) and the applicable rules and regulations of the Securities

and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures normally

included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring nature that are

necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as of February 28,

2023, was derived from the Company’s audited Financial Statements as of February 28, 2023, included in the Company’s Annual

Report on Form 10-K filed with the SEC on May 26, 2023.

These financial statements should be read in conjunction with that report.

The results of operations for the period ended May 31, 2023, may not necessarily be indicative of the results that may be expected for

results of operations for the period ended August 31, 2023, may not necessarily be indicative of the results that may be expected for

the full fiscal year ending February 28, 2024.

7 unchanged sentences

prepared assuming that the Company will continue as a going concern.

During the three-month period ended May 31, 2023, the Company reported

a net loss of approximately $ 1,141 and used cash in operating activities of approximately $ 797 , respectively, and at May 31, 2023 the

Company had a stockholders’ deficit of $ 20,546 .

In addition, at May 31,2023, convertible notes payable in the aggregate amount of

$ 4,403 are past due.

These factors raise substantial doubt about the Company’s ability to continue as a going concern within one

year of the date that the financial statements are issued.

In addition, the Company’s independent registered public accounting firm,

in its report on the Company’s February 28, 2023, financial statements, raised substantial doubt about the Company’s ability

to continue as a going concern.

The financial statements do not include any adjustments that might be necessary if the Company is unable

to continue as a going concern.

During the six-month period ended August 31, 2023, the Company recognized

net loss of $ 2,261 and used cash in operating activities of $ 1,532 , respectively.

As of August 31, 2023, the Company also has a shareholder

deficit of $ 20,909 and notes payable totaling $ 5,200 are also past due.

These factors raise substantial doubt about the Company’s

ability to continue as a going concern within one year of the date that the financial statements are issued.

In addition, the Company’s

independent registered public accounting firm, in its report on the Company’s February 28, 2023, financial statements, raised substantial

doubt about the Company’s ability to continue as a going concern.

The financial statements do not include any adjustments that might

be necessary if the Company is unable to continue as a going concern.

In the event the Company is unable to generate

12 unchanged sentences

The Company anticipates being able to obtain new sources of funding to support these actions in the upcoming

Higher inflation, the actions by the Federal Reserve

Bank to address inflation, most notably continuing increases in interest rates, and rising energy prices create uncertainty about the

future economic environment.

The Company expects that the impact of these issues will continue to evolve.

The Company believes these factors

impacted the Company’s business in 2023 and the first six months of 2024 and will continue to impact the Company’s business

in 2024 and 2025.

The implications of higher government deficits and debt, tighter monetary policy, and higher long-term interest rates

may drive a higher cost of capital for the business and an increase in the Company’s operating expenses.

As of the date of this filing, the COVID-19 pandemic

7 unchanged sentences

condition, or liquidity.

Use of Estimates

The preparation of financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date

of the financial statements, and the reported amounts of revenue and expenses during the reported periods.

Significant estimates include

assumptions made for inventory reserve, impairment testing of long-lived assets, the valuation allowance for deferred tax assets, assumptions

used in valuing derivative liabilities, assumptions used in valuing share-based compensation, and accruals for potential liabilities.

Amounts could materially change in the future.

Actual results could differ from those estimates.

Vendor Concentration

As of August 31, 2023 and February 28, 2023, there

were four vendors who accounted for over 10 % of the Company’s consolidated accounts payable.

Revenue Recognition

8 unchanged sentences

point-in-time), which also corresponds to the passage of legal title to the customer and the satisfaction of

our performance obligations to the customer.

Use of Estimates

The preparation of financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date

of the financial statements, and the reported amounts of revenue and expenses during the reported periods.

Significant estimates include

assumptions made for inventory reserve, impairment testing of long-lived assets, the valuation allowance for deferred tax assets, assumptions

used in valuing derivative liabilities, assumptions used in valuing share-based compensation, and accruals for potential liabilities.

Amounts could materially change in the future.

Actual results could differ from those estimates.

our performance obligation to the customer.

Share-Based Compensation

17 unchanged sentences

Level 3 – Unobservable inputs.

The recorded amounts of inventory, other current

assets, accounts payable, and accrued expenses approximate their fair value due to their short-term nature.

The carrying amounts of notes

payable and convertible notes payable approximate their respective fair values because of their current interest rates payable in relation

to current market conditions.

The recorded amounts of inventory, other current assets, accounts payable,

and accrued expenses approximate their fair value due to their short-term nature.

The carrying amounts of notes payable and convertible

notes payable approximate their respective fair values because of their current interest rates payable in relation to current market conditions.

The following table sets

forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of May 31, 2023 and February

(amounts in thousands)

warrant liability

forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of August 31, 2023 and February

in thousands)

August 31, 2023

Derivative warrant liability

The Company estimated

the fair value of the derivative warrant liability using the Binomial Model.

The following table

provides a roll-forward of the warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs

for the period ended May 31, 2023 as follows:

February 28, 2023

Derivative warrant liability

The Company estimated the fair value of the derivative

warrant liability using the Binomial Model.

The following table provides a roll-forward of

the warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended August

31, 2023 as follows:

(amounts in thousands, except share data)

Fair Value of

Derivative Warrants

Fair Value of Derivative Warrant Liability

February 28, 2023

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

August 31, 2023

Reclassifications

Certain February

28, 2023 balances have been reclassified to conform with the May 31, 2023 presentation.

