What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-06-01 compared with 2020-07-13 · 367 added, 436 removed, 33 unchanged (96% of the section changed)

We have been a party to litigation,

a consent solicitation and a proxy contest with shareholders controlling a majority of the Company’s stock, which is costly

and time-consuming and has had a material adverse effect on our business, results of operations and financial condition and could

adversely affect our stock price.

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.

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 Diaz-Versón, Jr.

Aura’s refusal to recognize

the legal effectiveness of the consents and the decision by the Company’s former leadership team to utilize corporate resources

to vigorously contest the shareholder action has consumed the Company’s financial resources, temporarily stagnated operations,

and resulted in substantial costs, all of which had a material adverse effect on our business, operating results and financial

We have a history of losses, and we may not be profitable

in any future period.

Except for fiscal 2018, in each fiscal year

since our reorganization in 2006, we have reported losses.

For fiscal years 2019 and 2020, we recorded net losses of $2.5

million and $2.6 million, respectively.

Since the Company’s Chapter 11 Plan reorganization in 2006, we have spent considerable

amounts on, among other things, building market awareness and infrastructure for sales and distribution, enhancing our engineering

capabilities, perfecting an all-electric refrigeration transport system for midsize trucks, developing a 20 kW product, and developing

a nine-inch system capable of delivering approximately 4 kW of power.

We continue to need substantial funds for the

development of new products, enhancement of existing products and in order to expand sales.

However, sales of our products

have not increased as we expected them to and may never increase to the level that we need to expand our operations, or even to

sustain them.

We can provide no assurance as to when, or if, we will be profitable in the future.

we achieve profitability, we may not be able to sustain it.

The effects of a pandemic or widespread

outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have a material adverse impact on our business,

results of operations and financial condition.

The recent outbreak of COVID-19,

which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide

economic activity.

A pandemic, including COVID-19, or other public widespread outbreak of an illness, poses the risk that

we, our employees, our suppliers, our customers and others may be restricted or prevented from conducting business activities

for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter

in place orders, travel restrictions and other actions and restrictions that may be requested or mandated by governmental authorities.

While we have implemented measures to mitigate the impact of the COVID-19 pandemic, we expect our fiscal 2021 results of operations

to be adversely affected by the COVID-19 pandemic.

The extent of the impact on our business will depend on a number of evolving

factors, including the duration and spread of the pandemic, as well as the possibility of the pandemic re-occurring, actions taken

by governmental authorities to restrict certain business operations and social activity and impose travel restrictions, the impact

of the pandemic on economic activity and whether recessionary conditions will persist, consumer demand, the ability of our supply

chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently

and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital,

all of which remain uncertain.

As a result, the magnitude and duration of the impact on our business, results of operations and

financial condition cannot be determined at this time.

We derive a substantial portion of our revenues from customers

in industries susceptible to trends and factors affecting those industries, including the COVID-19 pandemic.

Our AuraGen ®

is geared toward end-markets such as commercial vehicles, communications, transportation industries, and consumer and industrial

equipment markets.

Factors negatively affecting these industries also negatively affect our business, financial condition and

results of operations.

Any adverse occurrence, including industry slowdown, recession, costly or constraining regulations, excessive

inflation, prolonged disruptions in one or more of our customers’

production schedules or labor disturbances, that results

in significant decline in the volume of sales in these industries, or in an overall downturn in the business and operations of

our customers in these industries, could materially adversely affect our business, financial condition and results of operations.

As a result of the

COVID-19 pandemic, global vehicle production has decreased, and some manufacturers have completely shut down manufacturing operations

in some countries and regions, including the United States and Europe.

As a result, we have experienced, and are likely to continue

to experience, delays in the production and distribution of our products and the loss of sales.

If the global economic effects

caused by the COVID-19 pandemic continue or increase, overall customer demand may continue to decrease which could have a further

adverse effect on our business, results of operations and financial condition.

We will need additional capital

in the future to meet our obligations and financing may not be available.

During fiscal 2020, the Company attempted

to increase its engineering and manufacturing activities, but it still struggled with meeting its financial requirements.

cannot obtain additional capital, we will not be able to continue our operations.

As a result of our operating losses, we

have largely financed our operations through sales of our debt and equity securities.

Since fiscal 2017, the Company has significantly

reduced its engineering, manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations

and conserving cash.

For fiscal 2019, we had approximately $2.5 million negative cash flows from operations, and commencing with

fiscal 2020, the Company’s engineering and manufacturing activities remained limited due to our inability to raise significant

amounts of new financing.

Following July 2019, under the new management team, we increased our sales, engineering, manufacturing,

and marketing activities to improve operating results, but we continued to operate with a negative cash flow from operations for

fiscal 2020 of approximately $0.8 million, or an improvement of approximately $1.7 million.

Our ability to continue as a going

concern is directly dependent upon our ability to obtain additional operating capital and generating sufficient operating cash

The impacts of the COVID-19 pandemic have caused significant uncertainty and volatility in the credit markets and there

can be no assurance that lenders or investors will make additional commitments to provide financing to us under current circumstances.

As a result of the impacts of the COVID-19 pandemic, we may be required to raise additional capital and our access to and cost

of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability

of sufficient amounts of financing, and our prospects.

