What changed in this filing

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Item 9A. Controls and Procedures

2022-06-21 compared with 2021-06-01 · 1562 added, 1320 removed, 195 unchanged (94% of the section changed)

CONTROLS AND PROCEDURES

of Disclosure Controls and Procedures

Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed

under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the specified time periods.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required

to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated

and communicated to its management, including its principal executive and principal financial officers, or persons performing

similar functions, as appropriate to allow timely decisions regarding required disclosure.

President and our Chief Financial Officer concluded that, as a result of the material weakness in internal control over financial

reporting described below, our disclosure controls and procedures were effective as of February 28, 2021.

Management has concluded

that during the Fiscal year ended February 28, 2021, actions taken by the Company to maintain effectiveness were successful such

that our disclosure controls and procedures were effective as of February 28, 2021.

Management’s

Annual Report on Internal Control Over Financial Reporting

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting

as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934.

The Company’s internal control over financial reporting

is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with United States generally accepted accounting principles.

control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in

reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

United States generally accepted accounting principles, and that receipts and expenditures of the Company are being made only

in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision

and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness

of the design and operation of our disclosure controls and procedures.

The term “disclosure controls and procedures”, as defined

in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls

and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports

it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities

and Exchange Commission’s rules and forms.

Disclosure controls and procedures also include, without limitation, controls and procedures

designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act

is accumulated and communicated to the company’s management, including its principal executive and principal financial officers,

or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our President and Chief Financial Officer

concluded as of February 28, 2022, that our disclosure controls and procedures were not effective.

The matters involving internal controls

and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight

(1) ineffective controls over transactions for debt issuances to provide for review of all terms in a timely and accurate

manner, to ensure reporting is in conformity with generally accepted accounting principles and properly reflected in the financial results;

and (2) ineffective controls over transactions for issuances of common stock, options, and warrants to provide for review of all terms

in a timely and accurate manner, to ensure reporting is in conformity with generally accepted accounting principles and properly reflected

in the financial results.

These material weaknesses resulted in the restatement of our financial statements for the year ended February

The aforementioned material weaknesses were identified by our Chief Financial Officer in connection with the review of our financial

statements as of February 28, 2022.

Management’s Annual Report on Internal Control Over Financial

The Company’s management is responsible

for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding

the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States

generally accepted accounting principles.

Internal control over financial reporting includes policies and procedures that (i) pertain

to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets

of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

statements in accordance with United States generally accepted accounting principles, and that receipts and expenditures of the Company

are being made only in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance

regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have

a material effect on the financial statements.

has assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2021.

these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission

(“COSO”) in Internal Control-Integrated Framework.

Based on these assessments, and on those criteria, the Company’s

management concluded that the Company’s internal control over financial reporting was effective as of February 28, 2021.

in Internal Control Over Financial Reporting

was a significant change in the Company’s internal control over financial reporting that occurred during the Company’s

Fiscal year ended February 28, 2021, that has materially affected, or are reasonably likely to materially affect, the Company’s

internal control over financial reporting.

During the fiscal year ended February 28, 2021, the Company implemented QuickBooks

Solutions-Wholesale and Manufacturing software as its primary accounting and operations environment.

Limitations on Effectiveness of Controls

Company does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent

all errors and all fraud.

A control procedure, no matter how well conceived and operated, can provide only reasonable not absolute

assurance that the objectives of the control procedure are met.

Because of the inherent limitations in all control procedures,

no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company

have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that

breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of

some persons, by collusion of two or more people, or by management override of the control.

The design of any control procedure

also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design

will succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because

of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent

limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Management has assessed the effectiveness of the

Company’s internal control over financial reporting as of February 28, 2022.

In making these assessments, management used the criteria

set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated

Based on these assessments, and on those criteria, the Company’s management concluded that as of February 28, 2022, the

Company’s internal control over financial reporting was not effective to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance

generally accepted accounting principles .

Remediation Plan

an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated,

or plan to initiate, the following series of measures:

We have increased our personnel resources and technical accounting

expertise within the accounting function with the hiring of a new Chief Financial Officer as disclosed on Form 8-K filed with the Securities

and Exchange Commission on February 17, 2022.

We intend to hire one or more additional personnel for the finance and accounting function

which will provide the manpower to perform timely and complete reviews of debt and equity transactions consistent with control objectives.

We also plan to prepare written policies and procedures for accounting and financial reporting to establish a formal process to account

for all transactions, including equity and debt transactions.

We plan to test our updated controls and remediate our deficiencies in the

fiscal year 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal

control over financial reporting that occurred during the Company’s fiscal year ended February 28, 2022, that have materially affected,

or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company does not expect that its disclosure

controls and procedures or its internal control over financial reporting will prevent all errors and all fraud.

A control procedure, no

matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control procedure

Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that

all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include the realities

that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls

can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can

be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

over time, controls

may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

OTHER INFORMATION

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

and Executive Officers

March 2019, stockholders of the Company controlling 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.

Directors and Executive Officers

In March 2019, stockholders of the Company controlling

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.

David Mann, and

Robert Lempert as directors of the Company in their stead.

As a result of Aura’s refused to recognize the legal effectiveness of the consents, in April 2019, 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.

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 stockholder 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.

July 2019 the employment of Melvin Gagerman was terminated.

See Item 3, Legal Proceedings for more information.

Also in July 2019,

the Board of Directors appointed Ms.

Lavut to succeed Mr.

As a result of Aura’s refused to recognize the legal effectiveness

of the consents, in April 2019, 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.

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

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

benefit doctrine and/or other legal provisions.

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

to which such stockholders may be entitled.

In July 2019 the employment of Melvin Gagerman

was terminated.

(See Item 3, Legal Proceedings for more information.) Also in July 2019, the Board of Directors appointed Ms.

Gagerman as President of Aura, appointed Mr.

Mann to succeed Mr.

as Chief Financial Officer of the Company, and appointed Dr.

Gagerman as Chief Financial Officer of the Company, and appointed

Lempert Secretary of Aura.

following table sets forth the names, ages, and offices of all our current directors and executive officers.

Our officers are

appointed by, and serve at the pleasure of, the Board of Directors.

The stockholders at the annual meeting elect our directors

to serve until the next meeting.

Director, Member

of the Audit Committee

Salvador Diaz-Verson,

Director, Chairman

of the Audit Committee

In February 2022, the Board of Directors appointed Mr.

Steven Willett to succeed Mr.

Mann as the Company’s

Chief Financial Officer.

Mann remains on the Board of Directors.

The following table sets forth the names, ages,

and offices of all our current directors and executive officers.

Our officers are appointed by, and serve at the pleasure of, the Board

of Directors.

The stockholders at the annual meeting elect our directors to serve until the next meeting.

Gary Douglas (1)

Director, Member of the Audit Committee

Salvador Diaz-Verson, Jr.

Director, Chairman of the Audit Committee

David Mann (2), (3)

Chief Financial

Officer, Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of the Audit Committee

President, Chairman

of the Board, Member of Nominating Committee and Member of the Compensation Committee

Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of the Audit Committee, former Chief Financial Officer

Cipora Lavut (2)

President, Chairman of the Board, Member of Nominating Committee and Member of the Compensation Committee

Robert Lempert (2)

Secretary, Director,

Chairman of the Nominating Committee and Member of the Compensation Committee

Secretary, Director, Chairman of the Nominating Committee and Member of the Compensation Committee

Steven Willett (4)

Chief Financial Officer

Douglas and Mr.

Diaz-Verson, Jr.

were appointed to the Board of Directors on March 29, 2018 by the written consent of stockholders holding

a majority of the Company’s shares.

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

to the Company electing Ms.

Lempert to the Company’s Board of Directors.

Because of Aura’s refusal

to recognize the legal effectiveness of the consents, in April 2019 the stockholders filed suit in the Court of Chancery of the

State of Delaware seeking an order confirming the validity of the elections.

On July 8, 2019 the Court of Chancery entered final judgment

in favor of the stockholder plaintiffs, confirming that Ms.

Lempert had been validly elected by the holders of

a majority of the Company’s outstanding stock acting by written consent.

were appointed to the Board of Directors on March 29, 2018 by the written consent of stockholders holding a majority of the Company’s

(2) In March 2019, stockholders of

the Company controlling a combined total of more than 27.5 million shares delivered signed written consents to the Company electing Ms.

Lempert to the Company’s Board of Directors.

Because of Aura’s refusal to recognize the legal effectiveness

of the consents, in April 2019 the stockholders filed suit in the Court of Chancery of the State of Delaware seeking an order confirming

the validity of the elections.

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

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

acting by written consent.

In July 2019, the Board of Directors appointed Ms.

President and Chairman of the Board, appointed Mr.

Lavut President and Chairman of the Board, appointed Mr.

Mann as Chief Financial Officer and appointed Dr.

Lempert as Secretary.

(3) On February 14, 2022, Mr.

resigned as Chief Financial Officer.

(4) On February 14, 2022 Mr.

was appointed as Chief Financial Officer.

information with respect to our current directors and executive officer is provided below.

Diaz-Versón, Jr .

Diaz-Versón, Jr.

Diaz-Versón, Jr .

Diaz-Versón, Jr.

was elected as a director on March 29, 2018.

Previously, he served

as a director of the Company from 1997-2005 and again from June 2007 until January 2018.

Diaz-Versón, Jr.

Previously, he served as

a director of the Company from 1997-2005 and again from June 2007 until January 2018.

Diaz-Versón, Jr.

is the founder,

Chairman and President of Diaz-Verson Capital Investments, Inc., and was a registered investment advisor with the Securities

and Exchange Commission until 2009.

Diaz-Versón, Jr.

served as President and member of the board of directors of American

Family Corporation (AFLAC, INC.) from 1976 until 1992.

Diaz-Versón, Jr.

served as President and Chief Investment Officer

of American Family Life Assurance Company, a subsidiary of AFLAC, Inc.

Chairman and President of Diaz-Verson Capital Investments, Inc., and was a registered investment advisor with the Securities and

Exchange Commission until 2009.

Diaz-Versón, Jr.

served as President and member of the board of directors of American Family

Corporation (AFLAC, INC.) from 1976 until 1992.

Diaz-Versón, Jr.

served as President and Chief Investment Officer of American

Family Life Assurance Company, a subsidiary of AFLAC, Inc.

He is currently Chairman of Miramar Securities.

Diaz-Versón, Jr.

has received two presidential appointments to the Christopher Columbus Fellowship Foundation;

by President George H.W.

Bush in 1992 and subsequently by President Clinton in 2000.

Diaz-Versón, Jr.

of the Florida State University Foundation and is a national trustee of the Boys and Girls Club of America.

serves as a trustee of Clark Atlanta University.

Diaz-Versón, Jr.

is a graduate of Florida State University and was

selected as a director in view of his lengthy experience in managing companies and his knowledge of capital investments.

first by President George H.W.

in 1992 and subsequently by President Clinton in 2000.