In presenting the Company’s consolidated

balance sheet at February 28, 2023, the Company originally presented accrued interest of $ 1,389 and accrued payroll and expenses of $ 441 ,

totaling $ 1,830 as a separate line item called Accrued Expenses.

In presenting the Company’s consolidated balance sheet at May

31, 2023, the Company has reclassified the balance of accrued interest of $ 1,389 as a separate line item, and the balance of accrued

payroll and expenses of $ 441 as part of accounts payable and accrued expense in the accompanying February 28, 2023 financial statements.

Certain February 28, 2023 balances have been reclassified

to conform with the August 31, 2023 presentation.

In presenting the Company’s consolidated balance sheet at February 28, 2023, the

Company originally presented accrued interest of $ 1,389 and accrued payroll and other expenses of $ 441 , totaling $ 1,830 as a separate

line item called Accrued Expenses.

In presenting the Company’s consolidated balance sheet at August 31, 2023, the Company has reclassified

the balance of accrued interest of $ 1,389 as a separate line item, and the balance of accrued payroll and other expenses of $ 441 as part

of accounts payable and accrued expense.

Loss per share

The Company’s

loss per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period.

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average

number of shares of common stock outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net earnings

(loss) available to common shareholders by the weighted average number of shares of common stock assuming all potential shares had been

issued, and the additional shares of common stock were dilutive.

Diluted earnings (loss) per share reflects the potential dilution, using

the as-if-converted method for convertible debt, and the treasury stock method for options and warrants, which could occur if all potentially

dilutive securities were exercised.

For the three-months

ended May 31, 2023 and May 31, 2022, the calculations of basic and diluted loss per share are the same because potentially dilutive securities

would have had an anti-dilutive effect.

The Company’s loss per share amounts have

been computed based on the weighted-average number of shares of common stock outstanding for the period.

Basic earnings (loss) per share

is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares of common stock

outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders

by the weighted average number of shares of common stock assuming all potential shares had been issued, and the additional shares of common

stock were dilutive.

Diluted earnings (loss) per share reflects the potential dilution, using the as-if-converted method for convertible

debt, and the treasury stock method for options and warrants, which could occur if all potentially dilutive securities were exercised.

For the six-months ended August 31, 2023 and August

31, 2022, the calculations of basic and diluted loss per share are the same because potentially dilutive securities would have had an

anti-dilutive effect.

The potentially dilutive securities consisted of the following:

Convertible notes

Recent Accounting

Pronouncements

Recently Adopted

Accounting Pronouncements

May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”

(“ASU 2021-04”).

ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions

or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification

or exchange as an exchange of the original instrument for a new instrument.

An issuer should measure the effect of a modification or

exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately

before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding

accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance

and debt origination or modification).

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021,

including interim periods within those fiscal years.

An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications

or exchanges occurring on or after the effective date.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2021, the FASB issued

ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—

Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”).

ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding

equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of

the original instrument for a new instrument.

An issuer should measure the effect of a modification or exchange as the difference between

the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and

then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category

(equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification).

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal

An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the

effective date.

The Company adopted ASU 2021-04 effective March 1, 2022.

The adoption of ASU 2021-04

did not have any impact on the Company’s financial statement presentation or disclosures.

In September 2016, the

FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

The adoption of ASU 2021-04 did not have any impact on the Company’s

financial statement presentation or disclosures.

In September 2016, the FASB

issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires entities to use a forward-looking

7 unchanged sentences

2016-13 did not have any impact on the Company’s financial statement presentation or disclosures.

recent accounting pronouncements and guidance issued by the FASB, including its Emerging Issues Task Force, the American Institute of

Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management

to have a material impact on the Company’s present or future financial statements.

CONVERTIBLE NOTES PAYABLE, PAST DUE

Convertible notes payable consisted

of the following:

Other recent accounting pronouncements

and guidance issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and

the Securities and Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on

the Company’s present or future financial statements.

NOTE 2 – CONVERTIBLE NOTES PAYABLE, PAST

Convertible notes payable consisted of the following:

(amounts in thousands)

Convertible notes payable – past due

Fiscal 2013 and 2014, the Company issued six convertible notes payable in the aggregate of $ 4,000 .

The notes are unsecured, bear interest

at 5 % per annum and are convertible to shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

The notes were originally

due in 2014 to 2017, and were all amended in 2018 and the maturity date for all the notes was changed to January 11, 2023.

As of May 31, 2023 and

February 28, 2023, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

At May 31, 2023 and February

28, 2023, accrued interest on convertible notes payable totaled approximately $ 372 and $ 354 , respectively.

CONVERTIBLE NOTE PAYABLE-RELATED PARTY, PAST DUE

Convertible note payable – related

party consisted of the following:

In Fiscal 2013 and 2014,

the Company issued six convertible notes payable in the aggregate of $ 4,000 .

The notes are unsecured, bear interest at 5 % per annum and

are convertible to shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

The notes were originally due in 2014

to 2017, and were all amended in 2018 and the maturity date for all the notes was changed to January 11, 2023.