If we are unable to obtain additional funding as and when we need it, we

will not be able to recommence operations or undertake our planned expansion.

Our independent public accounting

firm has included an explanatory paragraph in its opinion to the effect that there is substantial doubt about our ability to continue

as a going concern.

Our independent public accounting firm

has included an explanatory paragraph in its opinion to the effect that there is substantial doubt about our ability to continue

as a going concern.

We do not have any sufficient committed sources of capital and do not know whether additional financing

will be available when needed on terms that are acceptable, if at all.

This going concern statement from our independent

public accounting firm may discourage some investors from purchasing our stock or providing alternative capital financing.

failure to satisfy our capital requirements will adversely affect our business, financial condition, results of operations and

If we do not receive additional

financing when and as needed, we may not be able to continue the research, development and commercialization of our technology

and products.

In that case, our business and results of operations would be materially and adversely affected.

Our capital requirements have been and

will continue to be significant.

We will require substantial additional funds in excess of our current financial resources

for research, development and commercialization of products, to obtain and maintain patents and other intellectual property rights

in these technologies and products, and for working capital and other purposes, the timing and amount of which are difficult to

When and as we need additional funds, such funds may not be available on commercially reasonable terms

If we cannot obtain additional funding when and as needed, our business and results of operation would be

materially and adversely affected.

Market acceptance of our AuraGen ®

product line is uncertain.

If a large enough market does not develop for our products, our business and the results

of our operations will be materially and adversely affected.

Our business is dependent upon sales generated

from our AuraGen ®

/VIPER family of products.

This product line utilizes advanced technology and has only recently

begun being used in the marketplace for selected applications.

We are dependent on the broad acceptance by businesses

and industry of our products.

Because the market for our product line is emerging, the potential size of this market

and the timing of its development cannot be predicted.

A significant market may fail to develop, or it may develop

more slowly than we anticipate, either of which will have a material adverse effect on our business and results of operations.

Our intellectual property rights

are valuable, and any inability or failure to protect them could reduce the value of our products, services and brand, which would

have a material adverse effect on our business.

Our patents, trademarks, and all of our

other intellectual property rights are important assets for us.

There are events that are outside of our control that

pose a threat to our intellectual property rights.

For example, effective intellectual property protection may not

be available in every country in which our products and services are distributed or made available.

Also, the efforts

we have taken to protect our proprietary rights may not be sufficient or effective.

Due to our lack of financial resources,

we may not be able to adequately protect our technology portfolio or apply for new patents to extend our intellectual property

have been a party to litigation, a consent solicitation and a proxy contest with shareholders controlling a majority of the Company’s

stock, which is costly and time-consuming and has had a material adverse effect on our business, results of operations and financial

condition and could adversely affect our stock price.

March 2019, stockholders of the Company representing a majority of the outstanding shares of the Company’s common stock

delivered signed written consents to the Company removing Ronald Buschur, William Anderson and Si Ryong Yu as members of the Company’s

Board and electing Ms.

Cipora Lavut, Mr.

David Mann and Dr.

Robert Lempert as directors of the Company.

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.

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.

refusal to recognize the legal effectiveness of the consents and the decision by the Company’s former leadership team to

utilize corporate resources to vigorously contest the shareholder action has consumed significant financial resources, temporarily

stagnated operations, and resulted in substantial costs, all of which had a material adverse effect on our business, operating

results and financial condition.

have a history of losses, and we may not be profitable in any future period.

for Fiscal 2018 and Fiscal 2021, in each fiscal year since our reorganization in 2006, we have reported losses.

years 2019 and 2020, we recorded net losses of $2.5 million and $2.6 million, respectively.

Since the Company’s Chapter

11 bankruptcy reorganization in 2006, we have spent considerable amounts on, among other things, building market awareness and

infrastructure for sales and distribution, enhancing our engineering capabilities, perfecting an all-electric refrigeration transport

system for midsize trucks, developing a 18-kW product, and developing an eight-inch system capable of delivering approximately

4.5- kW of power.

We continue to need substantial funds for the development of new products, enhancement of existing

products and in order to expand sales.

However, sales of our products have not increased as we expected them to, and

may never increase to the level that we need to expand our operations, or even to sustain them.

We can provide no assurance

as to when, or if, we will be profitable in the future.

Even if we achieve profitability, we may not be able to sustain

effects of a pandemic or widespread outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have

a material adverse impact on our business, results of operations and financial condition.

outbreak of COVID-19 was declared a pandemic by the World Health Organization (“WHO”) during our fourth quarter

of Fiscal 2020 and continues to impact our operations and cash flows up to the filing date of this Annual Report on Form 10-K

for Fiscal 2021.

While we have implemented measures to mitigate the impact of the COVID-19 pandemic, we expect our Fiscal 2022

results of operations to continue to be adversely affected by the COVID-19 pandemic.

a result of the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our corporate

facilities, as have our customers, partners, suppliers, and vendors, as described in Item 1 —

Business —

Recent Developments.”