Diaz-Versón, Jr.

is a trustee of the Florida State University

Foundation and is a national trustee of the Boys and Girls Club of America.

He also serves as a trustee of Clark Atlanta University.

Diaz-Versón, Jr.

is a graduate of Florida State University and was selected as a director in view of his lengthy experience

in managing companies and his knowledge of capital investments.

Douglas was elected as a director on March 29, 2018.

Gary Douglas has a BBA in Management degree, with

extensive experience in cooperate communication and investment banking.

He is a principal in Douglas Strategic Communications

LLC, a marketing strategy and communications consultancy, and Ex officio Chairman of Picture Marketing, Inc., a digital marketing

Douglas also formally served as Chief Marketing Officer of O’Melveny Consulting LLP, a unit of a global law

He also served as President of SP/Hambros America and Division President of Geneva Learning Systems and Group Vice President

of Business Development for the five Geneva Companies, both SP/Hambros and The Geneva companies were middle market investment

Douglas brings to the Board extensive experience in cooperate communication and investment banking.

Lavut was one of Aura’s original founding members.

Gary Douglas has a BBA in Management degree, with extensive

experience in cooperate communication and investment banking.

He is a principal in Douglas Strategic Communications LLC, a marketing

strategy and communications consultancy, and Ex officio Chairman of Picture Marketing, Inc., a digital marketing company.

also formally served as Chief Marketing Officer of O’Melveny Consulting LLP, a unit of a global law firm.

He also served as President

of SP/Hambros America and Division President of Geneva Learning Systems and Group Vice President of Business Development for the five

Geneva Companies, both SP/Hambros and The Geneva companies were middle market investment bankers.

Douglas brings to the Board extensive

experience in cooperate communication and investment banking.

Lavut was one of Aura’s original founding members.

From 1987 to 2002 Ms.

Lavut served on Aura’s

Board and as a Senior Vice President.

During this period, Ms.

Lavut was instrumental to Aura receiving large contracts from

The Boeing Company, Litton Industries and the United States Air Force.

Lavut also provided critical investor relations

and marketing support during this time.

Lavut was instrumental to Aura receiving large contracts from The

Boeing Company, Litton Industries and the United States Air Force.

Lavut also provided critical investor relations and marketing

support during this time.

Lavut left Aura in 2002.

At the request of Aura’s then Board of Directors

and management, in 2006 Ms.

Lavut returned to Aura as Vice President in charge of investors relations and corporate communication.

In January 2016, Ms.

Lavut left the Company to pursue other business ventures.

Lavut presently provides marketing

and business consulting to a variety of retail and service-oriented businesses.

She holds a degree from California State University,

Lempert graduated from the University of Pennsylvania and conducted his residency at the Albert Einstein

Medical Center in Philadelphia.

Lavut presently provides marketing and business consulting to a

variety of retail and service-oriented businesses.

She holds a degree from California State University, Northridge.

Lempert graduated from the University of Pennsylvania and conducted his residency at the Albert Einstein Medical

Center in Philadelphia.

Lempert also served as a Captain in the U.S.

Army and previously served on the Company’s

Board from November 28, 2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11,

Lempert has been a significant investor, shareholder and an active advocate of Aura’s technology for more

than 20 years.

Mann has been Vice President of Marketing for Mann Marketing, a manufacturing and import company, since 1990

and the Vice President of Sales of that company since 2007.

Army and previously served on the Company’s Board

from November 28, 2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11,

Lempert has been a significant investor, shareholder and an active advocate of Aura’s technology for more than 20

Mann has been Vice President of Marketing for Mann Marketing, a manufacturing and import company, since 1990 and the

Vice President of Sales of that company since 2007.

From 2000 until 2007, Mr.

Mann also served as Vice President

of Operations.

Mann has extensive experience dealing with all aspects of marketing and sales, as well as suppliers in

both North America and China.

Mann has been an investor in the Aura since 2007 and previously served as a director of

the Company from November 28, 2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until

January 11, 2018.

Mann holds a degree in Business Administration from College St.

Mann also served as Vice President of Operations.

Mann has extensive experience dealing with all aspects of marketing and sales, as well as suppliers in both North America and

Mann has been an investor in the Aura since 2007 and previously served as a director of the Company from November 28,

2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11, 2018.

a degree in Business Administration from College St.

Laurent, Montreal, Canada.

Willett was previously employed by Govino, LLC, where he has served as CFO and Vice President of Finance since 2017.

From 2014 to 2017, Mr.

Willett served as Director of Finance for the Americas of Identiv, Inc., and prior to that, as Director of Finance

of aerospace & defense contractor Trex Enterprises Corporation.

Willett holds a Bachelor of Science degree in accounting from

the University of Massachusetts and an M.B.A.

with concentration in finance from Bentley University McCallum Graduate School of Business.

Section 16(a) Reports

shares of common stock are registered under the Securities Exchange Act of 1934, and therefore our executive officers and directors

and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements

of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and

other equity securities, on Forms 3, 4 and 5 respectively.

Executive officers, directors and greater than 10% stockholders are

required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.

Based on our review of the copies of such forms received by us, and to the best of our knowledge, no executive officers, directors

and persons holding greater than 10% of our issued and outstanding stock have filed the required reports during the year ended

February 28, 2021.

have adopted a Code of Ethics applicable to the Company’s Chief Executive Officer, Chief Financial Officer and all other

members of the Company’s Finance Department.

This Code of Ethics is posted on the Company’s website within a broader

Code of Business Conduct and Ethics at www.aurasystems.com in the Investor Relations section.

We intend to satisfy the disclosure

requirement under Item 10 of Form 8-K regarding an amendment to, or a waiver from, the provision of our Code of Ethics that applies

to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing

similar functions and that relates to any element of such provision of our Code of Ethics by posting such information on our website

within four business days of the date of such amendment or waiver.

In the case of a waiver, the nature of the waiver, the name

of the person to whom the waiver was granted and the date of the waiver will also be disclosed.

shares of common stock are registered under the Securities Exchange Act of 1934, and therefore our executive officers and directors and

persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of

beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity

securities, on Forms 3, 4 and 5 respectively.

Executive officers, directors and greater than 10% stockholders are required by the Securities

and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.

Based on our review of the copies

of such forms received by us, and to the best of our knowledge, no executive officers, directors and persons holding greater than 10%

of our issued and outstanding stock have filed the required reports during the years ended February 28, 2022 and February 28, 2021.

have adopted a Code of Ethics applicable to the Company’s Chief Executive Officer, Chief Financial Officer and all other members

of the Company’s Finance Department.

This Code of Ethics is posted on the Company’s website within a broader Code of Business

Conduct and Ethics at www.aurasystems.com in the Investor Relations section.

We intend to satisfy the disclosure requirement under Item

10 of Form 8-K regarding an amendment to, or a waiver from, the provision of our Code of Ethics that applies to our principal executive

officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates

to any element of such provision of our Code of Ethics by posting such information on our website within four business days of the date

of such amendment or waiver.

In the case of a waiver, the nature of the waiver, the name of the person to whom the waiver was granted

and the date of the waiver will also be disclosed.

Relationships

of our directors or executive officers is related to one another.

directors or executive officers is related to one another.

of the Board of Directors

Board maintains the following committees to assist it in discharging its oversight responsibilities.

maintains the following committees to assist it in discharging its oversight responsibilities.

The Audit Committee does not have a formal charter but is responsible primarily for overseeing the services performed

by our independent registered public accounting firm, evaluating our accounting policies and system of internal controls, and

reviewing our annual and quarterly reports before filing with the Securities and Exchange Commission.

The current members of the

Audit Committee are Mr.

Salvador Diaz Versón Jr., Mr.

by our independent registered public accounting firm, evaluating our accounting policies and system of internal controls, and reviewing

our annual and quarterly reports before filing with the Securities and Exchange Commission.

The current members of the Audit Committee

Salvador Diaz Versón Jr., Mr.

David Mann and Mr.

Gary Douglas.

The Board of Directors has determined

that the Audit Committee does not have a member who is an “audit committee financial expert”

as such term is defined

by the rules and regulations of the Securities and Exchange Commission.

While the Board recognizes that the Board members serving

on the Audit Committee do not meet the qualifications required of an “audit committee financial expert,”

believes that the appointment of a new director to the Board of Directors and to the Audit Committee at this time is not necessary

as the level of financial knowledge and experience of the current member of the Audit Committee, including such member’s

ability to read and understand fundamental financial statements, is sufficient to adequately discharge the Audit Committee’s

responsibilities

The Compensation Committee does not have a formal charter but reviews and recommends to the full Board the amounts

and types of compensation to be paid to the Chairman and Chief Executive Officer;

reviews and approves the amounts and types of

compensation to be paid to our other executive officers and the non-employee directors;

reviews and approves, on behalf of the

Board, salary, bonus and equity guidelines for our other employees;

The Board of Directors has determined that the Audit Committee

does not have a member who is an “audit committee financial expert” as such term is defined by the rules and regulations

of the Securities and Exchange Commission.

While the Board recognizes that the Board members serving on the Audit Committee do not meet

the qualifications required of an “audit committee financial expert,” the Board believes that the appointment of a new director

to the Board of Directors and to the Audit Committee at this time is not necessary as the level of financial knowledge and experience

of the current member of the Audit Committee, including such member’s ability to read and understand fundamental financial statements,

is sufficient to adequately discharge the Audit Committee’s responsibilities

The Compensation Committee does not have a formal charter but reviews and recommends to the full Board the amounts and

types of compensation to be paid to the Chairman and Chief Executive Officer;

reviews and approves the amounts and types of compensation

to be paid to our other executive officers and the non-employee directors;

reviews and approves, on behalf of the Board, salary, bonus

and equity guidelines for our other employees;

and administers our equity plans.

The Compensation Committee

is currently comprised of Mr.

The Compensation Committee is currently comprised of

David Mann, Ms.

1 unchanged sentence

Robert Lempert.

The Nominating Committee does not have a formal charter but assists the Board in identifying qualified individuals

to become directors, determines the composition of the Board and its committees, monitors the process to assess the Board’s

effectiveness and helps develop and implement our corporate governance guidelines.

The Nominating Committee also considers nominees

proposed by stockholders.

The Nominating Committee does not have a formal charter but assists the Board in identifying qualified individuals to

become directors, determines the composition of the Board and its committees, monitors the process to assess the Board’s effectiveness

and helps develop and implement our corporate governance guidelines.

The Nominating Committee also considers nominees proposed by stockholders.

The Nominating Committee currently consists of Mr.

2 unchanged sentences

Robert Lempert.

we do not currently compensate our directors in cash for their service as members of our Board of Directors, the Board may, in

its discretion, elect to compensate directors for attending Board and Committee meetings and to reimburse directors for out-of-pocket

expenses incurred in connection with attending such meetings.

Additionally, our directors are eligible to receive stock options

under the 2011 Directors and Executive Officer Stock Option Plan.