As of August 31, 2023

and February 28, 2023, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

NOTE 3 – CONVERTIBLE NOTE PAYABLE-RELATED

PARTY, PAST DUE

Convertible note payable – related party consisted of the following:

(amounts in thousands)

Convertible note payable –

January 24, 2017, the Company entered into a debt refinancing agreement with a former director and current shareholder of the Company.

As part of the agreement, the Company issued a $ 3,000 convertible note.

The convertible note is unsecured, bears interest at 5 % per annum,

was due February 2, 2023, and is convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

May 31, 2023, the convertible note of $ 3,000 and related accrued interest of $ 751 has reached maturity and is past due.

May 31, 2023 and February 28, 2023, accrued interest on convertible notes payable-related party totaled $ 751 and $ 713 , respectively.

NOTES PAYABLE

Convertible note payable – past due

On January 24, 2017,

the Company entered into a debt refinancing agreement with a former director and current shareholder of the Company.

As part of the agreement,

the Company issued a $ 3,000 convertible note.

The convertible note is unsecured, bears interest at 5 % per annum, was due February 2, 2023,

and is convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

As of August 31, 2023

and February 28, 2023, the convertible note of $ 3,000 and is past due.

NOTE 4 – NOTES

Notes payable consisted of the following:

5 unchanged sentences

Injury Disaster (EID) Loan

On July 1, 2020,

the Company received a $150 loan under the United States Small Business Administration (“SBA”) Economic Injury Disaster Loan

(“EID Loan”) program.

The loan is due July 1, 2050, interest accrues at 3.75% per annum, and is secured by the

assets of the Company .

Accrued interest at May 31, 2023 and February 28, 2023 was $ 12 and $ 13 , respectively.

(b) Notes payable-vehicle

and equipment

During Fiscal 2022,

the Company issued notes payable to purchase two pieces of equipment and a vehicle for $329.

The notes are secured by the equipment and

vehicle purchased.

One note for $210 is due October 31, 2024, and requires 36 equal monthly payments of approximately $6 each, including

interest at 2.9% per annum.

The second note for $78 is due January 20, 2027, and requires 72 equal monthly payments of approximately

$1.5 each, including interest at 10.9% interest per annum.

As of May 31, 2023 and February 28, 2023, the balance of the two notes was

approximately $167 and $188, respectively.

(a) Economic Injury Disaster

On July 1, 2020, the Company received a $ 150 loan

under the United States Small Business Administration (“SBA”) Economic Injury Disaster Loan (“EID Loan”) program.

The loan is due July 1, 2050, interest accrues at 3.75 % per annum, and is secured by the assets

of the Company .

(b) Notes payable-vehicle and equipment

During Fiscal 2022, the Company issued notes payable

to purchase two pieces of equipment and a vehicle for $ 329 .

The notes are secured by the equipment and vehicle purchased.

$ 210 is due October 31, 2024, and requires 36 equal monthly payments of approximately $ 6 each, including interest at 2.9 % per annum.

second note for $ 78 is due January 20, 2027, and requires 72 equal monthly payments of approximately $ 1.5 each, including interest at

10.9 % interest per annum.

As of August 31, 2023 and February 28, 2023, the balance of the two notes was $ 147 and $ 188 , respectively.

As of May 31, 2023

and February 28, 2023, the Company has one note payable due to an individual issued in September 2015 that is payable on demand with

an interest rate of 10 % per annum.

Accrued interest at May 31, 2023 and February 28, 2023 was $ 10 and $ 10 , respectively.

NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties consisted

of the following:

As of August 31, 2023 and February 28, 2023, the

Company has one note payable due to an individual issued in September 2015 that is payable on demand with an interest rate of 10 % per

NOTE 5 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties consisted of the following:

(amounts in thousands)

6 unchanged sentences

(a) Kopple Note

In fiscals 2013

through 2018, the Company issued notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate

In fiscals 2013 through 2018, the Company issued

notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate principal amount of $ 6,107 .

Robert Kopple is the former Vice-Chairman of the Company’s Board of Directors and is a current shareholder in the Company.

On March 14, 2022, the Company reached an agreement with Kopple to resolve all remaining litigation between them, including all amounts

owed to Kopple under the notes.

Under the terms of the settlement, the Company agreed to issue a new note and pay Kopple an aggregate

amount of $ 10,000 , including $ 3,000 initially due in June 2022, and $ 1,000 to be paid annually for seven years after the initial $ 3,000

Additionally, the settlement agreement granted Koppel a five year, fully vested warrant exercisable into 3,331,664 shares of

the Company’s common stock at a price of $ 0.85 per share with a fair value of $ 1.1 million.

The Company assessed

the settlement with Kopple under ASC 470 and determined that the guidance under troubled debt restructuring should apply.

value of the restructured note remains the same as before the restructuring, reduced only by the fair value of the warrants issued in

connection with the transaction.

The Company determined that the future undiscounted cash flows of the restructured new Kopple note exceeded

the carrying value, and accordingly, no gain was recognized, and no adjustment was made to the carrying value of the debt, other than

the adjustment for the fair value of the warrants.

Interest expense on the new Kopple note will be computed using a new effective rate

that equates the present value of the future cash payments specified by the new terms with the carrying value of the debt.