Collectively, these disruptions have had a material adverse impact on our business throughout

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

we cannot predict for how long and to what extent this crisis will continue to impact our business operations or the global economy

Potential impacts to our business include, but are not limited to:

ability to successfully execute our long-term growth strategy;

declines in the level of purchases of products, including our products, caused by higher unemployment and lower disposal income

levels, travel and social gathering restrictions, work-from-home arrangements, or other factors beyond our control;

ability to generate sufficient cash flows to support our operations, including repayment of our debt obligations as they become

potential loss of one or more of our significant customers or partners, or the loss of a large number of smaller customers or

partners, if they are not able to withstand prolonged periods of adverse economic conditions, and our ability to collect outstanding

closures or other operational restrictions of our facilities;

chain disruptions resulting from closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of

goods produced in infected areas, including any related cost increases;

ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments, as well

as the ability of our key customers, suppliers, and vendors to do the same with regard to their own obligations;

costs to protect the health and safety of our employees, customers, and communities, such as more frequent and thorough cleanings

of our facilities and supplying personal protection equipment;

of management attention and resources from ongoing business activities and/or a decrease in employee morale;

ability to maintain an effective system of internal controls and compliance with the requirements under the Sarbanes-Oxley Act

discussion related to the various risks and uncertainties described above is included elsewhere within the “Risk Factors”

section of this Annual Report on Form 10-K.

derive a substantial portion of our revenues from customers in industries susceptible to trends and factors affecting those industries,

including the COVID-19 pandemic.

AuraGen ®

system is geared toward end-markets such as commercial vehicles, communications, transportation industries,

and consumer and industrial equipment markets.

Factors negatively affecting these industries also negatively affect our business,

financial condition and results of operations.

Any adverse occurrence, including industry slowdown, recession, costly or constraining

regulations, excessive inflation, prolonged disruptions in one or more of our customers’

production schedules or labor disturbances,

that results in significant decline in the volume of sales in these industries, or in an overall downturn in the business and

operations of our customers in these industries, could materially adversely affect our business, financial condition and results

of operations.

a result of the COVID-19 pandemic, global vehicle production has decreased, and some manufacturers have completely shut down manufacturing

operations in some countries and regions, including the United States and Europe.

As a result, we have experienced, and are likely

to continue to experience, delays in the production and distribution of our products and the loss of sales.

If the global economic

effects caused by the COVID-19 pandemic continue or increase, overall customer demand may continue to decrease which could have

a further adverse effect on our business, results of operations and financial condition.

will need additional capital in the future to meet our obligations and financing may not be available.

During Fiscal

2020 and 2021, the Company attempted to increase its engineering and manufacturing activities, but it still struggled with meeting

its financial requirements.

If we cannot obtain additional capital, we will not be able to continue our operations.

a result of our operating losses, we have largely financed our operations through sales of our equity securities.

Beginning with

Fiscal 2017, the Company significantly reduced its engineering, manufacturing, sales, and marketing activities to focus on renegotiating

numerous financial obligations and conserving cash.

For Fiscal 2021, we had approximately $1.9 million negative cash flows from

operations as compared to negative $0.8 million in Fiscal 2020 due primarily to the impact of Covid-19 pandemic.

The Company’s

engineering and manufacturing activities remained limited due to our inability to increase sales and raise significant amounts

of new financing.

Our ability to continue as a going concern is directly dependent upon our ability to obtain additional operating

capital and generating sufficient operating cash flow.

The impacts of the COVID-19 pandemic have caused significant uncertainty

and volatility in the credit markets and there can be no assurance that lenders or investors will make additional commitments

to provide financing to us under current circumstances.

As a result of the impacts of the COVID-19 pandemic, we may be required

to raise additional capital and our access to and cost of financing will depend on, among other things, global economic conditions,

conditions in the global financing markets, the availability of sufficient amounts of financing, and our prospects.

unable to obtain additional funding as and when we need it, we will not be able to recommence operations or undertake our planned

we do not receive additional financing when and as needed, we may not be able to continue the research, development and commercialization

of our technology and products.

In that case, our business and results of operations would be materially and adversely

capital requirements have been and will continue to be significant.

We will require substantial additional funds in

excess of our current financial resources for research, development and commercialization of products, to obtain and maintain

patents and other intellectual property rights in these technologies and products, and for working capital and other purposes,

the timing and amount of which are difficult to ascertain.

When we need additional funds, such funds may not be available

on commercially reasonable terms or at all.

If we cannot obtain additional funding when needed, our business and results

of operation would be materially and adversely affected.

intellectual property rights are valuable, and any inability or failure to protect them could reduce the value of our products,

services and brand, which would have a material adverse effect on our business.

patents, trademarks, and all of our other intellectual property rights are important assets for us.

There are events

that are outside of our control that pose a threat to our intellectual property rights.

For example, effective intellectual

property protection may not be available in every country in which our products and services are distributed or made available.

the efforts we have taken to protect our proprietary rights may not be sufficient or effective.

Due to our lack of

financial resources, we may not be able to adequately protect our technology portfolio or apply for new patents to extend our

intellectual property portfolio.

The expiration of patents in our patent portfolio may also have an adverse effect on our business.

Any significant

impairment of our intellectual property rights could harm our business and or our ability to compete.

Protecting our

intellectual property rights is costly and time consuming and we may need to resort to litigation to enforce our patent rights

Any significant impairment of our intellectual property rights could harm our business and or our ability to compete.

our intellectual property rights is costly and time consuming and we may need to resort to litigation to enforce our patent rights

or to determine the scope and validity of third-party intellectual property rights and we may not have the financial resources

2 unchanged sentences

effectively than we can because they have substantially greater resources.

