What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-22 compared with 2024-01-16 · 127 added, 186 removed, 144 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Amounts in thousands, except share and per

share amounts)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Amounts in thousands, except share and per share amounts)

Forward Looking Statements

22 unchanged sentences

ability to generate positive cash flow from operations;

Our ability to obtain additional financing to fund our operations;

The impact of economic, political and market conditions on us and our customers;

The impact of unfavorable results of legal proceedings;

Our exposure to potential liability arising from possible errors and omissions, breach of fiduciary duty, breach of duty of care, waste of corporate assets and/or similar claims that may be asserted against us;

Our ability to compete effectively against competitors offering different technologies;

Our business development and operating development;

Our expectations of growth in demand for our products;

Other risks described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and those risks discussed in our other filings with the Securities and Exchange Commission, including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended February 28, 2023, issued on May 26, 2023 (as the same may be updated from time to time in subsequent quarterly reports), which discussion is incorporated herein by this reference.

ability to obtain additional financing to fund our operations;

impact of economic, political and market conditions on us and our customers;

impact of unfavorable results of legal proceedings;

exposure to potential liability arising from possible errors and omissions, breach of fiduciary duty, breach of duty of care, waste

of corporate assets and/or similar claims that may be asserted against us;

ability to compete effectively against competitors offering different technologies;

business development and operating development;

expectations of growth in demand for our products;

Other risks described under the heading “Risk Factors” in

Part II, Item 1A of this Quarterly Report on Form 10-Q and those risks discussed in our other filings with the Securities and Exchange

Commission, including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year

ended February 29, 2024, issued on June 4, 2024 (as the same may be updated from time to time in subsequent quarterly reports), which

discussion is incorporated herein by this reference.

We do not intend to update or revise any forward-looking

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Our business is based on the exploitation of our

Axial Flux Induction solution known as the AuraGen ® for commercial and industrial applications and the VIPER for military

applications.

Our business model consists of two major components:

(i) sales and marketing, (ii) design and engineering.

Axial Flux Induction technology for both electric motors and generators.

Our power generation solution based on axial flux induction is

known as the AuraGen ® for commercial and industrial applications and the VIPER for military applications.

axial flux induction technology provide:

(i) higher motor/generator efficiency, that directly translated to lower cost for operations

(ii) lighter and smaller machines that lead to lower manufacturing cost, (iii) higher reliability that results in less down time and maintenance

cost, (iv) the only raw materials used for construction are copper and steel without any rare earth or any other types of permanent magnets.

This immediately results in global availability without market risks as well as geopolitical risks of dependence on single source, and

(v) the use of approximately 60% less of copper than the equivalent radial flux induction machines, results in less needed mining to extract

the needed copper with direct positive environmental impact.

Our business model consists of three major components:

(i) sales and marketing, iii) design and engineering and (iii) axial flux induction motors and generators manufacturing.

Our sales and

marketing approaches are composed of direct sales in North America and the use of agents and distributors in other areas.

In North America,

our primary focus is in (a) mobile exportable power applications, (b) EV applications, (c) U.S.

Military applications and (d) industrial

applications.

The second component of our business model is focused on the design of new products and engineering support for the sales

activities described above.

The engineering support consists of the introduction of new features for our AuraGen ® /VIPER solution

such as higher power/torque solutions, and different input and output voltages (DC and AC input and output versions).

In Fiscal 2020 stockholders of the Company successfully

removed Ronald Buschur, William Anderson and Si Ryong Yu from the Company’s Board of Directors and elected Ms.

we are also exploring limited licensing of our technology to very large potential users as well as potential joint ventures with existing

industrial motor/generator suppliers.

The second component of our business model is focused on the design, engineer and commercialize

of new commercial and industrial electric motors based on our axial flux induction for numerous applications such as pumps, compressors,

We are also designing electric motors for both 2- and 4-wheel EV application, as well as, expending the product line for electric

power generation.

The third component of our business model is to set up manufacturing of the axial flux induction products being engineered

We are currently completing a 250-kW electric

motor prototype based on our axial flux induction for EV applications.

This activity is in conjunction with a large European tier 1 automotive

supplier interest and inputs.

We have also in May 2024 completed the installation of our new smaller 10-kW mobile power generator on a

Polaris type ATV platform for US military applications.

We expect in the coming months to start shipping this new product to a specific

We are also currently in discussions for usage of our technology for numerous wind turbines applications.

fiscal 2024 and first quarter of fiscal 2025 we have significantly increased our engineering capabilities with having hired experts’

engineers in thermo dynamics (Ph.D.), electromagnetic motor design (Ph.D.) Power electronics & control (Ph.D.) and mechanical design

We have also acquired the latest in advance engineering tools such as Ansys Maxwell finite elements, MATLAB and 3-D solid work.