In June 2022, the

first installment of $ 3 million became due, of which $ 150 was paid.

Through February 28, 2023, the note was amended several times to

extend the payment date of the remaining balance of $ 2,850 of the initial payment through January 2023, and the Company incurred extension

and forbearance fees totaling $ 335 , of which, $ 105 was paid and $ 230 was accrued.

As of February 28, 2023, outstanding principal balance

amounted to $ 10.9 million and accrued interest and fees of $ 282 , for a total of $ 11.2 million.

In January 2023, pursuant to the terms of the

amended note payable, the Company started accruing interest on the outstanding note balance at a rate of 6 % per annum, compounded annually.

During the three months ended March 31, 2023, the Company recorded extension and forbearance fees totaling $ 260 , of which $ 60 was paid,

to further extend the payment date of the $ 2,850 to May 2023, and accrued interest at 6 % of $ 149 .

In addition, the Company recorded a

reduction of $ 62 to the note liability to adjust stated interest of 6 % to an effective interest rate of 3.5 %.

As of May 31, 2023, outstanding

balance of the note payable amounted to $ 10.8 million and accrued interest and fees of $ 631 for a total of $ 11.5 million.

In July 2023,

the note was again amended to extend the payment date of the $ 2,850 to August 1, 2023 (See Note 12).

The settlement

provides for certain increases in the amounts payable to Kopple and the right of such parties to enter judgement against the Company

if the Company remains in uncured default in its payment obligations.

Pursuant to the settlement agreement, the Company is also subject

to certain affirmative and negative covenants such as periodic submission of financial statements to Koppel and restrictions on future

financing and investing activities, as defined in the agreement, including the covenant to not create any indebtedness that is senior

in right of payment to the Kopple debt.

Management believes such covenants are normal for this type of transaction and that management

believes meeting these covenants will not affect operations and the Company was in compliance with all covenants as of May 31, 2023.

Note payable-Gagerman

Gagerman, the Company’s former CEO and CFO whose employment was permanently terminated in July 2019, claims that in April 2014

the Company issued an unsecured demand promissory note to him in the amount of $ 82 that bears interest at a rate of 10 % per annum.

claims that this note has not been repaid to date and is now owed.

June 2022, Gagerman brought suit against the Company for repayment of this alleged note.

Despite the fact that, based on Gagerman’s

allegations, the note was issued during a period when Gagerman was the Company’s CEO, CFO, Corporate Secretary and Chairman of

the Company’s Board of Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note.

disputes that any amount is presently owed to Gagerman.

Additionally, the Company has filed a cross-complaint against Gagerman for, among

things, conversion, violation of California Business & Professions Code §17200, and various breaches of fiduciary duty that

the Company believes Gagerman committed against the Company.

on Gagerman’s claims, as of May 31, 2023 and February 28, 2023, the outstanding balance of the Gagerman notes payable and accrued

interest would amount to approximately $ 166 and $ 16 , respectively.

As of May 31, 2023 and February 28, 2023, despite the fact that the

Company disputes Gagerman’s claims, under the guidance of ASC 450 - Contingencies , the Company has recorded the claimed

notes payable and accrued interest amounts of approximately $ 166 and $ 164 , respectively, in the accompanying balance sheets.

Jiangsu Shengfeng Note

On November 20,

2019, the Company reached an agreement with a former joint venture partner Jiangsu Shengfeng regarding the return of $ 700 that had been

advanced to the Company in prior years.

As a result, in November 2019, and the Company issued a non-interest-bearing promissory note

for $ 700 to be paid over an 11-month period beginning March 15, 2020, through February 15, 2021.

As of May 31, 2023 and February 28,

2023, the principal due was $ 700 , respectively, and was past due.

July 2017 and March 2022, the Company was engaged in litigation with Kopple relating to more than $ 13,000 of principal and accrued interest

due under the notes, and the equivalent of the approximately 23 million warrants.

On March 14, 2022, the Company reached an agreement

with Kopple and resolved all remaining litigation between them, including all amounts owed to Kopple under the notes.

Under the terms

of the settlement, the Company agreed to issue a new note and pay Kopple an aggregate amount of $ 10,000 , including $ 3,000 initially due

in June 2022, and $ 1,000 to be paid annually for seven years after the initial $ 3,000 is paid.

Additionally, the settlement agreement

granted Koppel a five year, fully vested warrant exercisable into 3,331,664 shares of the Company’s common stock at a price of $ 0.85

per share with a fair value of $ 1,100 .

The Company assessed the settlement with Kopple

under ASC 470 and determined that the guidance under troubled debt restructuring should apply.

The carrying value of the restructured

note remains the same as before the restructuring, reduced only by the fair value of the warrants issued in connection with the transaction.

The Company determined that the future undiscounted cash flows of the restructured new Kopple note exceeded the carrying value, and accordingly,

no gain was recognized, and no adjustment was made to the carrying value of the debt, other than the adjustment for the fair value of

the warrants.

Interest expense on the new Kopple note is computed using a new effective rate that equates the present value of the future

cash payments specified by the new terms with the carrying value of the debt.

In June 2022, the first installment of $ 3,000

became due, of which $ 150 was paid and $ 2,850 is still outstanding.