We seek to obtain patent protection for

our innovations.

It is possible, however, that some of these innovations may not be protectable.

given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important.

there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an

issued patent may be deemed invalid or unenforceable.

Our inability or failure to protect our intellectual property

rights could have a material adverse effect on our business by reducing the value of our products, services and brand.

We occasionally become subject to

commercial disputes that could harm our business by distracting our management from the operation of our business, by increasing

our expenses and, if we do not prevail, by subjecting us to potential monetary damages and other remedies.

From time to time we are engaged in disputes

regarding our commercial transactions.

These disputes could result in monetary damages or other remedies that could

adversely impact our financial position or operations.

Even if we prevail in these disputes, they may distract our management

from operating our business and the cost of defending these disputes would reduce our operating results.

We have been named as a party in

various legal proceedings, and we may be named in additional litigation, all of which will require significant management time

and attention, result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse

effect on our business, operating results and financial condition.

We are and may become subject to various

legal proceedings and claims that arise in or outside the ordinary course of business.

Certain current lawsuits and pending proceedings

are described under Part I, Item 3.

seek to obtain patent protection for our innovations.

It is possible, however, that some of these innovations may not

be protectable.

In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations

that later turn out to be important.

Furthermore, there is always the possibility, despite our efforts, that the scope

of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable.

inability or failure to protect our intellectual property rights could have a material adverse effect on our business by reducing

the value of our products, services and brand.

occasionally become subject to commercial disputes that could harm our business by distracting our management from the operation

of our business, by increasing our expenses and, if we do not prevail, by subjecting us to potential monetary damages and other

time to time, we are engaged in disputes regarding our commercial transactions.

These disputes could result in monetary

damages or other remedies that could adversely impact our financial position or operations.

Even if we prevail in these disputes,

they may distract our management from operating our business and the cost of defending these disputes would reduce our operating

have been named as a party in various legal proceedings, and we may be named in additional litigation, all of which will require

significant management time and attention, result in significant legal expenses and may result in an unfavorable outcome, which

could have a material adverse effect on our business, operating results and financial condition.

are and may become subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

current lawsuits and pending proceedings are described under Part I, Item 3.

“Legal Proceedings.”

The results of these lawsuits and future

legal proceedings cannot be predicted with certainty.

Also, our insurance coverage may be insufficient or not provide any coverage

at all for certain claims, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may

have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims.

Any such payments

or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results

or financial condition.

results of these lawsuits and future legal proceedings cannot be predicted with certainty.

Also, our insurance coverage may be

insufficient or not provide any coverage at all for certain claims, our assets may be insufficient to cover any amounts that exceed

our insurance coverage, and we may have to pay damage awards or otherwise may enter into settlement arrangements in connection

with such claims.

Any such payments or settlement arrangements in current or future litigation could have a material adverse effect

on our business, operating results or financial condition.

Even if the plaintiffs’

claims are not successful, current future litigation could result in substantial

costs and significantly and adversely impact our reputation and divert management’s attention and resources, which could

have a material adverse effect on our business, operating results or financial condition.

In addition, such lawsuits may make

it more difficult to finance our operations.

We are currently party to litigation

with a former director relating to approximately $10.6 million and approximately 3.33 million warrants which the director claims

are owed to him and his affiliates.

An adverse ruling on these claims in this litigation would materially and adversely affect

our business results or operating and financial condition, dilute our shareholders’

equity interests in the Company and

could adversely affect our stock price.

The Company is presently engaged in a

dispute with a former director, Robert Kopple, relating to approximately $10.6 million (representing approximately $5.4 million

loaned to the Company over the course of 2013 to 2016;

claims are not successful, current future

litigation could result in substantial costs and significantly and adversely impact our reputation and divert management’s

attention and resources, which could have a material adverse effect on our business, operating results or financial condition.

In addition, such lawsuits may make it more difficult to finance our operations.

are currently party to litigation with a former director relating to approximately $11.3 million and approximately 3.33 million

warrants which the director claims are owed to him and his affiliates.

An adverse ruling on these claims in this litigation would

materially and adversely affect our business results or operating and financial condition, dilute our shareholders’

interests in the Company and could adversely affect our stock price.

Company is presently engaged in a dispute with a former director, Robert Kopple, relating to approximately $11.3 million (representing

approximately $5.4 million loaned to the Company over the course of 2013 to 2016;

approximately $170,000 Mr.

Kopple claims to have advanced or paid to third

parties on Aura’s behalf;

Kopple claims to

have advanced or paid to third parties on Aura’s behalf;

and approximately $5.6 million Mr.

Kopple claims to be owed for interest, loan fees and late payment

fees) and approximately 3.33 million warrants which Mr.

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

July 2017, Mr.

Kopple filed suit against the Company as well as against the then other present and former members of the Board

of Directors in connection with these allegations.

The Company believes that it has valid defenses in these matters and believes

that no warrants are due to Mr.

Kopple claims to be owed for

interest, loan fees and late payment fees) and approximately 3.33 million warrants which Mr.

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 the then other present

and former members of the Board of Directors in connection with these allegations.

The Company believes that it has valid defenses

in these matters and believes that no warrants are due to Mr.

Kopple or his affiliates.

