What changed in this filing

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Item 1. Legal Proceedings

2021-01-19 compared with 2019-02-01 · 100 added, 33 removed, 1 unchanged (99% of the section changed)

Legal Proceedings

are subject to the legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have

not been fully resolved and that have arisen in the ordinary course of business.

Please refer to Item 3, “Legal Proceedings,”

in our Annual Report on Form 10-K for the year ended February 28, 2018 for a description.

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

consolidated financial statements for that reporting period could be materially adversely affected.

The Company settled certain

matters subsequent to year end that did not individually or in the aggregate have a material impact on the Company’s financial

condition or operating results.

2016, the Company and the Company’s Chief Executive Officer, Melvin Gagerman, became two of several defendants named in

a lawsuit filed by two secured creditors demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages.

In January 2017, the Company entered into an agreement with all secured creditors other than the two plaintiffs.

That agreement,

among other provisions, waived all past events of default.

In October 2017 the court dismissed the plaintiffs’

exemplary damages, leaving only contract claims.

In August 2018, the plaintiffs were awarded approximately$240,000 at trial.

Company intends to appeal this award.

April 2018, the Company filed suit against its former counsel, Kilpatrick Townsend &Stockton LLP relating to various acts

of malpractice and breach of fiduciary duty committed by the firm in connection with its representation of Aura.

In June 2018,

Kilpatrick Townsend &Stockton LLP filed a cross-complaint against the Company claiming approximately $400,000 in allegedly

unpaid legal fees.

The Company believes that it has valid defenses to these claims and intends to vigorously defend against these

addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A,

“Risk Factors,”

of the Company’s Annual Report on Form 10-K for the year ended February 28, 2018.

We are subject to the legal proceedings

and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and 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.

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 consolidated financial statements for

that reporting period could be materially adversely affected.

The Company settled certain matters subsequent to year end that did

not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

In 2017, the Company’s former COO

was awarded approximately $238,000 in accrued salary and related charges by the California labor board.

The Company believes that

this award does not reflect the amount owed which is significantly lower and is exploring all its options and available remedies

and is working toward an offer to settle this matter.

In 2016, the Company and the Company’s

former Chief Executive Officer, Melvin Gagerman, were named among several other defendants in a lawsuit filed by two secured creditors

demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages.

In January 2017, the Company entered

into an agreement with all secured creditors other than the two plaintiffs.

In September 2018 the court entered a judgment of approximately

$235,000 in favor of the two secured creditors.

The Company subsequently appealed this judgment and, in September 2019, reached

a settlement agreement with these creditors.

The Company is presently engaged in a dispute

with one of its former directors, Robert Kopple, relating to approximately $10 million and approximately 3.15 million warrants

Kopple claims to be owed to him and his affiliates by the Company.

In July 2017, Mr.

Kopple filed suit against the Company

as well as against current director Mr.

Diaz-Verson and former directors Mr.

Breslow and Mr.

Howsmon, as well as Mr.

the former CEO (not a director) in connection with these allegations.

In 2018, the Court sustained demurrers by Mr.

Howsmon and Mr.

Gagerman and as a result of these successful demurrers, all four of these defendants have been

dismissed from the suit.

While the Company believes that it has certain valid defenses in these matters, the Company is currently

in settlement discussions with Mr.

If the settlement negotiation is unsuccessful, the Company intends to vigorously defend

against these claims.

See “Liquidity and Capital Resources”

in “Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations”

included elsewhere in this Quarterly Report on Form 10-Q for additional

information regarding the transactions under dispute with Mr.

In April 2018, the Company filed suit against

its former counsel, Kilpatrick Townsend & Stockton LLP alleging various acts of malpractice and breach of fiduciary duty committed

by the firm in connection with its representation of Aura.

In June 2018, Kilpatrick Townsend & Stockton LLP filed a cross-complaint

against the Company claiming in excess of $400,000 in allegedly unpaid legal fees.

In January 2019, the Company reached a settlement

with Kilpatrick Townsend & Stockton LLP, pursuant to which, among other things, Kilpatrick Townsend & Stockton LLP agreed

to dismiss its cross-complaint and waive all unpaid legal fees.

The action and the cross-complaint were both subsequently dismissed.

In February 2018, the Company failed to

issue shares of stock contractually owed toBetterSea, LLC.

On August 15, 2018, 7,364,735 restricted shares were issued in fulfillment

of this contractual obligation based on the then-outstanding closing quote of the stock.

The issuance of the shares was previously

reported by the Company.

The Company also paid $20,000 in legal fees related to legal expense associated with the Company’s

delays in the issuance of the stock.

In May 2018, Shelley Scholnick dba JB Transporters

brought suit against the Company claiming ongoing fees in excess of $52,000 owed for the storage of the Company’s property.

Notably, in June 2017, the Company had brought suit against J.B.

Moving & Delivery, a business operated and controlled by Scholnick’s

relative, Jacob Binstok, for damages suffered by the Company as a result of the defendant’s improper storage of the Company’s

property and improper refusal to return such property.

In 2018, the Company successfully received a judgment against J.B.

& Delivery in the amount of approximately $114,000.

The Company disputes that any amount is now owed to Scholnick.

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.

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)

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.

In addition to the other information set

forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,”

of the Company’s

Annual Report on Form 10-K issued on June 13, 2019 and the Amended Annual Report on Form 10-K/A for the year ended February 28,

2019, issued on October 24, 2019.

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/A

Item 1. Legal Proceedings