Subsequently, the note was amended several times to extend the payment

date of the remaining balance of $ 2,850 of the initial payment through January 2023, and the Company incurred extension and forbearance

fees totaling $ 335 .

In January 2023, pursuant to the terms of the amended

note payable, the Company started accruing interest on the outstanding note balance at a rate of 6 % per annum, compounded annually.

of February 28, 2023, outstanding principal balance amounted to $ 10,915 .

During the six months ended August 31, 2023, the note

was amended multiple times to extend the payment term of the remaining balance of $ 2,850 of the initial payment and installment payment

of $ 1,000 , originally due in June 2023, through August 1, 2023.

As a result of these amendments, the Company incurred extension and forbearance

fees totaling $ 390 .

In addition, the Company recorded a reduction of $ 60 to the note to adjust stated interest of 6 % to an effective interest

rate of 4.5 %.

As of August 31, 2023, outstanding balance of the note payable amounted to $ 10,855 .

Subsequent to August 31, 2023, the Company and Kopple

have agreed in principle for another extension of the deadline for payment of the $ 2,850 of the initial payment and installment payment

of $ 1,000 and intend to memorialize such an agreement in writing by end of October 2023.

Such further amendment will also indicate that

by such extension, the Company is not in default of the agreement as of August 31, 2023, and through the date that the financial statements

The settlement agreement with Kopple provides

for certain increases in the amounts payable to Kopple and the right of such parties to enter a judgement against the Company if the Company

remains in unsecured default in its payment obligations.

Pursuant to the settlement agreement, the Company is also subject to certain

affirmative and negative covenants such as periodic submission of financial statements to Koppel and restrictions on future financing

and investing activities, as defined in the agreement, including the covenant to not create any indebtedness that is senior in right of

payment to the Kopple debt.

Management believes such covenants are normal for this type of transaction and that management believes meeting

these covenants will not affect operations and the Company was in compliance with all covenants as of August 31, 2023.

(b) Note payable-Gagerman

Melvin Gagerman, the

Company’s former CEO and CFO whose employment was permanently terminated in July 2019, claims that in April 2014 the Company issued

an unsecured demand promissory note to him in the amount of $ 82 that bears interest at a rate of 10 % per annum.

Gagerman claims that this

note has not been repaid to date and is now owed.

In June 2022, Gagerman

brought suit against the Company for repayment of this alleged note.

Despite the fact that, based on Gagerman’s allegations, the

note was issued during a period when Gagerman was the Company’s CEO, CFO, Corporate Secretary and Chairman of the Company’s

Board of Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note.

The Company disputes that any

amount is presently owed to Gagerman.

Additionally, the Company has filed a cross-complaint against Gagerman for, among things, conversion,

violation of California Business & Professions Code §17200, and various breaches of fiduciary duty that the Company believes

Gagerman committed against the Company.

Although the Company

disputes Gagerman’s claims, under the guidance of ASC 450 – Contingencies , the Company has recorded the claimed notes

payable and accrued interest of approximately $ 167 and $ 164 as of August 31, 2023 and February 28, 2023, respectively.

On November 20, 2019, the Company reached an agreement

with a former joint venture partner Jiangsu Shengfeng regarding the return of $ 700 that had been advanced to the Company in prior years.

As a result, in November 2019, the Company issued a non-interest-bearing promissory note for $ 700 to be paid over an 11-month period beginning

March 15, 2020, through February 15, 2021.

As of August 31, 2023 and February 28, 2023, the

principal due was $ 700 , and was past due.

NOTE 6 – ACCRUED INTEREST

3 unchanged sentences

Accrued interest-convertible notes payable related party (past due)

Accrued interest and fees- Kopple note payable

Accrued interest and fees- Kopple note payable (related party)

Accrued interest-notes payable

1 unchanged sentence

NOTE 7 – LEASES

Our administrative,

and production operations including warehousing, are housed in an approximately 18,000 square foot facility in Lake Forest, California.

The Lake Forest lease is for 66-months effective February 2021 through August 31, 2026.

The initial monthly base rental rate was approximately

$22 per month and escalates 3% each year to approximately $26 per month in 2026.

The lease liability was determined by discounting the

future lease payments under the lease terms using a 10 % per annum discount rate to arrive at the current lease liability.

Operating lease

right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments

over the lease term.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent the

Company’s obligation to make lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements is

not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments.

The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and

supplemental cash flow information related to leases for the period are as follows:

Our administrative and production operations including

warehousing, are housed in an approximately 18,000 square foot facility in Lake Forest, California.

The Lake Forest lease is for 66-months

effective February 2021 through August 31, 2026.

The initial monthly base rental rate was approximately $ 22 per month and escalates 3 %

each year to approximately $ 26 per month in 2026.

The lease liability was determined by discounting the future lease payments under the

lease terms using a 10 % per annum discount rate to arrive at the current lease liability.

Operating lease right-of-use (“ROU”)

assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

represent our right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make

lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements is not readily determinable and the Company

utilizes its incremental borrowing rate in determining the present value of lease payments.