During Fiscal 2021, each Director received options under the

2011 Directors and Executive Officer Stock Option Plan to acquire 250,000 shares of the Company’s common stock at an exercise

price of $0.25.

we do not currently compensate our directors in cash for their service as members of our Board of Directors, the Board may, in its discretion,

elect to compensate directors for attending Board and Committee meetings and to reimburse directors for out-of-pocket expenses incurred

in connection with attending such meetings.

Additionally, our directors are eligible to receive stock options under the 2011 Directors

and Executive Officer Stock Option Plan.

Fiscal 2022, the President and Board Chairman received options under the 2011 Directors and Executive Officers Stock Option Plan (the

“2011 Plan”) to acquire 500,000 shares of the Company’s common stock at an exercise price of $0.50.

Additionally, during

Fiscal 2022, the other four Directors received options in varying amounts under the 2011 Plan to acquire an aggregate total of 1,000,000

shares of the Company’s common stock at an exercise price of $0.25.

On the date of these grants, the Company’s shares were

traded at $0.35 and $0.24 per share, respectively.

Fiscal 2021, each Director received options under the 2011 Plan to acquire 250,000 shares of the Company’s common stock, an aggregate

total of 1,250,000 shares, at an exercise price of $0.25.

On the date of grant the shares were traded at $0.16 per share.

None of the Directors received any stock options

during the prior Fiscal year (Fiscal 2020).

There are no payments due to any directors upon their resignation or retirement as

members of the Board.

payments due to any directors upon their resignation or retirement as members of the Board.

EXECUTIVE COMPENSATION

following table sets forth the compensation earned by or paid to the principal executive officer and the two most highly compensated

executive officers, other than the principal executive officer, (the “named executive officers”) during the Fiscal

years ended February 28, 2021 and February 29, 2020.

following table sets forth the compensation earned by or paid to the principal executive officer and the named executive officers during

the Fiscal years ended February 28, 2022 and February 28, 2021.

Summary Compensation Table

Option Awards

Non-Equity Incentive Compensation

All Other Compensation

Name and Principal Position

Melvin Gagerman (1)

Chief Executive Officer

Chief Financial Officer

Kevin Michaels (2)

Treasury Officer

elected Chairman and Chief Financial Officer effective February 1, 2006 and was elected President and Chief Executive Officer

effective May 25, 2006.

On March 28, 2018, Mr.

Gagerman was terminated by the then-seated Board of Directors but was subsequently

re-appointed.

Gagerman was permanently terminated on July 8, 2019.

On January 11, 2018 the Board of Directors authorized

the Company to pay Mr.

Gagerman a monthly salary of $16,000, including a monthly car allowance of $1000, and to provide Mr.

Gagerman with health and life insurance benefits commensurate with those given to all other employees.

No other benefits or

compensation were authorized by the Board of Directors.

Michaels began

serving as Treasury Officer in February 2019;

he was terminated in July 2019.

Lavut was elected

President effective July 9, 2019 and on March 19, 2020, the Board of Directors authorized an annual salary of $250,000, retroactively

effective to January 1, 2020.

From January through February 2020, Ms.

Lavut’s salary was accrued but was not paid.

March 2020 to February 2021, Ms.

Lavut has been accruing an annual salary of $250,000 and has been paid 140,000 over the same

From July 2019 through

December 31, 2019, Ms.

Lavut received $42,300 in compensation.

In March 2020, the Board of Directors authorized an annual

salary of $250,000, retroactively effective January 1, 2020.

From January through February 2020, Ms.

Lavut’s salary

was accrued but was not paid.

Incentive Compensation

Principal Position

Financial Officer

Lavut was elected President

effective July 9, 2019 and on March 19, 2020, the Board of Directors authorized an annual salary of $250,000, retroactively effective

to January 1, 2020.

For Fiscal 2021, Ms.

Lavut accrued an annual salary of $250,000 and was paid $140,000 in cash over the same period,

deferring the balance.

For Fiscal 2022, Ms.

has been accruing an annual salary of $250,000 and has been paid $144,750 in cash over the same period, deferring the balance.

Additionally in Fiscal

Lavut received approximately 286,000 shares of common stock to settle $100,000 of previously deferred accrued salary.

Willett began serving

as Chief Financial Officer in February 2022.

The amount in the table for Fiscal 2022 represents the pro rata compensation received

for the two-week period since his appointment.

Equity Awards at 2022 Fiscal Year-End

Gagerman nor Mr.

Michaels have any outstanding stock option awards as of February 28, 2021.

On March 19, 2020, the Board of

Directors approved the grant of a total of 1,250,000 options to acquire the Company’s common stock to each of the five current

board members in equal amounts of 250,000 per person under the Company’s Directors and Executive Officers Stock Option Plan.

All of these options were outstanding as of February 28, 2021.

of Directors and Executive Officers have been granted various options to acquire the Company’s common stock under the Company’s

2011 Directors and Executive Officers Stock Option Plan )the “2011 Plan”) as detailed in the table below.

All of these options

were outstanding as of February 28, 2022.

Contractual Life

Average Exercise

Price of Options

Cipora Lavut,

President and Board Chair

Salvador Diaz-Verson, Jr.,

Gary Douglas, Director

David Mann, Director

Robert Lempert, Director

Exercises and Stock Vesting During Fiscal 2022

stock options were exercised during Fiscal 2020 by the individuals named in the Summary Compensation Table.

options were exercised during Fiscal 2022 by the individuals named in the Summary Compensation Table.

February 25, 2021, the Board of Directors approved the grant of 500,000 options to acquire the Company’s common stock to the Company’s

President for successfully recruiting advisors to the Board under the Company’s Directors and Executive Officers Stock Option Plan.

The options were granted with immediate vesting, a five-year expiration term, and with an exercise price of $0.50 per option share.

December 10, 2020, the Board of Directors approved the grant of an aggregate total of 1,000,000 options to acquire the Company’s

common stock to four of the five current Board members in varying amounts for services provided outside of standard Board responsibilities

under the Company’s 2011 Plan.

The options were granted with pro rata monthly vesting over a one-year vesting period, with a five-year

expiration term, and with an exercise price of $0.25 per option share.

Exercises and Stock Vesting During Fiscal 2021

March 19, 2020, the Board of Directors approved the grant of a total of 1,250,000 options to acquire the Company’s common

stock to each of the five current board members in equal amounts of 250,000 per person under the Company’s Directors and

Executive Officers Stock Option Plan.

Per the terms of the 2011 D&O Option Plan, vesting occurs after a six-month period plus

one day from the date of grant, with a five-year expiration term, and with an exercise price of $0.25 per warrant

stock options were exercised during Fiscal 2021 by the individuals named in the Summary Compensation Table.

March 19, 2020, the Board of Directors approved the grant of an aggregate total of 1,250,000 options to acquire the Company’s common

stock to each of the five current board members in equal amounts of 250,000 per person under the Company’s 2011 Plan.

Per the terms

of the 2011 Plan, vesting occurs after a six-month period plus one day from the date of grant, with a five-year expiration term, and

with an exercise price of $0.25 per option share.

Contracts, Termination of Employment Contracts and Change in Control Arrangements

do not currently have any employment agreements with any of our Named Executive Officers.

In March 2020, the Board of Directors

approved an annual salary for Ms.

In March 2020, the Board of Directors approved

an annual salary for Ms.

Lavut of $250,000, retroactively effective from January 1, 2020.

Payments to the Named Executive Officers Upon Termination or Change in Control

of the named executive officers is entitled to any payments or benefits upon termination, whether by change in control or otherwise,

other than benefits available generally to all employees.

named executive officers is entitled to any payments or benefits upon termination, whether by change in control or otherwise, other than

benefits available generally to all employees.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

following table sets forth, to the extent of our knowledge, certain information regarding our common stock owned as of May 20,

2021 (i) by each person who is known to be the beneficial owner of more than 5% of our outstanding common stock, (ii) by each

of our Directors and the named executive officers in the Summary Compensation Table, and (iii) by all Directors and current executive

officers as a group:

following table sets forth, to the extent of our knowledge, certain information regarding our common stock owned as of June 30, 2020

(i) by each person who is known to be the beneficial owner of more than 5% of our outstanding common stock, (ii) by each of our Directors

and the named executive officers in the Summary Compensation Table, and (iii) by all Directors and current executive officers as a group:

Ownership Table

Beneficial Owner (1)

Melvin Gagerman

Kevin Michaels

William Anderson

Salvador Diaz-Verson, Jr.

Salvador Diaz-Verson,

Gary Douglas (3)

Cipora Lavut (4)

David Mann (5)

Robert Lempert (5)

All current executive officers and Directors as a group (five) (2) (3) (4) (5) (6)

David Mann (6)

Steven Willett (7)

All current executive officers

and Directors as a group (six) (2) (3) (4) (5) (6) (7)

5% Stockholders

Warren Breslow (7)

Elimelech Lowy (8)

BetterSea LLC

Less than 1% of

outstanding shares

Beneficial ownership

is determined in accordance with rules of the Securities and Exchange Commission.

The calculation of the percentage of beneficial

ownership is based upon 71,107,442 shares of common stock outstanding on February 28, 2021.

In computing the number of shares

beneficially owned by any stockholder and the percentage ownership of such stockholder, shares of common stock which may be

acquired by a such stockholder upon exercise or conversion of warrants or options which are currently exercisable or exercisable

within 60 days of February 28, 2021, are deemed to be exercised and outstanding.

Such shares, however, are not deemed outstanding

for purposes of computing the beneficial ownership percentage of any other person.

Shares issuable upon exercise of warrants

and options which are subject to stockholder approval are not deemed outstanding for purposes of determining beneficial ownership.

Except as indicated by footnote, to our knowledge, the persons named in the table above have the sole voting and investment

power with respect to all shares of common stock shown as beneficially owned by them.

The mailing address for each of the

officers and directors is c/o Aura Systems, Inc., 20431 North Sea, Lake Forest, CA 92630.

Includes 687,428

warrants exercisable within 60 days of February 28, 2021.

Including 450,000

warrants exercisable within 60 days of February 28, 2021.

301,666 warrants

exercisable within 60 days of February 28, 2021.

On August 28, 2019, the Board of Directors approved 1,030,625 shares for

issuance to Ms.

Lavut in settlement of amounts previously lent by Ms.

Lavut to the Company and certain unpaid amounts owed

Lavut for services performed prior to February 2016.

Includes warrants

to purchase 500,912 shares exercisable within 60 days of June 30, 2020 as well as 1,323,931 shares, 891,204 of which Mr.

has sole dispositive power and approximately 432,727 of which, Mr.

Mann holds a power of attorney to vote such shares.

than 1% of outstanding shares

Beneficial ownership is

determined in accordance with rules of the Securities and Exchange Commission.

The calculation of the percentage of beneficial ownership

is based upon 83,123,537 shares of common stock outstanding on February 28, 2022.

In computing the number of shares beneficially

owned by any stockholder and the percentage ownership of such stockholder, shares of common stock which may be acquired by a such

stockholder upon exercise or conversion of warrants or options which are currently exercisable or exercisable within 60 days of February

28, 2022, are deemed to be exercised and outstanding.