The Company intends to vigorously defend against these claims and has

been actively attempting to reach a resolution with Mr.

However, to-date, no settlement has been reached in large part

Kopple continues to demand that as part of any such settlement, he receive unilateral control over significant aspects

of the Company’s financial and management functions such as, but not limited to, the right to unilaterally direct the Company’s

ordinary business expenditures and requiring the Company to seek his approval for the hiring of nearly all personnel, all to the

exclusion of the Company’s management team and stockholder-elected Board of Directors.

The Company believes that allowing

Kopple such level of operational control over the Company without any accountability would be highly detrimental to the Company

and is incompatible with the Board of Directors’

The Company intends to vigorously defend

against these claims and has been actively attempting to reach a resolution with Mr.

However, to-date, no settlement has

been reached in large part because Mr.

Kopple continues to demand that as part of any such settlement, he receive unilateral control

over significant aspects of the Company’s financial and management functions such as, but not limited to, the right to unilaterally

direct the Company’s ordinary business expenditures and requiring the Company to seek his approval for the hiring of nearly

all personnel, all to the exclusion of the Company’s management team and stockholder-elected Board of Directors.

believes that allowing Mr.

Kopple such level of operational control over the Company without any accountability would be highly

detrimental to the Company and is incompatible with the Board of Directors’

duties to shareholders and creditors as a whole.

However, if we are unable

to reach and resolution with Mr.

However, if we are unable to reach and resolution with Mr.

Kopple and Mr.

Kopple were to prevail in his lawsuit, an adverse ruling on these claims would

materially and adversely affect our business results or operating and financial condition, dilute our shareholders’

interests in the Company and could adversely affect our stock price.

Kopple were to prevail in his lawsuit, an adverse ruling

on these claims would materially and adversely affect our business results or operating and financial condition, dilute our shareholders’

equity interests in the Company and could adversely affect our stock price.

“Legal Proceedings”, “Liquidity

5 unchanged sentences

under dispute.

Our business is not diversified.

we cannot increase market acceptance of our products, modify our products and services, or compete with new technologies, we may

never be profitable.

We currently focus all of our resources

on the successful commercialization of the AuraGen ®

business is not diversified.

If we cannot increase market acceptance of our products, modify our products and services,

or compete with new technologies, we may never be profitable.

currently focus all of our resources on the successful commercialization of the AuraGen ®

family of products.

Because we have elected to focus our business

on a single product line rather than diversifying into other areas, our success will be dependent upon the commercial success

of these products.

If we are unable to increase market acceptance of our products, if we are unable to modify our products

and services on a timely basis so that we lose customers, or if new technologies make our technology obsolete, we may never be

Most of our competitors are larger

and better financed than we are and have a greater presence in the marketplace.

Our business may be adversely affected

by industry competition.

Both in the U.S.

and internationally,

the industries in which we operate are extremely competitive.

We face substantial competition from companies that have

a long history of offering traditional auxiliary power units (portable generators), traditional automotive alternators, and inverters

(a device that inverts battery direct current electricity to alternating current).

Most of our competitors have substantially

greater financial resources, spend considerably larger sums than we spend on research, new product development and marketing,

and have long-standing customer relationships.

Furthermore, we must compete with many larger and better-established

companies in the hiring and retention of qualified personnel.

Although we believe we have significant technological

advantages over our competitors, realizing and maintaining such advantages will require us to develop customer relationships and

will also depend on market acceptance of our products.

We may not have the financial resources, technical expertise,

or marketing and support capabilities to compete successfully, which would materially and adversely affect our business.

We may not be able to establish

an effective distribution network or strategic OEM relationships;

in which case our sales will not increase as expected and our

financial condition and results of operations would be adversely affected.

We are in the very beginning stages of

developing our distribution network and establishing strategic relationships with original equipment manufacturer (OEM) customers.

may not be able to identify appropriate distributors or OEM customers on a timely basis.

The distributors with which

we partner may not focus adequate resources on selling our products or may otherwise be unsuccessful in selling them.

addition, we cannot assure you that we will be able to establish OEM relationships on favorable terms or at all.

lack of success of distributors or OEM customers in marketing our products would adversely affect our financial condition and

results of operations.

If we are unable to locate and lease

a new facility for limited production, testing, warehousing, engineering and office space, it would have a material adverse effect

on our business and results of operations.

Our current Stanton facility is not sufficient

to support our expected operations in fiscal 2021.

Accordingly, the Company is actively searching for a new facility that would

be used for limited production, testing, warehousing and engineering and office space for support staff.

The inability to locate

a suitable facility could adversely affect our financial performance, business operations and growth.

Appropriate locations or

financing for the lease of a new facility may not be available at reasonable costs or at all.

Our failure to secure a new facility

will impede our business strategy.

If we are successful in executing

our business plan to grow our business, our failure to efficiently manage our growth could have an adverse effect on our business.

If we are successful in executing our

business plan, we may experience growth in our business that could place a significant strain on our management and other resources.

ability to manage this growth will require us to successfully assimilate new employees, improve existing management information

systems and reorganize our operations.

If we fail to manage growth efficiently, our business could be adversely affected.

We may experience delays in product

shipments and increased product costs because we depend on third party manufacturers for certain product components.

in product shipment or an inability to replace certain suppliers could have a material adverse effect on our business and results

of operations.