The operating lease ROU asset includes any

lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information

related to leases for the period are as follows:

(amounts in thousands)

Operating lease cost

(included in general and administration in the Company’s statement of operations)

Cash paid for amounts included in

the measurement of lease liabilities

Weighted average remaining lease

term – operating leases (in years)

Average discount rate – operating

The supplemental balance sheet information

related to leases for the period is as follows:

Operating lease cost (included in general and administration in the Company’s statement of operations)

Other Information

Cash paid for amounts included in the measurement of lease liabilities

Weighted average remaining lease term – operating leases (in years)

Average discount rate – operating leases

The supplemental balance sheet information related to leases for the

period is as follows:

Operating leases

3 unchanged sentences

Total operating lease liabilities

Maturities of the Company’s lease

liability is as follows:

Maturities of the Company’s lease liability is as follows:

Years Ending February 28:

3 unchanged sentences

Present value of lease liabilities

NOTE 8 – WARRANT DERIVATIVE LIABILITY

In prior years

the Company issued warrants that include a fundamental transaction provision that could give rise to an obligation to pay cash to the

warrant holder.

The Company determined that the warrants do not satisfy the criteria for classification as equity instruments due to

the existence of the cash settlement feature that is not within the sole control of the Company, and the warrants are accounted for as

liabilities in accordance with ASC 815.

The fair value of the warrants is remeasured at each reporting period, and the change in the

fair value is recognized in earnings in the accompanying statements of operations.

The warrant liability will ultimately be converted

into the Company’s equity when the warrants are exercised, or will be extinguished on the expiration of the outstanding warrants.

The following tables

summarize the derivative warrant liability:

(amounts in thousands, except

share and per share data)

NOTE 8 – DERIVATIVE WARRANT LIABILITY

In prior years the Company issued warrants that

include a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder.

The Company determined

that the warrants do not satisfy the criteria for classification as equity instruments due to the existence of the cash settlement feature

that is not within the sole control of the Company, and the warrants are accounted for as liabilities in accordance with ASC 815.

fair value of the warrants is remeasured at each reporting period, and the change in the fair value is recognized in earnings in the accompanying

statements of operations.

The warrant liability will ultimately be converted into the Company’s equity when the warrants are exercised

or will be extinguished upon the expiration of the outstanding warrants.

The following tables summarize the derivative

warrant liability:

in thousands, except share and per share data)

Risk free interest rate

4 unchanged sentences

Fair value of derivative warrant liability

STOCKHOLDERS’ DEFICIT

During the three-months

ended May 31, 2023, the Company issued 2,586,362 shares of common stock for approximately $ 853 in cash.

During the three-months ended

May 31, 2022 the Company issued 2,116,665 shares of common stock for approximately $ 635 .

Fair Value of

February 28, 2023

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

August 31, 2023

NOTE 9 – SHAREHOLDERS’ DEFICIT

During the six-months ended August 31, 2023, the

Company issued 4,877,271 shares of common stock for approximately $ 1,610 in cash.

During the six-months ended August 31, 2022 the

Company issued 6,060,333 shares of common stock for approximately $ 1,669 .

Stock Options

A summary of the Company’s stock

option activity for the three-months ended May 31, 2023 is as follows:

(amounts in thousands, except share and per share

A summary of the Company’s stock option activity for the six-months

ended August 31, 2023 is as follows:

(amounts in thousands, except share and per share data)

Outstanding, February 28, 2023

Outstanding, May 31, 2023

There was no intrinsic

value as of May 28, 2023, as the exercise prices of these options were greater than the market price of the Company’s stock.

exercise prices and information related to options under the 2011 Plan outstanding on May 31, 2023 is as follows:

Exercise Price

Outstanding, August 31, 2023

There was no intrinsic value as of August 31,

2023, as the exercise prices of these options were greater than the market price of the Company’s stock.

The exercise prices and

information related to options under the 2011 Plan outstanding on August 31, 2023 is as follows:

Range of Exercise Price

Stock Options

Weighted Average

Contractual Life

Weighted Average

Exercise Price

Options Outstanding

Weighted Average

Exercise Price of

Options Exercisable

$ 0.25 to $ 1.40

The Company granted

no stock options under its stock option 2011 Plan for the three-month period ended May 31, 2023 and the three-month period ended May

A summary of the

Company’s warrant activity for the three-months ended May 31, 2023 is as follows:

The Company granted no stock options under its

stock option 2011 Plan for the six-month period ended August 31, 2023 and the six-month period ended August 31, 2022.

A summary of the Company’s warrant activity

for the six-months ended August 31, 2023 is as follows:

Outstanding, February 28, 2023

Outstanding, May 31, 2023

There was no intrinsic

value as of May 31, 2023, as the exercise prices of these warrants were greater than the market price of the Company’s stock.

exercise prices and information related to the warrants as of May 31, 2023 is as follows:

Exercise Price

Outstanding, August 31, 2023

There was no intrinsic value as of August 31, 2023, as the exercise

prices of these warrants were greater than the market price of the Company’s stock.

The exercise prices and information related

to the warrants as of August 31, 2023 is as follows:

Range of Exercise Price

Stock Warrants

Weighted Average

Contractual Life

Weighted Average

Exercise Price

Warrants Outstanding

Weighted Average

Exercise Price of

Warrants Exercisable

$ 0.50 to $ 1.40

During March 2022,

the Company reached a settlement agreement with its former Director, Robert Kopple who had been in litigation with the Company over unpaid

notes payable and accrued interest since 2017 (See Note 6).