Our engineering, research and development costs for the three months ended May 31, 2024, were approximately $98.4.

2020 stockholders of the Company successfully removed Ronald Buschur, William Anderson and Si Ryong Yu from the Company’s Board

of Directors and elected Ms.

Cipora Lavut, Mr.

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Robert Lempert as directors of the Company in their stead.

See Item 3, Legal Proceedings for more information.

in Fiscal 2020, Melvin Gagerman –– Aura’s CEO and CFO since 2006 –– was replaced.

3, Legal Proceedings for more information.

Also, in Fiscal 2020, Melvin Gagerman –– Aura’s CEO and CFO since 2006 ––

was replaced.

In July 2019 Ms.

succeeded Mr.

Lavut succeeded Mr.

Gagerman as President and Mr.

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Gagerman as CFO.

Lempert was appointed as Secretary of the Company

by the Board of Directors also in July 2019.

In the second half of Fiscal 2020, the Company began significantly increasing its engineering,

manufacturing and marketing activities.

From July 8, 2019 through the end of Fiscal year 2022 (February 28, 2022), we shipped more than

140 units to customers (more than a ten-fold increase over Fiscal 2019).

Although our operations were impacted in Fiscal 2022 and Fiscal

2021 by the COVID-19 pandemic, during these periods we continued to expand our engineering and manufacturing capabilities.

Impact of the COVID-19 Pandemic” included in our Annual Report on Form 10-K for fiscal 2022 for information regarding

the impact of COVID-19 on our operations.

Our engineering, research and development costs for the nine months ended November 30, 2023,

and the nine months ended November 30, 2022 were approximately $228 and $411, respectively.

During the three months ended May 31, 2021,

we relocated all administrative offices and operations to a new state-of-the-art facility consisting of approximately 18,000 square feet

in Lake Forest, California.

This new facility is wholly occupied by Aura.

During Fiscal 2018 and Fiscal 2019, the Company’s

engineering, manufacturing, sales, and marketing activities were reduced while we focused on renegotiating numerous financial obligations.

During this time, the Company’s agreements with numerous customers, third party vendors, and organizations and entities material

to the operation of the Company business were canceled, delayed or terminated.

During Fiscal 2018, the Company successfully restructured

in excess of $30,000 of debt.

Robert Kopple, our former Vice Chairman of the Board, was the only significant unsecured note holder that

did not executed formal agreements regarding the restructure of his debt.

Legal Proceedings” included in our

Annual Report on Form 10-K for Fiscal 2022 filed with the SEC on June 21, 2022, and Part II, Other Information Item 1, contained in this

Quarterly Report for information regarding the dispute and settlement with Mr.

Kopple regarding these transactions.

In March 2022, the

Company reached a settlement that resolves the various claims asserted against us by Mr.

Kopple and his affiliated entities (collectively

the “Kopple Parties”).

Under the terms of the settlement, we have agreed to pay an aggregate amount of $10,000 over a period

of seven years;

$3,000 of which is to be paid within approximately four months of the settlement date, after which, interest will accrue

on the unpaid balance at a rate of 6%, compounded annually.

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

eight years from the date of the initial payment.

The Kopple Parties have also received seven-year warrants to purchase up to an aggregate

of 3,331,664 shares of our common stock at a price of $0.85 per share.

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.

Lempert was appointed

as Secretary of the Company by the Board of Directors also in July 2019.

Critical Accounting Policies and Estimates

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derivative instrument could be required within 12 months of the balance sheet date.

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.

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

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 nine 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.

The Company believes these factors impacted

the Company’s business in fiscals 2023 and 2024 and will continue to impact the Company’s business in fiscal 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

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Results of Operations

Three months ended November 30, 2023 compared

to three months ended November 30, 2022

Three months ended May 31, 2024, compared to

three months ended May 31, 2023

Net revenue was $47 for the three-months ended

November 30, 2023 compared to $54 for the three-months ended November 30, 2022.

May 31, 2024, compared to $10 for the three-months ended May 31, 2023.

Revenues continue to be negatively impacted due to a generally

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Cost of goods sold was $47 in the three-months

ended November 30, 2023 compared to $26 for the three-months ended November 30, 2022.

This resulted in a gross loss of $52 compared to

a gross profit of $28 for the three-months ended November 30, 2022.

The gross loss and related gross margin loss for both the three-month

periods were largely influenced by the low volume of shipments in this quarter which reduced our ability to fully absorb fixed operating

In addition, the gross margin loss in the three-months ended November 30, 2023 included an increase in the inventory reserve of

Engineering, research and development expenses

were $34 in the three-months ended November 30, 2023, compared to $229 for the three-months ended November 30, 2022.

