What changed in this filing

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Item 3. Legal Proceedings

2022-06-21 compared with 2021-06-01 · 83 added, 102 removed, 4 unchanged (98% 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.

Our management evaluates our exposure to these

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

loss is estimable and the loss is probable.

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

subject to significant uncertainty.

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

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

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

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.

2017, the Company’s former COO was awarded approximately $238,000 in accrued salary and related charges by the California

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.

Company is presently engaged in a dispute with one of its former directors, 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.

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 feess) 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 current director

Diaz-Verson and former directors Mr.

Breslow and Mr.

as well as Mr.

Gagerman, our former CEO and a former director in connection with these allegations.

In 2018, the Court sustained

demurrers by Mr.

Diaz-Verson, 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.

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.

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.

Delivery, a business operated and controlled by a relative of Scholnick, 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.

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

In April 2020, Aura and Scholnick entered into a Confidential Settlement and Release Agreement wherein (i) the 2018 action initiated

by Scholnick against Aura was resolved with no amounts owing by Aura and the complaint and cross-complaint were subsequently dismissed

with prejudice;

and (ii) the amount owing to Aura pursuant to the judgment against J.B.

Moving and Delivery was compromised and

resolved through a single lump-sum payment to Aura.

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.

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,

As a result of prior management’s unsuccessful opposition to this stockholders’

action filed in the Court of Chancery,

such stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate

benefit doctrine and/or other legal provisions.

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

if any, to which such stockholders may be entitled.

June 20, 2013, the Company entered into an agreement with two individuals, Mr.

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.

Although management considers the likelihood of such an

outcome to be remote, if one or more of these legal matters were resolved against the Company for amounts in excess of management’s

expectations, the Company’s financial statements for that reporting period could be materially adversely affected.

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.

In August 2021, the Company

reached a settlement by which the Company agreed to pay approximately $330,000, representing the principal award plus accrued

As of the time of this filing, the Company has paid approximately $108,400 toward the settlement amount.

The remaining

balance of approximately $221,600 is to be paid no later than September 1, 2022, and accrues interest of 10% per annum

Since July 2017 the Company has been engaged in

litigation with a former director, Robert Kopple, relating to more than $13 million and the current equivalent of the approximately 23

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

Kopple and his affiliated entities (collectively

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

to between 2013-2016.

In March 2022, the Company reached a settlement with the Kopple Parties that resolves all claims asserted against

the Company without any admission, concession or finding of any fault, liability or wrongdoing on the part of the Company.

Under the terms

of the settlement, we have agreed to pay an aggregate amount of $10 million over a period of seven years;

$3 million of which is to be

paid on or before June 8, 2022, after which, interest will accrue on the unpaid balance at a rate of 6%, compounded annually.

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 approximately 3.3 million 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.

As of June 8, 2022 and

the date of this report, the Company has not yet paid the $3,000,000 installment due to Kopple.

Pursuant to the agreement, the Company

has 60 days to cure the nonpayment of the $3,000,000 default.

(See Part IV, Item 15, Note 19 to the Financial Statements).

On March 26, 2019, various stockholders of the

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

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

On March 27, 2019, those

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

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

These written consents represented a majority

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

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

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

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

Diaz-Versón, Jr.

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

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

outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority

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

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

As a result of prior management’s unsuccessful

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

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

To-date, no final determination

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

On June 20, 2013, the Company entered into an

agreement with two individuals, Mr.

Abdou and Mr.

Abdou, for the sale of $125,000

of secured convertible notes payable (the “Notes”) and warrants.

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 the Messrs.

Abdou 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 Mr.

Abdou, for the sale of $125,000 of secured convertible notes payable (the “Notes”)

and warrants.

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 the Messrs.

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

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

Abdou and Mr.

In September 2018 the court entered a judgment

of approximately $235,000 plus legal fees in favor of the Messrs.

The Company subsequently appealed this judgment and,

in September 2019, reached a settlement agreement with the Messrs.

Abdou to implement a payment plan in accordance with the 2018

As of February 28, 2021 the outstanding balance was $120,181.

September 2018 the court entered a judgment of approximately $235,000 plus legal fees in favor of the Messrs.

The Company subsequently

appealed this judgment and, in September 2019, reached a settlement agreement with the Messrs.

Abdou to implement a payment plan in accordance

with the 2018 judgment.

As of February 28, 2022 the outstanding principal balance was zero and remaining interest was approximately $18,000.

of the date of this filing, all amounts have been paid and no principal or interest remains outstanding.

MINE SAFETY DISCLOSURES

Not applicable.

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-K

Item 3. Legal Proceedings