As a part of the settlement, the Company issued to Mr.

Kopple 3,331,664 warrants

to purchase the Company’s common stock (the “Kopple Warrants”) with a term of 7 years and at an exercise price of $ 0.85

The Company determined the fair value of the Kopple Warrants was $ 1,051 using a Black-Scholes model using the assumptions

as set forth in the table below:

Three-Months Ended

In March 2022, pursuant to an agreement with a

note holder (see Note 5), the Company issued to Mr.

Kopple 3,331,664 warrants to purchase the Company’s common stock with a term

of 7 years and at an exercise price of $ 0.85 per share.

The Company determined the fair value of the Kopple Warrants was $ 1,051 using

a Black-Scholes model using the assumptions as set forth in the table below:

Warrants issued during the Six-Months Ended August 31, 2022

Exercise Price

2 unchanged sentences

Dividend Rate

RELATED PARTY TRANSACTIONS

As of May 31, 2023

and February 28, 2023, Bettersea LLC (“Bettersea”) was an 9.4 % and 9.7 %, respectively, shareholder in the Company.

three-months ended May 31, 2023 and May 31, 2022, the Company incurred total fees to Bettersea of $ 36 and $ 35 , respectively, for various

consulting services.

As of May 31, 2023 and February 28, 2023, a total of $ 231 and $ 216 , respectively, was due to Bettersea and included

in accounts payable and accrued expenses.

CONTINGENCIES

The Company is

subject to legal proceedings and claims that have arisen in the ordinary course of business.

Our management evaluates our exposure to

these claims and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the

loss is estimable and the loss is probable.

However, the outcome of legal proceedings and claims brought against the Company is subject

to significant uncertainty.

Although management considers the likelihood of such an outcome to be remote, if one or more of these legal

matters were resolved against the Company for amounts in excess of management’s expectations, the Company’s financial statements

for that reporting period could be materially adversely affected.

In 2017, the Company’s

former COO was awarded approximately $ 238 in accrued salary and related charges by the California labor board.

In August 2021, the Company

reached a settlement by which the Company agreed to pay approximately $ 330 , representing the principal award plus accrued interest.

of the time of this filing, the Company has paid approximately $ 277 toward the settlement amount.

The remaining balance of approximately $ 53

is to be paid no later than September 1, 2023 , and accrues interest of 10 % per annum until paid.

Between July 2017

and March 2022, the Company had been engaged in litigation with a former director, Robert Kopple, relating to more than $ 13 million and

the current equivalent of the approximately 23 million warrants, exercisable for seven years at a price of $ 0.10 per share, which Mr.

Kopple and his affiliated entities (collectively the “Kopple Parties”) claimed should have been originally issued to them

pursuant to various agreements with the Company entered to between 2013-2016.

In March 2022, the Company reached a settlement with the

Kopple Parties that resolves all claims asserted against the Company without any admission, concession or finding of any fault, liability

or wrongdoing on the part of the Company.

Under the terms of the settlement, the Company agreed to pay an aggregate amount of $10,000,

including an initial amount of $3,000 due in June 2022, which was subsequently extended to August 1, 2023.

In June, 2022, the Company

paid $150 of the initial amount.

All amounts, including all accrued interest and accrued forbearance fees, are to be paid no later than

eight years from the date of the initial payment.

The settlement also provides for standard mutual general release provisions and includes

customary representations, warranties, and covenants, including certain increases in the amount payable to the Kopple Parties and the

right of such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations under

the settlement.

As of the date of this report, the Company has not yet paid the $2,850 balance of the initial installment (see Note 6).

26, 2019, various stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed written

consent to the Company removing Ronald Buschur as a member of the Company’s Board and electing Cipora Lavut as a director of the

On March 27, 2019, those same stockholders delivered a further signed written consent to the Company removing William

Anderson and Si Ryong Yu as members of the Company’s Board and electing Robert Lempert and David Mann as directors of the Company.

These written consents represented a majority of the outstanding shares of the Company’s common stock as of March 26, 2019

and March 27, 2019, respectively.

Because of Aura’s refusal to recognize the legal effectiveness of the consents, on April 8,

2019 the stockholders filed suit in the Court of Chancery of the State of Delaware pursuant to Section 225 of the Delaware General

Corporations Law, seeking an order confirming the validity of the consents and declaring that Aura’s Board consists of Ms.

Douglas and Mr.

Diaz-Versón, Jr.

On July 8, 2019 the Court of Chancery entered

final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been

validly removed by the holders of a majority of the Company’s outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority of the Company’s outstanding stock acting by written consent,

and (c) the Company’s Board of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador

NOTE 10 – RELATED PARTY TRANSACTIONS

As of August 31, 2023 and February 28, 2023, Bettersea

LLC (“Bettersea”) was an 9.2 % and 9.7 %, respectively, shareholder in the Company.

For the six-months ended August 31, 2023 and August

31, 2022, the Company incurred total fees to Bettersea of $ 88 and $ 69 , respectively, for various consulting services.

As of August 31, 2023 and February 28, 2023, a

total of $ 229 and $ 216 , respectively, was due to Bettersea and included in accounts payable and accrued expenses.

NOTE 11 – CONTINGENCIES

The Company is subject to legal proceedings and

claims that have arisen in the ordinary course of business.