The decrease was

due to decreased development by the engineering staff of the new prototype for our new product line as we get closer to completion.

Selling, general and administration (“SG&A”)

expenses decreased by $113 or 19% to $494 in the three-month period ending November 30, 2023 compared to the three-months ended November

The decrease was principally attributed to lower legal costs of $142, and lower selling fees of $5 due to lower sales.

Interest expense increased $71 during the three-months

ended November 30, 2023 compared to the three-months ended November 30, 2022 due principally to the settlement of the Kopple litigation

which resulted in the conversion of the Kopple notes payable into a new note.

The new note did not accrue interest until January 2023,

so the three-months ended November 30, 2022 did not include any Kopple-based interest.

Nine months ended November 30, 2023 compared

to nine months ended November 30, 2022

Net revenue was approximately $57 for the nine-months

ended November 30, 2023 (“Fiscal Q3 2024”) compared to approximately $70 for the nine-months ended November 30, 2022 (“Fiscal

Revenues continue to be negatively due to a generally low level of resources of our Legacy products as we concentrate

on building our new product line.

To increase revenues which were impacted by the economic effects of the pandemic, the Company needs

to augment its marketing and sales efforts substantially towards our new product line to be released in early Fiscal 2025.

Cost of goods sold was approximately $194 in

Fiscal Q3 2024 compared to approximately $56 in Fiscal Q3 2023.

This resulted in a gross loss of approximately $137 or a gross

margin loss of 239%, and approximately $15 gross profit and a gross margin gain of 21%, in Fiscal Q3 2024 and Fiscal Q3 2023,

respectively.

The gross loss and related gross margin loss for both the nine-month periods were largely influenced by the low volume

of shipments in both quarters which reduced our ability to fully absorb fixed operating costs.

In addition, the gross margin loss in

Fiscal Q3 2024 included an increase in the inventory reserve of $32.

ended May 31, 2024, compared to $15 for the three-months ended May 31, 2023.

This resulted in a gross profit of $0 compared to a gross

loss of $5 for the three-months ended May 31, 2023.

The gross loss and related gross margin loss were largely influenced by the low volume

of shipments in this quarter which reduced our ability to fully absorb fixed operating costs.

In addition, the cost of goods sold in the

three-months ended May 31, 2024, included an increase in the inventory reserve of $32.

Engineering, research and development expenses

were approximately $528 in Fiscal Q3 2024, compared to approximately $640 in the Fiscal Q3 2023, or a decrease of 18%.

Fiscal Q2 2024

includes a higher engineering staff level and a concentrated effort to optimize the Company’s several new designs of its generators

Fiscal Q3 2023 reflects the Company’s initial efforts to increase its development program, including costs for engineering

several new designs, as well as increased testing of its new electronic control unit (“ECU”).

were $310 in the three-months ended May 31, 2024, compared to $207 for the three-months ended May 31, 2023.

Selling, general and administration (“SG&A”)

expenses decreased by approximately $684 or 34% to approximately $1,344 in the Fiscal Q3 2024 period from approximately $2,028 in the

Fiscal Q3 2023 period.

The decrease during Fiscal Q3 2024 was principally attributed to lower legal costs of $548 almost exclusively related

to the settlement of the Kopple litigation in the Fiscal Q1 2023 period.

Accounting fees were also down by $31.

Selling costs were down

by $94 due to lower sales.

Interest expense in Fiscal Q3 2024 increased approximately

$681 or 139%, to approximately $1,171 from approximately $489 in the Fiscal Q3 2023 period due principally to the settlement of the Kopple

litigation which resulted in the conversion of the Kopple notes payable into a new note.

The new note did not accrue interest until January

2023, so FQ3 2023 included no Kopple-based interest.

In Fiscal Q3 2024, $472 of interest was accrued on the unpaid balance of the restructured

Kopple note, and in addition, the Company recorded $390 of extension and forbearance fees, which are being categorized as interest.

Other income in the Fiscal Q3 2024 period was

approximately $9 which represents the favorable change in the fair value of the derivative warrant liability for the nine-months, measured

as of November 30, 2023.

Comparatively, the revaluation of the derivative warrant liability in Fiscal Q3 2023, measured as of November

30, 2022, resulted in a favorable change in the fair value of approximately $560 for the nine-month period.

Net loss for the nine-month period of Fiscal Q3

2024 increased by approximately $589, to a loss of approximately $3,171 from a net loss of approximately $2,582 in the nine-month period

of Fiscal Q3 2023.

This was attributed to (i) a significantly lower net gain related to derivative liability valuation of approximately

$551 and (ii) higher interest expense of approximately $681, which were partially offset by (i) a decreased operating loss of $644 principally

attributable to the lower legal expenses related to the Kopple settlement.

expenses for the three months ending May 31, 2024, were $396 as compared to $508 for the three months ending May 31, 2024.

by $112 or 22% in the three-month period ending May 31, 2024, compared to the three-months ended May 31, 2023.