Such shares, however, are not deemed outstanding for purposes of computing

the beneficial ownership percentage of any other person.

Shares issuable upon exercise of warrants and options which are subject

to stockholder approval are not deemed outstanding for purposes of determining beneficial ownership.

Except as indicated by footnote,

to our knowledge, the persons named in the table above have the sole voting and investment power with respect to all shares of common

stock shown as beneficially owned by them.

The mailing address for each of the officers and directors is c/o Aura Systems, Inc.,

20431 North Sea, Lake Forest, CA 92630.

Includes 1,108,857 warrants

to purchase 350,000 shares exercisable within 60 days of February 28, 2021.

exercisable within 60 days of February 28, 2022.

Includes 700,000 warrants

to purchase 666,000 shares exercisable within 60 days of February 28, 2021.and the right to convert $3,000,000 and accrued

interest of $412,911 convertible note payable to 2,437,794 common shares at a conversion price of $1.40.

exercisable within 60 days of February 28, 2021.

Includes 750,000 warrants

to purchase 4,092,877 shares exercisable within 60 days of February 28, 2021.

exercisable within 60 days of February 28, 2022.

Includes warrants to purchase

350,000 shares exercisable within 60 days of February 28, 2021.

Includes warrants to purchase

650,912 shares exercisable within 60 days of February 28, 2022, as well as 1,411,931 shares, 979,204 of which Mr.

Mann has sole dispositive

power and approximately 432,727 of which, Mr.

Mann holds a power of attorney to vote such shares.

Includes common shares

only as of February 28, 2022.

Includes warrants to purchase

16,000 shares exercisable within 60 days of February 28, 2022, and the right to convert $3,000,000 and accrued interest of $412,911

convertible note payable to 2,437,794 common shares at a conversion price of $1.40.

Includes warrants to purchase

4,092,877 shares exercisable within 60 days of February 28, 2022.

and 3,519,768 shares, which Mr.

Lowy has sole

dispositive power.

Lowy has sole dispositive power.

Includes common shares only as of February 28, 2022.

Authorized for Issuance Under Equity Compensation Plans as of February 28, 2022

4 unchanged sentences

Exercise Price

Number of Securities

of Securities

For Future Issuances

1 unchanged sentence

(Excluding Securities Reflected in Column (a.)

Equity compensation plans approved by equity holders

Equity compensation plans not approved by equity holders

Reflects options

under the 2006 Stock Option Plan and the 2011 Stock Option Plan, of which both were approved by Company shareholders.

2006 Stock Option Plan authorizes the Company to grant stock options exercisable for up to an aggregate number of shares of

common stock equal to the greater of (i) 10,000,000 shares of common stock, or (ii) 10% of the number of shares of common

stock outstanding from time to time.

The 2011 Stock Option Plan authorizes the Company to grant stock options or warrants

to executive officers and directors exercisable for up to an aggregate number of shares equivalent to 15% of the number of

shares of common stock outstanding from time to time.

The numbers in this table are as of February 28, 2021 (See Note 9 to

the Financial Statements).

additional information regarding options and warrants, see Note 10 to our financial statements appearing elsewhere in this report.

compensation plans approved by equity holders

compensation plans not approved by equity holders

Reflects options under

the 2006 Stock Option Plan and the 2011 Stock Option Plan, of which both were approved by Company shareholders.

Additionally, it

includes options which were authorized by the Board but cannot be issued until the proposal for renewal of the employee stock option

plan is approved by the shareholders.

The 2006 Stock Option Plan authorizes the Company to grant stock options exercisable for up

to an aggregate number of shares of common stock equal to the greater of (i) 10,000,000 shares of common stock, or (ii) 10% of the

number of shares of common stock outstanding from time to time.

The 2011 Stock Option Plan authorizes the Company to grant stock

options or warrants to executive officers and directors exercisable for up to an aggregate number of shares equivalent to 15% of

the number of shares of common stock outstanding from time to time.

The numbers in this table are as of February 28, 2022 (See Note

15 to the Financial Statements).

For additional information regarding options and warrants, see Note

15 to our financial statements appearing elsewhere in this report.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

and Approval of Related Party Transactions

Audit Committee is responsible for the review and approval of all related party transactions required to be disclosed to the public

under SEC rules.

This procedure, which is contained in the written charter of our Audit Committee, has been established by our

Board of Directors in order to serve the interests of our shareholders.

Related party transactions are reviewed and approved by

the Audit Committee on a case-by-case basis.

Under existing, unwritten policy no related party transaction can be approved by

the Audit Committee unless it is first determined that the terms of such transaction is on terms no less favorable to us than

could be obtained from an unaffiliated third party on an arms-length basis and is otherwise in our best interest.

the definition of “independence”

included in the listing rules of The Nasdaq Stock Market, our Board has determined

that Salvador Diaz-Versón, Jr.

Audit Committee is responsible for the review and approval of all related party transactions required to be disclosed to the public under

This procedure has been established by our Board of Directors in order to serve the interests of our shareholders.

party transactions are reviewed and approved by the Audit Committee on a case-by-case basis.

Under existing, unwritten policy no related

party transaction can be approved by the Audit Committee unless it is first determined that the terms of such transaction is on terms

no less favorable to us than could be obtained from an unaffiliated third party on an arms-length basis and is otherwise in our best

the definition of “independence” included in the listing rules of The Nasdaq Stock Market, our Board has determined that

Salvador Diaz-Versón, Jr.

and Gary Douglas are both independent directors.

PRINCIPAL ACCOUNTING FEES AND DISCLOSURES

following table sets forth the aggregate fees billed to us by BF Borgers, CPA, PC (“BFB CPA”) for the years ended

February 28, 2021, and February 29, 2020:

following table sets forth the aggregate fees billed to us by BF Borgers, CPA, PC (“BFB CPA”) for the years ended February

28, 2022, and February 29, 2021:

Audit-related fees

All other fees

defined by the SEC, (i) “audit fees”

are fees for professional services rendered by our principal accountant for the

audit of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are

normally provided by the accountant in connection with statutory and regulatory filings or engagements for those Fiscal years;

(ii) “audit-related fees”

are fees for assurance and related services by our principal accountant that are reasonably

related to the performance of the audit or review of our financial statements and are not reported under “audit fees;”

(iii) “tax fees”

are fees for professional services rendered by our principal accountant for tax compliance, tax advice,

and tax planning;

and (iv) “all other fees”

are fees for products and services provided by our principal accountant,

other than the services reported under “audit fees,”

“audit-related fees,”

and “tax fees.”

defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit

of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are normally provided

by the accountant in connection with statutory and regulatory filings or engagements for those Fiscal years;

(ii) “audit-related

fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of

the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are

fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning;

and (iv) “all

other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit

fees,” “audit-related fees,” and “tax fees.”

provided to us by BFB CPA, Inc.

with respect the audit of our annual financial statements and review of our annual reports on

Form 10-K and for reviews of the financial statements are included in our quarterly reports on Form 10-Q for the first three quarters

of the years ended February 28, 2021 and February 29, 2020.

CPA did not provide any professional services to us during Fiscal 2021 or Fiscal 2020 which would constitute “audit related

CPA did not provide any professional services to us during Fiscal 2021 or Fiscal 2020 which would constitute “tax fees”.

CPA did not provide any professional services to us during Fiscal 2021 or Fiscal 2020 which would constitute “other fees”.

with respect the audit of our annual financial statements and review of our annual reports on Form 10-K

and for reviews of the financial statements are included in our quarterly reports on Form 10-Q for the first three quarters of the years

ended February 28, 2022 and February 29, 2021.

CPA did not provide any professional services to us during Fiscal 2022 or Fiscal 2021 which would constitute “audit related fees”.

CPA did not provide any professional services to us during Fiscal 2022 or Fiscal 2021 which would constitute “tax fees”.

CPA did not provide any professional services to us during Fiscal 2022 or Fiscal 2021 which would constitute “other fees”.

on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

the SEC’s rules, the Audit Committee is required to pre-approve the audit and permissible non-audit services performed by

the independent registered public accounting firm in order to ensure that they do not impair the auditors’

independence.

The SEC’s rules specify the types of non-audit services that an independent auditor may not provide to its audit client

and establish the Audit Committee’s responsibility for administration of the engagement of the independent registered public

accounting firm.

with the SEC’s rules, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent

the SEC’s rules, the Audit Committee is required to pre-approve the audit and permissible non-audit services performed by the independent

registered public accounting firm in order to ensure that they do not impair the auditors’ independence.

The SEC’s rules

specify the types of non-audit services that an independent auditor may not provide to its audit client and establish the Audit Committee’s

responsibility for administration of the engagement of the independent registered public accounting firm.

with the SEC’s rules, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent

These services may include audit services, audit-related services, tax and other services.

Pre-approval is generally

provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally

subject to a specific budget.

The independent auditors and management are required to periodically report to the Audit Committee

regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the

services performed to date.

Pre-approval is generally provided

for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to

a specific budget.

The independent auditors and management are required to periodically report to the Audit Committee regarding the extent

of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date.

The Audit Committee may also pre-approve particular services on a case-by-case basis.

During Fiscal

2018 and 2017 all services provided by BFB CPA were pre-approved by the Audit Committee in accordance with this policy.

were no hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for

the most recent Fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time,

permanent employees.

During Fiscal 2022 and Fiscal 2021 all services

provided by BFB CPA were pre-approved by the Audit Committee in accordance with this policy.

were no hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most

recent Fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

filed as part of this Form 10-K:

Index to Financial Statements at page F-1

Statement Schedules

Index to Financial Statements at page F-1

Exhibit Index

Financial Statements

to Financial Statements at page F-1

Financial Statement

to Financial Statements at page F-1

FORM 10-K SUMMARY

Amended and Restated Certificate of Incorporation of Aura Systems, Inc.

(Incorporated by reference to Exhibit 3.1 to Aura Systems, Inc.’s Form 10-K filed on June 15, 2009)

Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated February 14, 2018 (Incorporated by reference to Exhibit 3.1 to Aura Systems, Inc.’s Current Report on Form 8-K filed on February 21, 2018)

Amended and Restated Bylaws of Aura Systems, Inc.

(Incorporated by reference to Exhibit 3.2 to Aura Systems, Inc.’s Report on Form 10-K filed on June 15, 2009)

Aura Systems, Inc.

2006 Stock Option Plan (Incorporated by reference to Exhibit 10.4 to Aura System, Inc.’s Form 10-K filed on March 25, 2008)

Form of Aura Systems, Inc.

Non-Statutory Stock Option Agreement (Incorporated by reference to Exhibit 10.5 to Aura System, Inc.’s Form 10-K filed on March 25, 2008)

Second Amendment to Transaction Documents dated March 14, 2017 among Registrant and those persons who have signed the signature page thereto (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Third Amendment to Transaction Documents dated April 8, 2017 among Registrant and those persons who have signed the signature page thereto (Incorporated by reference to Exhibit 10.2 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Second Amendment to Debt Refinancing Agreement dated April 9, 2017 by and between Aura Systems, Inc., on the one hand, and Warren Breslow and the Survivor’s Trust Under the Warren L.