Our management evaluates our exposure to these claims and proceedings individually

and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.

Although management

considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for

amounts in excess of management’s expectations, the Company’s financial statements for that reporting period could be materially

adversely affected.

In 2017, the Company’s former COO was awarded

approximately $ 238 in accrued salary and related charges by the California labor board.

In August 2021, the Company reached a settlement

by which the Company agreed to pay approximately $ 330 , representing the principal award plus accrued interest.

As of the time of this

filing, the Company has paid approximately $ 292 toward the settlement amount.

The remaining balance of approximately $ 38 is to be

paid no later than December 31, 2023 , and accrues interest of 10 % per annum until paid.

Between July 2017 and March 2022, the Company

was engaged in litigation with a former director, Robert Kopple, relating to more than $ 13,000 and the current equivalent of the approximately

23 million warrants, exercisable for seven years at a price of $ 0.10 per share, which Mr.

Kopple and his affiliated entities (collectively

“Kopple”) claimed should have been originally issued to them pursuant to various agreements with the Company entered into

between 2013-2016.

In March 2022, the Company reached a settlement (the “Binding Term Sheet”) with Kopple that resolved all

claims asserted against the Company without any admission, concession or finding of any fault, liability, or wrongdoing on the part of

Under the terms of the settlement, the Company agreed to pay an aggregate amount of $ 10,000 over a period of seven years ,

including $ 3,000 initial payment to be paid in June 2022.

$ 150 was paid in June 2022, and the balance of the initial payment of $ 2,850

was extended to August 1, 2023 .

The Company and Koppel have agreed in principle to another extension of the deadlines for payments owed

by the Company to Kopple and intend to memorialize such an agreement in writing on or before October 31, 2023.

Such further amendment

will also indicate that by such extension the Company is not in default on the Binding Term Sheet as of September 30, 2023, and through

the date that the financial statements are issued.

All amounts, including all accrued interest and deferred fees, are to be paid no later

than eight years from the date of the initial payment.

The settlement also provides for standard mutual general release provisions and

includes customary representations, warranties, and covenants, including certain increases in the amount payable to the Kopple Parties

and the right of such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations

under the settlement (see Note 5).

On March 26, 2019, various stockholders of the

Company controlling a combined total of more than 27.5 million shares delivered a signed written consent to the Company removing Ronald

Buschur as a member of the Company’s Board and electing Cipora Lavut as a director of the Company.

On March 27, 2019, those

same stockholders delivered a further signed written consent to the Company removing William Anderson and Si Ryong Yu as members of the

Company’s Board and electing Robert Lempert and David Mann as directors of the Company.

These written consents represented a majority

of the outstanding shares of the Company’s common stock as of March 26, 2019 and March 27, 2019, respectively.

of Aura’s refusal to recognize the legal effectiveness of the consents, on April 8, 2019 the stockholders filed suit in the

Court of Chancery of the State of Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking an order confirming

the validity of the consents and declaring that Aura’s Board consists of Ms.

Diaz-Versón, Jr.

As a result of prior management’s unsuccessful opposition to this stockholders’ action filed in the

Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s

corporate benefit doctrine and/or other legal provisions.

To date, no final determination has been made as to the amount of recoupment,

if any, to which such stockholders may be entitled.

SUBSEQUENT EVENTS

Subsequent to May

31, 2023, an additional amendment to the settlement agreement with Kopple (see Note 6) was entered into extending the due date for the

$ 2,850 balance due on the initial payment to August 1, 2023.

In exchange for the additional amendments, the Company agreed to pay additional

extension fees of $ 30 in cash and an additional $ 100 in deferred forbearance fees to be paid with the final payment under the settlement

Subsequent to May

31, 2023, the Company issued 969,698 shares of common stock in exchange for cash proceeds of approximately $ 320 .

On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs,

confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of a majority of the Company’s

outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority

of the Company’s outstanding stock acting by written consent, and (c) the Company’s Board of Directors validly consists of

Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

As a result of prior management’s unsuccessful

opposition to this stockholders’ action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup

their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or other legal provisions.

To date, no final

determination has been made as to the amount of recoupment, if any, to which such stockholders may be entitled.

In June 2022, Melvin Gagerman, the Company’s

former CEO and CFO whose employment with Aura was permanently terminated in July 2019, brought suit against the Company for repayment

of an allegedly unsecured demand promissory note in the principal amount of $ 82 which he claims was entered into in April 2014 and bears

interest at a rate of 10 % per annum.

Despite the fact that, based on Gagerman’s allegations, the note was issued during a period

when he was the Company’s CEO, CFO, Corporate Secretary and Chairman of Aura’s Board of Directors, Gagerman has stated that

he does not possess a copy of the alleged promissory note.

The Company disputes that any amount is presently owed to Gagerman and has

filed a cross-complaint against him for, among things, conversion, violation of California Business& Professions Code §17200,

and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura, including without limitation, Gagerman’s

actions in opposing the valid 2019 stockholder consent action.

NOTE 12 – SUBSEQUENT EVENTS

Subsequent to August 31, 2023, the Company issued

796,972 shares of common stock in exchange for cash proceeds of approximately $ 263 .

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

What changed 10-Q

Item 1. Financial Statements