Interest expense decreased by $153 to $275 from

$428 for the three months ending May 31, 2024, and 2023 respectively.

Liquidity and Capital Resources

Going Concern

During the nine-month period ended November 30,

2023, the Company reported a net loss of $3,171 and used cash in operating activities of approximately $2,178.

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 three-month period ended May 31, 2024,

the Company recognized net loss of $15,258 from operation and used cash in operating activities of $784.

As of May 31, 2024, the Company

also has a shareholder deficit of $35,627 and notes payable totaling $5,315 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.

the Company’s independent registered public accounting firm, in its report on the Company’s February 29, 2024, 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

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and ultimately to attain profitability.

During the next twelve months we intend to continue

to attempt to increase the Company’s operations and focus on the sale of our AuraGen ®® /VIPER products both domestically

and internationally and to add to our existing management team.

In addition, we plan to source new suppliers for manufacturing operations,

rebuild the engineering and sales teams, and to the extent appropriate, utilize third party contractors to support the operation.

anticipate being able to obtain new sources of funding to support these actions in the upcoming fiscal year.

At November 30, 2023, we had cash of approximately

During the next twelve months we intend to

continue to attempt to increase the Company’s operations and focus on the sale of our AuraGen®®/VIPER products both

domestically and internationally and to add to our existing management team.

In addition, we plan to source new suppliers for

manufacturing operations, rebuild the engineering and sales teams, and to the extent appropriate, utilize third party contractors to

support the operation.

We anticipate being able to obtain new sources of funding to support these actions in the upcoming fiscal

At May 31, 2024, we had cash of approximately

$297, compared to cash of approximately $124 at February 29, 2024.

Subsequent to November 30, 2023, the Company issued 766,668 shares of

common stock in exchange for cash proceeds of approximately $253.

Working capital deficit at November 30, 2023 was a $14,600 deficit as

compared to an $13,700 deficit at February 28, 2023.

At November 30, 2023 and February 28, 2023, we had no accounts receivable.

Subsequent to May 31, 2024, the Company issued 920,000 shares of common

stock in exchange for cash proceeds of approximately $235.

Prior to Fiscal 2020, in order to maintain liquidity,

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Kopple and his affiliated entities (collectively

the “Kopple”) 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 (the “Binding Term Sheet”) with Kopple that resolves 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, we have agreed to pay an aggregate amount of $10,000 over a period of seven years;

of which was originally to be paid in June 2022, and subsequently extended to August 1, 2023.

Beginning in January 2023, interest began

to accrue on the unpaid balance at a rate of 6%, compounded annually.

All amounts, including all accrued interest and deferred forbearance

fees, are to be paid no later than eight years from the date of the initial payment.

As of the date of this report, the Company has not

yet paid the full $3,000 installment due to Kopple;

the “Kopple”) 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 Kopple 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, we have agreed to pay an aggregate amount of $10,000 over a period of seven years;

$3,000 of which was originally to be paid

in June 2022, and subsequently extended to August 1, 2023.

Beginning in January 2023, interest began to accrue on the unpaid balance

at a rate of 6%, compounded annually.

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

than eight years from the date of the initial payment.

As of the date of this report, the Company has not yet paid the full $3,000 installment

due to Kopple;

having only made a partial payment of $150 in June 2022.

The Company and Koppel have

agreed in principle to another extension of the deadlines for payments owed by Aura to Plaintiffs and intend to memorialize such an agreement

in writing on or before January 31, 2024.

Such further amendment will also indicate that by such extension the Company is not in default

on the Binding Term Sheet (See Part I, Note 5 to the Financial Statements).

In March 2024, the Company and Kopple again amended the note

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with the requirement to pay $2,000 due

December 15, 2024, effectively extending the payment of $1,850 to future periods;

(ii) increased the stated interest rate to 10%;

(iii) added a fee of $15 monthly until the Company makes a principal payment of $2 million by December 2024;

(iv) effective

August 30, 2024, the Company will grant Kopple a conversion right that gives Kopple the option to be able to convert the note payable

into equity of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted

average price of the Company’s common stock;

(v) during Fiscal 2025, will require the Company to pay 20% of all collected

revenues within 10 days of the end of each fiscal quarter;

(vi) will require the Company to pay Kopple 20% of any amount raised

in new capital in the form of equity, debt or convertible debt above $3.5 million;

(vii) reduces the exercise price of the warrants

granted to Kopple in March 2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date from

March 8, 2029, to March 31, 2031.

Legal Proceedings” and

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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 2. Management’s Discussion and Analysis