We currently do not have the capability

to manufacture most of the AuraGen ®

we have elected to focus our business on a single product line rather than diversifying into other areas, our success will be

dependent upon the commercial success of these products.

If we are unable to increase market acceptance of our products,

if we are unable to modify our products and services on a timely basis so that we lose customers, or if new technologies make

our technology obsolete, we may never be profitable.

of our competitors are larger and better financed than we are and have a greater presence in the marketplace.

may be adversely affected by industry competition.

and internationally, the industries in which we operate are extremely competitive.

We face substantial

competition from companies that have a long history of offering traditional auxiliary power units (portable generators), traditional

automotive alternators, and inverters (a device that inverts battery direct current electricity to alternating current).

of our competitors have substantially greater financial resources, spend considerably larger sums than we spend on research, new

product development and marketing, and have long-standing customer relationships.

Furthermore, we must compete with

many larger and better-established companies in the hiring and retention of qualified personnel.

Although we believe

we have significant technological advantages over our competitors, realizing and maintaining such advantages will require us to

develop customer relationships and will also depend on market acceptance of our products.

We may not have the financial

resources, technical expertise, or marketing and support capabilities to compete successfully, which would materially and adversely

affect our business.

may not be able to establish an effective distribution network or strategic OEM relationships;

in which case our sales will not

increase as expected and our financial condition and results of operations would be adversely affected.

are in the very beginning stages of developing our distribution network and establishing strategic relationships with original

equipment manufacturer (OEM) customers.

We may not be able to identify appropriate distributors or OEM customers on

a timely basis.

The distributors with which we partner may not focus adequate resources on selling our products or

may otherwise be unsuccessful in selling them.

In addition, we cannot assure you that we will be able to establish

OEM relationships on favorable terms or at all.

The lack of success of distributors or OEM customers in marketing our

products would adversely affect our financial condition and results of operations.

we are successful in executing our business plan to grow our business, our failure to efficiently manage our growth could have

an adverse effect on our business.

we are successful in executing our business plan, we may experience growth in our business that could place a significant strain

on our management and other resources.

Our ability to manage this growth will require us to successfully assimilate

new employees, improve existing management information systems and reorganize our operations.

If we fail to manage

growth efficiently, our business could be adversely affected.

may experience delays in product shipments and increased product costs because we depend on third party manufacturers for certain

product components.

Delays in product shipment or an inability to replace certain suppliers could have a material adverse

effect on our business and results of operations.

currently do not have the capability to manufacture most of the AuraGen ®

components on a commercial scale.

Therefore, we rely extensively on contracts

with third party manufacturers for such components.

The use of third-party manufacturers increases the risk of delay

of shipments to our customers and increases the risk of higher costs if our manufacturers are not available when required.

suppliers and manufacturers may not supply us with a sufficient number of components or components of adequate quality, which

would delay production of our product.

We do not currently have written agreements with any suppliers.

those suppliers who make certain components may not be easily replaced.

Any of these disruptions in the supply of components

could have a material adverse effect on our business or results of operations.

Furthermore, we are monitoring the impact of the

COVID-19 pandemic on the operations of the Company, particularly with respect to possible delays and other disruptions to the

supply-chain.

Although we generally aim to use

standard parts and components for our products, some of our components are currently available only from limited sources.

We may experience delays in production

of the AuraGen ®

if we fail to identify alternate vendors, or if any parts supply is interrupted or reduced or if there is

a significant increase in production costs, each of which could materially adversely and affect our business and operations.

We will need to renew sources of

component supplies to meet increases in demand for the AuraGen ®

There is no assurance that our suppliers can or

will supply the components to us on favorable terms or at all.

As we recommence our operations and in

we rely extensively on contracts with third party manufacturers for such components.

The use of third-party manufacturers

increases the risk of delay of shipments to our customers and increases the risk of higher costs if our manufacturers are not

available when required.

Our suppliers and manufacturers may not supply us with a sufficient number of components or

components of adequate quality, which would delay production of our product.

We do not currently have written agreements

with any suppliers.

Furthermore, those suppliers who make certain components may not be easily replaced.

these disruptions in the supply of components could have a material adverse effect on our business or results of operations.

we are monitoring the impact of the COVID-19 pandemic on the operations of the Company, particularly with respect to possible

delays and other disruptions to the supply-chain.

we generally aim to use standard parts and components for our products, some of our components are currently available only from

limited sources.

may experience delays in production of the AuraGen ®

if we fail to identify alternate vendors, or if any parts supply

is interrupted or reduced or if there is a significant increase in production costs, each of which could materially adversely

and affect our business and operations.

will need to renew sources of component supplies to meet increases in demand for the AuraGen ®

is no assurance that our suppliers can or will supply the components to us on favorable terms or at all.

order to meet future demand for AuraGen ®

systems, we will need to renew contracts or form new contracts with our prior manufacturers

and suppliers or locate other suitable manufacturers and suppliers for subassemblies and other components.

Recently, we entered

into discussions with several of our prior suppliers and we are in the process of negotiating settlements of old payables and

arranging new supply contracts.

Although we believe that there are a number of potential manufacturers and suppliers of the components,

we cannot guarantee that contracts for components can be obtained on favorable terms or at all.

Any material adverse

change in terms of the purchase of these components could increase our cost of goods.