Breslow Trust, on the other hand (Incorporated by reference to Exhibit 10.3 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

First Amendment to Unsecured Convertible Promissory Note dated June 15, 2017 by and between the Survivor’s Trust Under the Warren L.

Breslow Trust and the Registrant (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Agreement entered into on June 19, 2017 between Aura Systems Inc.

and BetterSea LLC (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Current Report on Form 8-K/A filed on May 9, 2018)

Financing Letter of Agreement dated June 20, 2014 between Aura Systems, Inc.

and KF Business Ventures, LP, joined by its affiliate Kopple Family Partnership, LP (Incorporated by reference to Exhibit 10.31 to Aura Systems, Inc.’s Form 10-K for the period ended February 28, 2015)**

Unsecured Promissory Note dated June 20, 2014 by Aura Systems, Inc.

in favor of KF Business Ventures, LP in the original principal amount of $2,915,206.11 (Incorporated by reference to Exhibit A to Exhibit 10.31 to Aura Systems, Inc.’s Form 10-K for the period ended February 28, 2015)**

Form of Warrant by Aura Systems, Inc.

to KF Business Ventures, LP (Incorporated by reference to Exhibit B to Exhibit 10.31 to Aura Systems, Inc.’s Form 10-K for the period ended February 28, 2015)**

Sino-Foreign Cooperative Joint Venture Contract dated January 27, 2017 between Aura Systems, Inc.

and Jiangsu AoLunTe Electrical Machinery Industrial Col, Ltd.

(Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Form 8-K filed on February 1, 2017)

Aura Systems, Inc.

Directors and Executive Officers Stock Option Plan (Incorporated by reference to Exhibit 10.67 to Aura Systems, Inc.’s Form S-1 filed on November 30, 2011)

Code of Ethics (Incorporated by reference to Exhibit 14.1 to Aura Systems, Inc.’s Annual Report on Form 10-K filed on June 13, 2018)

and Restated Certificate of Incorporation of Aura Systems, Inc.

(Incorporated by reference to Exhibit 3.1 to Aura Systems, Inc.’s

Form 10-K filed on June 15, 2009)

of Amendment to the Amended and Restated Certificate of Incorporation, dated February 14, 2018 (Incorporated by reference to Exhibit

3.1 to Aura Systems, Inc.’s Current Report on Form 8-K filed on February 21, 2018)

and Restated Bylaws of Aura Systems, Inc.

(Incorporated by reference to Exhibit 3.2 to Aura Systems, Inc.’s Report on Form

10-K filed on June 15, 2009)

Systems, Inc.

2006 Stock Option Plan (Incorporated by reference to Exhibit 10.4 to Aura System, Inc.’s Form 10-K filed on March

of Aura Systems, Inc.

Non-Statutory Stock Option Agreement (Incorporated by reference to Exhibit 10.5 to Aura System, Inc.’s

Form 10-K filed on March 25, 2008)

Amendment to Transaction Documents dated March 14, 2017 among Registrant and those persons who have signed the signature page thereto

(Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Amendment to Transaction Documents dated April 8, 2017 among Registrant and those persons who have signed the signature page thereto

(Incorporated by reference to Exhibit 10.2 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Amendment to Debt Refinancing Agreement dated April 9, 2017 by and between Aura Systems, Inc., on the one hand, and Warren Breslow

and the Survivor’s Trust Under the Warren L.

Breslow Trust, on the other hand (Incorporated by reference to Exhibit 10.3 to

Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017)

Amendment to Unsecured Convertible Promissory Note dated June 15, 2017 by and between the Survivor’s Trust Under the Warren

Breslow Trust and the Registrant (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on

Form 10-Q filed on October 25, 2017)

entered into on June 19, 2017 between Aura Systems Inc.

and BetterSea LLC (Incorporated by reference to Exhibit 10.1 to Aura Systems,

Inc.’s Current Report on Form 8-K/A filed on May 9, 2018)

Cooperative Joint Venture Contract dated January 27, 2017 between Aura Systems, Inc.

and Jiangsu AoLunTe Electrical Machinery Industrial

(Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Form 8-K filed on February 1, 2017)

Systems, Inc.

Directors and Executive Officers Stock Option Plan (Incorporated by reference to Exhibit 10.67 to Aura Systems,

Inc.’s Form S-1 filed on November 30, 2011)

of Ethics (Incorporated by reference to Exhibit 14.1 to Aura Systems, Inc.’s Annual Report on Form 10-K filed on June 13, 2018)

CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

1 unchanged sentence

Certification pursuant to 18 U.S.C.

XBRL Instance Document

XBRL Schema Document

XBRL Calculation

Linkbase Document

XBRL Definition

Linkbase Document

XBRL Label Linkbase

XBRL Presentation

Linkbase Document

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Indicates a management

contract or compensatory plan or arrangement.

Proceedings”

“Security Ownership of Certain Beneficial Owners and Management”

included elsewhere

in this Annual Report on Form 10-K for information on the dispute with Mr.

Kopple regarding these exhibits.

accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement

or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of

Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

SYSTEMS, INC.

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the date indicated.

President (Principal

Executive Officer),

Chief Financial

(Principal Financial Officer,

Principal Accounting Officer),

Robert Lempert

or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section

18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be

signed on its behalf by the undersigned, thereunto duly authorized.

AURA SYSTEMS,

June 21, 2022

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the date indicated.

/s/ Cipora Lavut

President (Principal Executive Officer),

June 21, 2022

/s/ Steven Willett

Chief Financial Officer (Principal Financial Officer)

June 21, 2022

Steven Willett

/s/ David Mann

June 21, 2022

/s/ Robert Lempert

June 21, 2022

Robert Lempert

/s/ Gary Douglas

June 21, 2022

/s/ Salvador Diaz-Verson, Jr.

June 21, 2022

Salvador Diaz-Verson, Jr.

Salvador Diaz-Verson,

to Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Financial Statements of Aura Systems, Inc.:

Balance Sheets as of February 28, 2022 and February 28, 2021 (as restated) F-3

Statements of Operations - Years ended February 28, 2022 and February 28, 2021 (as restated) F-4

Statements of Stockholders’ Deficit - Years ended February 28, 2022 and February 28, 2021 (as restated) F-5

Statements of Cash Flows - Years ended February 28, 2022 and February 28, 2021 (as restated) F-6

Notes to Financial Statements F-7 to F-26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Financial Statements

To the Stockholders and the Board of Directors

of Aura Systems, Inc.

Balance Sheets as of February 28, 2021 and February 29, 2020

Statements of Operations - Years ended February 28, 2021 and February 29, 2020

Statements of Stockholders’

Deficit - Years ended February 28, 2021 and February 29, 2020

Statements of Cash Flows - Years ended February 28, 2021 and February 29, 2020

Notes to Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders

Systems, Inc.

on the Financial Statements

have audited the accompanying balance sheets of Aura Systems, Inc.

(a Delaware corporation), (the “Company”) as of

February 28, 2021 and February 29, 2020, the related statements of operations and comprehensive loss, shareholders’

and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of

February 28, 2021 and February 29, 2020 and the results of its operations and its cash flows for the years then ended, in conformity

with accounting principles generally accepted in the United States.

Concern Uncertainty

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the financial statements, the Company has incurred significant operating losses since inception and has a working

capital deficit which raises substantial doubt about its ability to continue as a going concern.

The financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Aura Systems, Inc.

(the “Company”) as of February 28, 2022 and 2021 (restated), the related statements of operations, stockholders’

deficit, and cash flows for the year ended February 28, 2022, the related statements of operations, stockholders’ deficit, and cash

flows for the year ended February 28, 2021 (restated), and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February

28, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

The 2021 financial statements were previously

audited by another auditor.

As discussed in Note 3 to the financial statements, the 2021 financial statements have been restated to correct

Going Concern

The accompanying financial statements have been

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

As discussed in Note 1 to the financial statements, during the year

ended February 28, 2022, the Company has incurred a loss and used cash in operations, and at February 28, 2022, had a stockholders’

In addition, $13 million of convertible notes payable were in default as of that date.

These matters raise substantial doubt

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

Management’s plans in regard to these matters are also described

in Note 1 to the financial statements.

The financial statements do not include any adjustments that might result from the outcome of this

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or

disclosures to which it relates.

Audit Matter Description

Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the

consideration the Company expects to receive in exchange for those products or services.

Significant judgment is exercised by

the Company in determining revenue recognition for these customer agreements, and includes the following:

pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance

● Identification

and treatment of contract terms that may impact the timing and amount of revenue recognized

(e.g., variable consideration, optional purchases, and free services).

the Critical Audit Matter Was Addressed in the Audit

selected a sample of sales and performed the following procedures:

invoices, receipts, shipping documents for each selection.

the terms in the customer invoices and evaluated the appropriateness of management’s

application of their accounting policies, along with their use of estimates, in the determination

of revenue recognition conclusions.

evaluated management’s significant accounting policies related to these customer agreements for reasonableness

tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized

in the financial statements.

BF Borgers CPA PC

Public Accountants

have served as the Company’s auditor since 2020.

Critical Audit Matter

The critical audit matter communicated below is

a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the

audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion

on the critical audit matters or on the accounts or disclosures to which it relates.

Determination and Valuation of Warrant Derivative

As discussed in Notes 3 and 13 to the financial

statements, during the year ended February 28, 2022 and in prior periods, the Company issued warrants that required management to assess

whether the warrants required accounting as derivative liabilities.

When it is determined that derivative liability accounting treatment

is required, the Company measures the derivative liabilities at fair value using binominal models.

Such models use certain assumptions

related to exercise price, term, expected volatility, and risk-free interest rate.

As of February 28, 2022, the warrant derivative liability

totaled $828,000.

We identified the determination and valuation of the warrant derivative

liability as a critical audit matter due to the significant judgements used by the Company in determining whether the warrants required

derivative accounting treatment and the significant judgements used in determining the fair value of the warrant derivative liability

including the appropriateness of the model utilized.

Auditing the determination and valuation of the warrant derivative liability involved

a high degree of auditor judgement and specialized skills and knowledge were needed.

The primary procedures we performed to address

this critical audit matter included the following.

We inspected and reviewed warrant agreements to evaluate the Company’s determination

of whether derivative accounting was required, including assessing and evaluating management’s application of relevant accounting

standards to such transactions.

We evaluated the reasonableness and appropriateness of the choice of valuation model used for each specific

derivative instrument.

We tested the reasonableness of the underlying assumptions and data used in the valuations to determine the fair

values, including stock price, exercise price, term, expected volatility and risk-free interest rate.

We tested the accuracy and completeness

of data used by the Company in developing the assumptions used in the model.

We developed an independent expectation using market data

sources, models and key assumptions determined to be relevant and reliable and compared such independent expectation to the Company’s

We have served as the Company’s auditor

/s/ Weinberg & Company, P.A.

Los Angeles, California

June 21, 2022

AURA SYSTEMS, INC.