We need to invest in tooling to

have a more extensive line of products.

If we cannot expand our tooling, it may not be possible for us to expand our

We are currently limited in the products

that we are able to manufacture because of the limitations of our tooling capabilities.

In order to have a broader

line of products that address industrial and commercial needs, we must make a significant investment in additional tooling or

pursue new alternatives to replace traditional tooling.

We do not currently have the funds required to acquire new

tooling or to obtain replacements and no assurances can be given that we will have the required funds in the future.

systems, we will need to renew contracts or form new contracts with our

prior manufacturers and suppliers or locate other suitable manufacturers and suppliers for subassemblies and other components.

Recently, we entered into discussions with several of our prior suppliers and we are in the process of negotiating settlements

of old payables and arranging new supply contracts.

Although we believe that there are a number of potential manufacturers and

suppliers of the components, we cannot guarantee that contracts for components can be obtained on favorable terms or at all.

material adverse change in terms of the purchase of these components could increase our cost of goods.

need to invest in tooling to have a more extensive line of products.

If we cannot expand our tooling, it may not be

possible for us to expand our operations.

are currently limited in the products that we are able to manufacture because of the limitations of our tooling capabilities.

order to have a broader line of products that address industrial and commercial needs, we must make a significant investment in

additional tooling or pursue new alternatives to replace traditional tooling.

We do not currently have the funds required

to acquire new tooling or to obtain replacements and no assurances can be given that we will have the required funds in the future.

we do not acquire the required funds for tooling or replacement tooling, we may not be able to expand our product line to meet

industrial and commercial needs.

We are subject to government regulation

that may restrict our ability to use certain suppliers outside the U.S.

or to sell our products into certain countries.

we cannot obtain the required approval from government agencies, then our business may be adversely affected.

We depend on third party suppliers for

our parts and components, some of which are located outside of the United States.

In the event that some of these suppliers

are barred from selling their products in the United States, or cannot meet other U.S.

government regulations, we would need to

locate other suppliers, which could delay or prevent us from shipping product to our customers.

We use copper, steel

and aluminum in our product and in the event of government regulations or restrictions of these materials we may experience a

shortage of these materials to manufacture our product.

are subject to government regulation that may restrict our ability to use certain suppliers outside the U.S.

or to sell our products

into certain countries.

If we cannot obtain the required approval from government agencies, then our business may be

adversely affected.

depend on third party suppliers for our parts and components, some of which are located outside of the United States.

the event that some of these suppliers are barred from selling their products in the United States, or cannot meet other U.S.

government regulations, we would need to locate other suppliers, which could delay or prevent us from shipping product to our

We use copper, steel and aluminum in our product and in the event of government regulations or restrictions

of these materials we may experience a shortage of these materials to manufacture our product.

Furthermore, U.S.

law restricts us from selling products in

some potential foreign markets without U.S.

restricts us from selling products in some potential foreign markets without U.S.

government approval.

If we cannot obtain the required approvals from government

agencies to obtain materials or contract with suppliers or if we are restricted by government regulation from selling our products

into certain countries, our business may be adversely affected.

Acquisitions, joint ventures, and

strategic alliances may have an adverse effect on our business.

In March 2017, we entered into a joint

venture agreement with a Chinese partner.

This joint venture arrangement and other transactions and arrangements involve significant

challenges and risks, including that they do not advance our business strategy, that we get an unsatisfactory return on our investment,

that we have difficulty integrating and retaining new employees, business systems, and technology, or that they distract management

from our other businesses.

If an arrangement fails to adequately anticipate changing circumstances and interests of a party, it

may result in early termination or renegotiation of the arrangement.

The success of these transactions and arrangements will depend

in part on our ability to leverage them to enhance our existing products and services or develop compelling new ones.

longer than expected to realize the full benefits from these transactions and arrangements, such as increased revenue, enhanced

efficiencies, or increased market share, or the benefits may ultimately be smaller than we expected.

These events could adversely

affect our operating results or financial condition.

During fiscal 2020, the Company recorded an impairment expense of $250,000

writing-off the Jiangsu Shengfeng investment due to operational and future cash-flow uncertainties associated with AuraGen ®

obtain the required approvals from government agencies to obtain materials or contract with suppliers or if we are restricted

by government regulation from selling our products into certain countries, our business may be adversely affected.

Acquisitions,

joint ventures, and strategic alliances may have an adverse effect on our business.

March 2017, we entered into a joint venture agreement with a Chinese partner.

This joint venture arrangement and other transactions

and arrangements involve significant challenges and risks, including that they do not advance our business strategy, that we get

an unsatisfactory return on our investment, that we have difficulty integrating and retaining new employees, business systems,

and technology, or that they distract management from our other businesses.

If an arrangement fails to adequately anticipate changing

circumstances and interests of a party, it may result in early termination or renegotiation of the arrangement.

The success of

these transactions and arrangements will depend in part on our ability to leverage them to enhance our existing products and services

or develop compelling new ones.

It may take longer than expected to realize the full benefits from these transactions and arrangements,

such as increased revenue, enhanced efficiencies, or increased market share, or the benefits may ultimately be smaller than we

These events could adversely affect our operating results or financial condition.