BALANCE SHEETS

(As Restated)

Current assets

Cash and cash equivalents

Other current assets

Prepaid and other current assets

Total current assets

Fixed Assets, net

Right-of-use asset

Liabilities & Shareholders’

Property and equipment, net

Operating lease right-of-use asset

Security deposit

Liabilities and Shareholders’ Deficit

Current liabilities

Accounts payable

Accrued expenses

Accounts payable (including $ 208,507 and $ 590,501 due to related party, respectively)

Accrued expenses (including $ 187,411 and $ 178,536 due to related party, respectively)

Customer advances

Operating lease liability

Accrued expense-related party

Notes payable, current portion

Notes payable and accrued interest-related party

Convertible notes payable, current portion

Convertible note payable-related party, current portion

Notes payable-related parties, –in default

Operating lease liability, current portion

Derivative warrant liability

Total current liabilities

Convertible note payable-related party

Notes payable

Operating lease liability

Convertible notes payable

Operating lease liability, non-current

Convertible note payable-related party

Total liabilities

Commitments and contingencies

Shareholders’

Shareholders’ deficit

Common stock:

150,000,000 shares authorized at February 28, 2021 and February 29, 2020;

71,107,442 and 56,400,874 issued and

outstanding at February 28, 2021 and February 29, 2020, respectively

$ 0.0001 par value;

150,000,000 shares authorized;

83,119,104 and 71,103,009 issued and outstanding at February 28, 2022 and February 28, 2021, respectively.

Additional paid-in capital

2 unchanged sentences

( 467,372,506 )

Total shareholders’

Total shareholders’ deficit

( 21,219,535 )

( 21,116,125 )

Total liabilities and shareholders’

accompanying notes to these financial statements.

Total liabilities and shareholders’ deficit

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

STATEMENTS OF

STATEMENTS OF OPERATIONS

Fiscal Years Ended

(As Restated)

Cost of goods sold

Gross profit (loss)

Operating expenses:

Engineering, research & development

Selling, general & administration

Impairment of joint venture

Engineering, research and development

Selling, general and administration (including $ 137,500 and $ 131,300 to related party, respectively)

Total operating expenses

Loss from operations

( 3,429,816 )

( 1,781,214 )

Other income (expense):

Interest expense, net

(Gain) loss on debt settlement

( 1,271,586 )

( 1,279,949 )

Gain on extinguishment of debt

Gain on extinguishment of PPP loans

Gain on extinguishment of derivative warrant liability, net

Gain on debt settlement

Change in fair value of derivative warrant liability

Income (loss) before tax provision

( 3,991,863 )

Income tax provision

2 unchanged sentences

Basic income (loss) per share

Basic weighted-average shares outstanding

Diluted income (loss) per share

Dilutive weighted-average shares outstanding

accompanying notes to these financial statements.

Basic weighted-average shares outstanding

Diluted weighted-average shares outstanding

See accompanying notes to these financial statements.

AURA SYSTEMS INC.

STATEMENTS OF SHAREHOLDERS’

Total Shareholders’

Balance, February 28, 2019

STATEMENTS OF SHAREHOLDERS’ DEFICIT

Shareholders’

Balance, February 29, 2020 (As Restated)

$ 443,548,428

1 unchanged sentence

$ ( 23,863,168 )

Shares issued for cash

Shares cancelled

Shares issued for settlement

Shares issued for services

Warrants issued to equity investors

Balance, February 29, 2020

Common shares issued for cash

Common shares issued for settlement of debt-related party

Share-based compensation

Balance, February 28, 2021 (As Restated)

( 467,372,506 )

( 21,116,125 )

Common shares issued for cash

Common shares issued for settlement of debt-related parties

Common shares issued for services

Share-based compensation

( 3,991,863 )

Shares issued for cash

Shares issued for settlement

Stock-based compensation

( 3,991,863 )

Balance, February 28, 2022

2 unchanged sentences

$ ( 21,219,535 )

accompanying notes to these financial statements.

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

1 unchanged sentence

Fiscal Years Ended

(As Restated)

Net income (loss)

$ ( 3,991,863 )

Adjustments to reconcile net

income (loss) to cash used in operating activities

Gain on write-off of liabilities

Loss on settlement of debt

Impairment of joint venture

Stock-based compensation expense

Changes in working capital assets and liabilities:

Other current assets

Deposit on leased facility

Adjustments to reconcile net loss to cash used in operating activities

Inventory write-down

Gain on extinguishment of debt

( 3,447,039 )

Gain on extinguishment of PPP loans

Gain on extinguishment of derivative warrant liability, net

Change in fair value of derivative warrant liability

Gain on debt settlement

Common stock issued for services

Share-based compensation

Changes in operating assets and liabilities:

Prepaid and other current assets

Operating lease right-of-use asset

Accounts payable and accrued expenses

1 unchanged sentence

Operating lease liability

Customer advances

Cash used in operating activities

( 2,640,774 )

( 1,888,796 )

Cash used in investing activities:

Purchase of property, plant and equipment

Purchase of property and equipment

Cash flows from financing activities:

Issuance of common stock

Payment on notes payable

Proceeds from Federal PPP & SBA notes

Proceeds from issuance of common stock

Principal payments of notes payable

Proceeds from government assistance loans – PPP and EID loans

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Beginning cash

Cash paid in the period for:

Cash and cash equivalents-beginning of year

Cash and cash equivalents-end of year

Cash paid for:

Supplemental schedule of non-cash transactions:

Recognition of operating lease right of use asset and operating lease liability

Accounts payable converted into shares of common stock

Accrued expenses converted into shares of common stock

Notes payable converted into shares of common stock

Convertible notes converted into shares of common stock

Customer advance reclassified as note payable

accompanying notes to these financial statements.

SYSTEMS, INC.

TO FINANCIAL STATEMENTS

ORGANIZATION AND OPERATIONS

Systems, Inc., (“Aura”, “We”

or the “Company”) a Delaware corporation, was founded to engage

in the development, commercialization, and sale of products, systems, and components, using its patented and proprietary electromagnetic

Aura develops and sells AuraGen ®

axial flux mobile induction power systems to the industrial, commercial,

and defense mobile power generation markets.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

the fiscal years ended February 28, 2021 and February 29, 2020, the Company incurred net profit of approximately $0.8 million

and a loss of approximately $2.6 million, respectively, and had negative cash flows from operating activities of $1.9 million

and $0.8 million, respectively.

The net profit of $0.8 million in Fiscal 2021 is attributed to recognizing non-operating income

associated with the cancellation of certain liabilities due the expiration of the statute of limitations of approximately $3.6

In the event the Company is unable to generate profits and is unable to obtain financing for its working capital requirements,

it may have to curtail its business further or cease business altogether.

These factors raise substantial doubts about the Company’s

ability to continue as a going concern.

additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing

and business development activities.

The Company’s continuation as a going concern is dependent upon its ability to generate

sufficient cash flow to meet its obligations on a timely basis, to retain its current financing, to obtain additional financing,

and ultimately to attain profitability.

During the next twelve

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

Acquisition of property and equipment with notes payable

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

February 28, 2022

NOTE 1 – ORGANIZATION AND OPERATIONS

Aura Systems, Inc., (“Aura”, “We”

or the “Company”) a Delaware corporation, was founded to engage in the development, commercialization, and sale of products,

systems, and components, using its patented and proprietary electromagnetic technology.

Aura develops and sells AuraGen ®

axial flux mobile induction power systems to the industrial, commercial, and defense mobile power generation markets.

Going Concern

The accompanying financial statements have been prepared assuming that

the Company will continue as a going concern.

During the fiscal year ended February 28, 2022, the Company incurred a net loss of

approximately $ 4.0 million and had negative cash flows from operating activities of approximately $ 2.6 million and at February 28, 2022,

had a stockholders deficit of approximately $ 21.2 million and a working capital deficit of approximately $ 21.7 million.

Also, at February

28, 2022, the Company is in default on notes payable in the aggregate amount of approximately $ 13.0 million.

These factors raise substantial

doubts about the Company’s ability to continue as a going concern within one year of the date that these financial statements are

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

as a going concern.

At February 28, 2022, the Company had cash on

hand in the amount of $ 150,000 .

Subsequent to February 28, 2022, the Company issued 1,153,666 shares of common stock in exchange for cash

proceeds of $ 346,100 .

In addition, subsequent to February 28, 2022, the Company reached an agreement with a related party note holder

to resolve all litigation between them related to notes payable and accrued interest of $ 12.1 million (see Note 19).

Management estimates

that the current funds on hand will be sufficient to continue operations through the next four months.

The Company’s ability to

continue as a going concern is dependent upon its ability to continue to implement its business plan.

During the next twelve months we

intend to continue to attempt to increase the Company’s sale of our AuraGen ® /VIPER products both domestically

and internationally and to add to our existing management team.

In Fiscal 2021, we completed our relocation of our operations and administrative

offices to a new location (see Note 8, Leases), 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 year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

core principle of ASC 606, Revenue from Contracts with Customers (“ASC 606”), is that an entity

recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the

consideration to which the entity expects to be entitled in exchange for those goods or services.

In applying ASC 606, all

revenue transactions must be evaluated using a five-step approach to determine the amount and timing of revenue to be

The five-step approach requires (1) identifying the contract with the customer, (2) identifying the performance

obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance

obligations in the contract and (5) recognizing revenue when performance obligations are satisfied.

Our primary source of

revenue is the manufacture and delivery of generator sets used primarily in mobile power applications, which represented 100%

of our revenues of approximately $0.1 million and $0.8 million for the fiscal years ended February 28, 2021 and February 29,

2020, respectively.

In addition, we plan to continue to 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 year.

No assurance can be given that any future financing, if needed,

will be available or, if available, that it will be on terms that are satisfactory to the Company.

Even if the Company is able to obtain

additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial

dilution for its stockholders, in the case of equity financing.

In the event the Company is unable to generate profits and is unable to

obtain financing for its working capital requirements, it may have to curtail its business further or cease business altogether.

As of the date of this filing, there continues to

be widespread concern regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company

Although the impacts of the COVID-19 pandemic have not been material to date, a prolonged downturn in economic conditions could

have a material adverse effect on our customers and demand for our services.

The Company has not observed any impairments of its assets

or a significant change in the fair value of its assets due to the COVID-19 pandemic.

At this time, it is not possible for the Company

to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results

of operations, financial condition, or liquidity.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity

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

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

Significant estimates include

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

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

Amounts could materially change in the future.

Revenue Recognition

The Company recognizes revenue in accordance with

Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue

from Contracts with Customers.

To determine revenue recognition under ASC 606, an entity performs the following five-steps (i) identifies

the contract(s) with a customer;

(ii) identifies the performance obligations in the contract;

(iii) determines the transaction price;

(iv) allocates the transaction price to the performance obligations in the contract;

and (v) recognizes revenue when (or as) the entity

satisfies a performance obligation.