During Fiscal 2020, the Company recorded

an impairment expense of $250,000 writing-off the Jiangsu Shengfeng investment due to operational and future cash-flow uncertainties

associated with AuraGen ®

market development prospects in China through the joint venture

We rely on highly skilled personnel

and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.

Our performance is largely dependent on

the talents and efforts of highly skilled individuals.

Our future success depends on our continuing ability to identify,

hire, develop, motivate, and retain highly skilled personnel for all areas of our organization.

We are currently in default

under several agreements with various key consultants which may make those parties unwilling to continue to work with the Company.

Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing

employees and consultants.

The incentives to attract, retain and motivate employees and consultants provided by our

ability to pay competitive salaries and rates as well as offering additional incentives such as stock option grants or by future

arrangements may not be as effective as in the past.

If we do not succeed in attracting excellent personnel or retaining

or motivating existing personnel, we may be unable to grow effectively.

is subject to the risks of earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as

computer viruses, terrorism, or pandemics.

Our corporate

headquarters and our research and development operations are located in the State of California in regions known for seismic activity.

A significant natural disaster, such as an earthquake, in this region could have a material adverse effect on our business, financial

condition and results of operations.

In addition, our servers are vulnerable to computer viruses, break-ins, and similar disruptions

from unauthorized tampering with our computer systems.

Any such event could have a material adverse effect on our business, financial

condition and results of operations.

rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may

not be able to grow effectively.

performance is largely dependent on the talents and efforts of highly skilled individuals.

Our future success depends

on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization.

are currently in default under several agreements with various key consultants which may make those parties unwilling to continue

to work with the Company.

Our continued ability to compete effectively depends on our ability to attract new employees and to

retain and motivate our existing employees and consultants.

The incentives to attract, retain and motivate employees

and consultants provided by our ability to pay competitive salaries and rates as well as offering additional incentives such as

stock option grants or by future arrangements may not be as effective as in the past.

If we do not succeed in attracting

excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively.

business is subject to the risks of earthquakes and other natural catastrophic events, and to interruptions by man-made problems

such as computer viruses, terrorism, or pandemics.

corporate headquarters and our research and development operations are located in the State of California in regions known for

seismic activity.

A significant natural disaster, such as an earthquake, in this region could have a material adverse effect on

our business, financial condition and results of operations.

In addition, our servers are vulnerable to computer viruses, break-ins,

and similar disruptions from unauthorized tampering with our computer systems.

Any such event could have a material adverse effect

on our business, financial condition and results of operations.

to maintain effective internal controls over financial reporting could adversely affect our business and the market price of our

Common Stock.

Pursuant to rules

adopted by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls

over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports.

This report contains, among other matters, a statement as to whether our internal controls over financial reporting are effective

and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management.

also requires our independent registered public accounting firm to audit the effectiveness of our internal control over financial

in ITEM 9A, Controls and Procedures contained herein in this Annual Report, we have concluded that the material weakness that

was previously disclosed on Form 10-K, as amended, for the fiscal year ended February 28, 2019, was successfully remediated during

to rules adopted by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal

controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual

This report contains, among other matters, a statement as to whether our internal controls over financial reporting are

effective and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management.

Section 404 also requires our independent registered public accounting firm to audit the effectiveness of our internal control

over financial reporting.

described in ITEM 9A, Controls and Procedures contained herein in this Annual Report, we have concluded that the material weakness

that was previously disclosed on Form 10-K, as amended, for the Fiscal year ended February 29, 2020, was successfully remediated

during Fiscal 2020.

Presently, the Company does not have the financial resources to fully comply with all requirements of Section

If, in the future, we identify additional material weaknesses in our internal controls over financial reporting during this continuous

evaluation process, our management may not be able to assert that such internal controls are effective.

Therefore, if we

are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors are unable

to attest that our internal controls are effective or they are unable to express an opinion on the effectiveness of our internal

controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse

effect on our business and the market price of our Common Stock.

Trading on the OTC Markets is volatile

and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their

Our common stock is quoted on the Pink

Sheets of the OTC Markets.

Trading in stock quoted on the OTC Markets is often thin and characterized by wide fluctuations in

trading prices, due to many factors, some of which may have little to do with our operations or business prospects.

This volatility

could depress the market price of our common stock for reasons unrelated to operating performance.

Moreover, the OTC Markets is

not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed

on a quotation system like NASDAQ or a stock exchange like the New York Stock Exchange.

If, in the future, we identify additional material weaknesses in our internal controls over financial reporting during this

continuous evaluation process, our management may not be able to assert that such internal controls are effective.

if we are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors

are unable to attest that our internal controls are effective or they are unable to express an opinion on the effectiveness of

our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would

have an adverse effect on our business and the market price of our Common Stock.

on the OTC Markets is volatile and sporadic, which could depress the market price of our common stock and make it difficult for

our stockholders to resell their shares .

common stock is quoted on the Pink Sheets of the OTC Markets.

Trading in stock quoted on the OTC Markets is often thin and characterized

by wide fluctuations in trading prices, due to many factors, some of which may have little to do with our operations or business

This volatility could depress the market price of our common stock for reasons unrelated to operating performance.

Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the

trading of securities listed on stock exchanges like NASDAQ or the New York Stock Exchange.

These factors may result in investors

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What changed 10-K

Item 1A. Risk Factors