The Company only applies the five-steps to contracts when it is probable that the entity will collect

the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Our primary source of revenue is the manufacture and delivery of generator

sets used primarily in mobile power applications, which represented nearly 100 % of our revenues of approximately $ 100,000 and $ 115,000

for the fiscal years ended February 28, 2022 and February 28, 2021, respectively.

Our principal sales channel is sales to a domestic distributor.

accordance with ASC 606, we recognize the entirety of the revenue, net of discounts, for our generator sets at time of product

delivery to the domestic distributor (i.e.

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

and the satisfaction of our performance obligations to the customer.

Our payment terms are cash payment due upon delivery and

typically includes a 2% price discount off the selling price in accordance with this policy.

Our commercial terms and conditions

do not include a right of return for reasons other than a defect in performance or quality.

We offer an eighteen-month assurance-type

warranty covering material and manufacturing defects, which we account for under the guidance of ASC 460, Guarantees.

have a limited history of shipments, and, as such, we have not recorded a warranty liability on our balance sheets at February

In accordance with ASC 606, we recognize revenue,

net of discounts, for our generator sets at time of product delivery to the domestic distributor (i.e.

point-in-time), which also corresponds

to the passage of legal title to the customer and the satisfaction of our performance obligations to the customer.

Our payment terms

are cash payment due upon delivery and typically includes a 2 % price discount off the selling price in accordance with this policy.

commercial terms and conditions do not include a right of return for reasons other than a defect in performance or quality.

a 24 month assurance-type warranty covering material and manufacturing defects, which we account for under the guidance of ASC 460, Guarantees.

We have a limited history of shipments, and, as such, we have not recorded a warranty liability on our balance sheets at February

28, 2022 and February 28, 2021, respectively;

however, we expect warranty claims to eventually be nil, therefore, we have not

delayed the recognition of revenue during Fiscal years 2021 and 2020.

and Cash Equivalents

and equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments

with original maturities of three months or less.

We have not experienced any losses in such accounts and believe we are not exposed

to any significant risk on cash and cash equivalents.

are valued at the lower of cost (first-in, first-out) or market, on an average cost basis.

We review the components of inventory

on a regular basis for excess or obsolete inventory based on estimated future usage and sales.

From Fiscal 2015 through 2019 we

minimally operated and therefore only produced minimal product.

As a result, while we believed that a portion of the inventory

had value, we were unable to substantiate its demand and market value, we fully reserved it as of February 28, 2019

Company accounts for stock-based compensation under the provisions of FASB ASC 718, Compensation –

Stock Compensation

(“ASC 718”), which requires the measurement of all share-based payments to employees, including grants of employee

stock options, using a fair value-based method and the recording of such expense in the statements of operations.

Company accounts for stock option and warrant grants issued and vesting to non-employees, such as consultants and third parties,

in accordance with ASC 718, where appropriate, whereas the fair value of the equity-based compensation is based upon the measurement

date as determined at the earlier of either (a) the date at which a performance commitment is reached or (b) at the

date at which the necessary performance to earn the equity instruments is complete.

accordance with established public company accounting practice, the Company has consistently utilized the Black-Scholes option-pricing

model to calculate the fair value of stock options and warrants issued as compensation, primarily to management, employees, and

The Black-Scholes option-pricing model is a widely accepted method of valuation that public companies typically

utilize to calculate the fair value of options and warrants that they issue in such circumstances.

Company adopted ASC Topic 842, Leases (“ASC 842”), in Fiscal 2020, which required that public companies evaluate

all operating leases in accordance with ASC 842 and recognize a lease liability on the balance sheet by determining the present

value of the remaining lease payments for each lease using a discount rate based on the Company’s incremental borrowing

A corresponding right-of-use (“ROU”) asset is also recognized that is subject to amortization over the remaining

term of the lease.

Throughout Fiscal 2020 and the majority of Fiscal 2021, we did not implement the new guidance to our existing

leases because the guidance does not require application of the standard for leases that are less than 12 months with lease renewal

All of the facility leases were month-to-month with management’s intention of exiting the leases and facilities

as soon as practical.

In February 2021, we entered into a 66-month facility lease in Lake Forest, CA that began on March 1, 2021,

which resulted in the application of ASC 842 for the fiscal year ended February 28, 2021.

As of February 28, 2020, we recognized

a lease liability and a right-of-use asset of $1.2 million, respectively.

During Fiscal 2022 and beyond, we will be applying ASC

842 to this lease and any other operating leases we enter into in the future.

Value of Financial Instruments

Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize

the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The classification of a financial

asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement.

Under ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the

inputs into three levels that may be used to measure fair value:

Level 1 –

Quoted prices (unadjusted) for identical assets and liabilities in active markets;

Level 2 –

Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly

or indirectly;

Level 3 –

Unobservable inputs.

Company measures our financial assets and liabilities in accordance with the requirements of FASB ASC 825 “Financial Instruments”.

The carrying values of accounts payable, current notes payable, accrued expenses and other liabilities approximate fair value

due to the short-term maturities of these instruments.

The carrying amounts of long-term convertible notes payable approximate

their respective fair values because of their current interest rates payable and other features of such debt in relation to current

market conditions.

Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”).

Under ASC 740,

deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and

liabilities and their financial statement reporting amounts at each period end based on enacted tax laws and statutory tax rates

applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established,

when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provision for income taxes represents

the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities.

Company has significant income tax net operating losses;

however, due to the uncertainty of the realizability of the related deferred

tax asset and other deferred tax assets, a valuation allowance equal to the amount of deferred tax assets has been established

at February 28, 2021 and February 29, 2020.

740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions.

A tax benefit

from an uncertain position may be recognized only if it is “more likely than not”

that the position is sustainable

based on its technical merit.

Earnings (Loss) per

Company applies FASB ASC 260, Earnings per Share (“ASC 260”).

Basic earnings (loss) per share is computed by

dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding.

earnings per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include

additional common shares available upon exercise of outstanding warrants using the treasury stock method, except for periods of

operating loss for which no common share equivalents are included because their effect would be anti-dilutive.

Diluted earnings per

share also includes the dilutive effect of assuming the convertible securities that are outstanding are converted into common shares

by applying the conversion rate to the securities’

amounts outstanding and determining which, if any, convertible securities

are dilutive.

This assumption will add additional shares to the denominator for the diluted number of shares outstanding.

numerator is affected by assuming the accrued interest due to the holders of the convertible securities is no longer applicable,

which increases the amount of income in the numerator.

The Company determined that all of the convertible securities outstanding at

February 28, 2021 were antidilutive to the basic earnings per share and 4,631,500 shares were excluded from the calculation.

addition, 1,040,000 stock options granted under the 2011 Plan (See note 9) and warrants of 5,662,272 were excluded from the

calculation of diluted earning per share at February 28, 2021 because they were antidilutive.

The following table sets forth the

basic and diluted income (loss) per share for the fiscal years ended February 28, 2021 and February 29, 2020:

Fiscal Year Ended February

(Denominator)

Income available to common stockholders

Effect of Dilutive Securities

Stock Options-2011 Plan

Income available to common stockholders plus assumed conversions

Fiscal Year Ended February

(Denominator)

Loss available to common stockholders

however, we expect warranty claims to eventually be nil, therefore, we have not delayed

the recognition of revenue during Fiscal years 2022 and 2021.

Cost of Goods Sold

Cost of goods sold primarily consists of the salaries

of certain employees and contractors, purchase price of consumer products, packaging supplies, inventory reserve and customer shipping

and handling expenses.

Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of

revenue upon sale of products to our customers.

Cash and Cash Equivalents

Cash and equivalents include cash on hand and cash

in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Inventories are valued at the lower of cost (first-in,

first-out) or net realizable value, on an average cost basis.

We review the components of inventory on a regular basis for excess or

obsolete inventory based on estimated future usage and sales.

When evidence exists that the net realizable value of inventory is lower

than its cost, the difference is recognized as a loss in the period in which it occurs.

Once inventory has been written down, it creates

a new cost basis for inventory that may not be subsequently written up.

During the year ended February 28, 2022, the Company wrote-down

inventories of $ 36,000 .

During the year ended February 28, 2021, there were no inventory write downs recorded.

Property and Equipment

Property and equipment are recorded at historical

cost and depreciated on a straight-line basis over their estimated useful lives of approximately three years up to ten years once the

individual assets are placed in service.

Leasehold improvements are amortized over the shorter of the useful life or the remaining period

of the applicable lease term.

Management assesses the carrying value of property

and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If there is indication

of impairment, management prepares an estimate of future cash flows e xpected

to result from the use of the asset and its eventual disposition.

If these cash flows are less than the

carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value at that time.

28, 2022 and 2021, management determined there were no impairments of the Company’s property and equipment.

of Long-lived Assets

The Company reviews its property and

equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset group may not be recoverable.

Recoverability is measured by a comparison of the carrying amount of an

asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds

its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset

exceeds the fair value of the assets.

Fair value is generally determined using the asset’s expected future discounted cash flows

or market value, if readily determinable.

For the years ended February 28, 2022 and 2021, the Company had no impairment of long-lived

The Company determines whether a contract is, or

contains, a lease at inception.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term,

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

Right-of-use assets and

lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease

The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present

value of unpaid lease payments.

Customer Advances

Customer advances represent consideration received

from customers under revenue contracts for which the Company has not yet delivered to the customer.

Concentration of Credit and Other Risks

Financial instruments that potentially subject the

Company to concentrations of credit risk consist of cash and accounts receivable.

Cash is deposited with a limited number of financial

institutions.

The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”)

insurance limits of up to $ 250,000 .

We have not experienced any losses in such accounts and believe we are not exposed to any significant

risk on cash and cash equivalents.

During the year ended February 28, 2022, one customer

accounted for 18 % of revenues.

During the year ended February 28, 2021, one customers accounted for 83 % of revenues.

As of February 28, 2022, three vendors accounted

for 44 %, 13 % and 15 % of accounts payable.

As of February 28, 2021, three vendors accounted for 34 %, 31 % and 13 % of accounts payable.

Research and Development

The Company engages in research and development to stay current with

changes in vehicle manufacture and design and to maintain an advantage over potential competition.

Research and development expenses relate

primarily to the development, design, testing of preproduction prototypes and models and are expensed as incurred.

Research and development

costs for Fiscal 2022 and 2021 was approximately $ 600,000 and $ 200,000 , respectively.

Share-Based Compensation

The Company periodically issues stock options

and warrants, and shares of common stock to employees and non-employees in non-capital raising transactions for services and for financing

Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized

as expense over the requisite service period.

Recognition of compensation expense for non-employees is in the same period and manner as

if the Company had paid cash for services.

The Company uses an asset and liability approach

for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood

of realization of tax benefits in future years.

Under the asset and liability approach, deferred taxes are provided for the net tax effects

of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used

for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either

expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s policy is

to recognize interest and/or penalties related to income tax matters in income tax expense.

Derivative Warrant Liability

The Company evaluates its financial instruments

to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments

that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each

reporting date, with changes in the fair value reported in the statements of operations.

The classification of derivative instruments,

including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the

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

The Company uses Level 2 inputs for its valuation

methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing model.

The Company’s

derivative liabilities are adjusted to reflect fair value at each reporting date, with any increase or decrease in the fair value being

recorded in the statement of operations.

Fair Value of Financial Instruments

The Company determines the fair values of its financial

instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of

unobservable inputs when measuring fair value.

The classification of a financial asset or liability within the hierarchy is based upon

the lowest level input that is significant to the fair value measurement.

Under ASC 820, Fair Value Measurement and Disclosures

(“ASC 820”), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Quoted prices (unadjusted) for identical assets and liabilities

in active markets;

Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities

that are observable either directly or indirectly;

Level 3 – Unobservable inputs.

The recorded amounts of inventory, other current

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

The carrying amounts of notes

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

to current market conditions.

The following table sets

forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of February 28, 2022 and

February 28, 2022

Derivative warrant liability

Total liabilities

February 28, 2021

Derivative warrant liability

Total liabilities

The Company estimated

the fair value of the derivative warrant liability using the Binomial Model (see Note 14).

(loss) per share

The Company’s earnings (loss) per share

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

Basic earnings (loss)

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

stock outstanding during the period.

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

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

shares of common stock were dilutive.

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

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

were exercised

following information sets forth the computation of basic and diluted net increase in the Company's net assets per share resulting from

operations for the years ended February 28, 2022 and 2021:

Year Ended February 28,

Net income (loss)

$ ( 3,991,863 )

Loss available to common stockholders

Adjustment for interest expense on convertible notes

Adjusted net income (loss)

$ ( 3,991,863 )

Use of Estimates

preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported

amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Denominator for basic weighted average share

Adjustment for dilutive effect of convertible notes

Denominator for diluted weighted average share

Earnings (loss) per share

Basic earnings (loss) per share:

Diluted earnings (loss) per share

the years ended February 28, 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities

would have had an anti-dilutive effect.

The potentially dilutive securities consisted of the following:

Convertible notes

Reclassifications

prior period amounts have been reclassified to conform to the current year presentation.

Issued Accounting Pronouncements

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) which enhances and simplifies various aspects of

the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that

is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law.

The amendment will be effective for public companies with fiscal years beginning after December 15, 2020;

early adoption is permitted.

The Company is evaluating the impact of this amendment on its financial statements.

January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint

Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction

of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in

Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.

ASU 2020-01 is

effective for the Company beginning January 1, 2021.

The Company is currently evaluating the effect of adopting this ASU on its

consolidated financial statements.

February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments

to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective Date Related to Accounting

Standards Update No.

2016-02, Leases (Topic 842) which amends the effective date of the original pronouncement for smaller

reporting companies.

ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal

years beginning after December 15, 2022.

The Company believes the adoption will modify the way the Company analyzes financial

instruments, but it does not anticipate a material impact on results of operations.

The Company is in the process of determining

the effects adoption will have on its financial statements.

August 2020, the FASB issued ASU 2020-06, Debt –

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging –

Contracts in Entity’s Own Equity (Subtopic 815 –

40), (“ASU 2020-06”).

simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible

instruments and contracts on an entity’s own equity.

The ASU2020-06 amendments are effective for fiscal years beginning

after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted, but no earlier than

fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is evaluating

the impact of this guidance on its financial statements.

on February 28, 2021 and February 29, 2020 consisted of the following:

Certain prior period amounts have been reclassified

to conform to the current year presentation.

These reclassifications have no effect on the previously reported financial position, results

of operations and cash flows (see Note 3).

The Company operates

in one segment for the manufacture and delivery of generator sets.

In accordance with the “ Segment Reporting ” Topic

of the ASC, the Company’s chief operating decision maker has been identified as the President, who reviews operating results to

make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a management

approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide

disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities

in economic characteristics;

nature of products and services;

and procurement, manufacturing and distribution processes.

Since the Company

operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No.

Credit Losses – Measurement of Credit Losses on Financial Instruments (“ASC 326”).

The standard significantly changes

how entities will measure credit losses for most financial assets, including accounts and notes receivables.

The standard will replace

today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances

based on expected rather than incurred losses.

Entities will apply the standard’s provisions as a cumulative-effect adjustment to

retained earnings as of the beginning of the first reporting period in which the guidance is effective.

As a small business filer, the

standard will be effective for the Company for interim and annual reporting periods beginning after March 1, 2023.

Management is currently

assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

(“ASU 2020-06”) “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40).

” ASU 2020-06 reduces the number of accounting models for convertible debt instruments

by eliminating the cash conversion and beneficial conversion models.

As a result, a convertible debt instrument will be accounted for

as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives.

By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest

Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted

ASU 2020-06 will be effective March 1, 2024, for the Company and is to be adopted through a cumulative-effect adjustment to the

opening balance of retained earnings.

Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within

Management is currently evaluating the effect of the adoption of ASU 2020-06 on the financial statements, but currently does

not believe ASU 2020-06 will have a significant impact on the Company’s accounting for its convertible debt instruments.

will largely depend on the composition and terms of the financial instruments at the time of adoption.

In May 2021, the FASB issued ASU 2021-04, Earnings

Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications

or Exchanges of Freestanding Equity-Classified Written Call Options .

ASU 2021-04 provides clarification and reduces diversity in

an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants)

that remain equity classified after modification or exchange.

An issuer measures the effect of a modification or exchange as the difference

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

ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment

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

or modification).

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

within those fiscal years.

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

on or after the effective date.

Early adoption is permitted for all entities, including adoption in an interim period.

If an entity elects

to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes

that interim period.

The adoption of ASU 2021-04 is not expected to have a material impact on the Company’s financial statements

or disclosures.

Other recent accounting pronouncements issued

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

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

present or future financial statements.

NOTE 3 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The financial statements for the year ended February 28, 2021 and certain

balances as of February 29, 2020 have been restated.

On May 31, 2022, our management determined the following:

● that the Company erroneously did not recognize a derivative warrant

liability associated with warrants issued in prior years that included a fundamental transaction provision that could give rise to an

obligation to pay cash to the warrant holder.

As such, the Company determined that the warrants fundamental transaction provision created

a derivative liability pursuant to current accounting guidelines.

● that the Company had issued common stock in exchange for

a settlement of debt to a former employee during fiscal 2018 and had erroneously not accounted for it until fiscal 2021.

● that the Company had granted stock options during fiscal

2021 which were erroneously not recorded.

The effects on the previously issued financial statements are as follows:

(A) In fiscal 2022, the Company recognized that previously issued warrants

had characteristics of derivative liabilities.

The Company determined the fair value of the warrant derivative liability as of February

29, 2020, was $ 947,271 , and recorded the liability and its associated expense as a prior period adjustment to Accumulated Deficit in the

amount of $ 947,271 .

Additionally, the warrant derivative liability was revalued at February 28, 2021 and the net increase in fair value

of $ 419,103 was recorded as additional liability.

The associated other net expense of $ 432,714 for the increase in fair value, partially

offset by the gain on expiring warrants of $ 13,611 , was recorded to the statement of operations.

(B) In fiscal 2022, the Company recognized that during fiscal 2021, the

Company recorded the effect of issuing common stock for debt to a former employee when the issuance had occurred in fiscal 2018.

the timing of recording the transaction, the Company calculated the gain on the extinguishment of debt as of the February 28, 2018, issuance

date in the amount of $ 256,044 and recorded the gain as a prior period adjustment to Accumulated Deficit.

Additionally, the interest expense

associated with the debt of $ 13,460 and gain on its extinguishment of $ 133,500 recorded in fiscal 2021 were reversed out of the statement

of operations.

€ In fiscal 2022, the Company recognized that certain stock options granted during fiscal 2021 should have been fully or partially vested in the year of grant but had no share-based compensation expense recorded in fiscal 2021.

To correct the timing of the expense recognition, the Company computed the amount of expense associated with the vesting as of February 28, 2021, and recorded an additional $ 258,636 of stock-based compensation expense to the statement of operations and is included in selling, general and administrative expenses.

Reclassifications

(1) In fiscal 2021, the Company presented

interest accrued of $ 3,668 on its Economic Injury Disaster Loan as additional note payable principle.

In the accompanying fiscal

2022 financial statements, the Company has reclassified the accrued interest of $ 3,668 recorded in fiscal 2021 from notes payable to

accrued interest.

(2) In fiscal 2021, the Company presented

$ 2,713,652 of extinguishment of accrued wages and accounts payable as Other Income.

In the accompanying fiscal 2022 financial

statements, the $ 2,713,652 has been reclassified to gain on extinguishment of debt.

The following table presents the effect of the restatements and reclassifications

on the Company’s previously issued balance sheet:

As of February 28, 2021

As Previously

Reclassifications

Accrued expenses (including accrued interest)

Derivative warrant liability

Additional paid-in capital

Accumulated deficit

( 465,883,499

( 467,372,506

The following table presents the effect of the restatements and reclassifications

on the Company’s previously issued statement of operations:

As of February 28, 2021

As Previously

Reclassifications

Selling, general and administrative expense

Interest expense

Gain on extinguishment of debt

Gain on extinguishment of derivative warrant liability

Change in fair value of derivative warrant liability

Net income per share, basic and diluted

The following table presents the effect of the restatements on the

Company’s previously issued statement of shareholder deficit:

Shareholders’

Balance, February 29, 2020, as previously reported

$ 443,417,452

$ ( 466,726,027 )

$ ( 23,302,937 )

Prior period revisions

Corrections of errors

Balance, February 29, 2020, as restated

$ 443,548,428

$ ( 467,417,254 )

$ ( 23,863,168 )

Balance, February 28, 2021, as previously reported

$ 446,126,640

$ ( 465,883,499 )

$ ( 19,749,750 )

Prior period revisions

( 1,489,007 )

( 1,366,375 )

Corrections of errors

Balance, February 28, 2021, as restated

$ 446,249,272

$ ( 467,372,506 )

$ ( 21,116,125 )

The following table presents the effect of the restatements and reclassifications

on the Company’s previously issued statement of cash flows:

As of February 28, 2021

As Previously

Reclassifications

Cash flows from operating activities:

Gain on extinguishment of liabilities

Gain on debt settlement

Gain on extinguishment of derivative warrant liability

Change in fair value of derivative warrant liability

Share-based compensation expense

Changes in working capital assets and liabilities:

Operating lease right-to-use asset

Accounts payable and accrued expenses

Accrued interest on notes payable

Operating lease liability

Supplemental schedule of non-cash transactions:

Notes payable converted into shares of common stock

4 – INVENTORIES

consisted of the following:

Raw materials

Work-in-process

Finished goods

Total inventory

consist primarily of components required for the manufacture of the Company’s AuraGen ®

/VIPER product.

OTHER CURRENT ASSETS AND INVESTMENT IN JOINT VENTURE

current assets of approximately $115,000 on February 28, 2021 consist of vendor advances of $37,400, employee salary draws of

$63,500 and prepaid expenses of $14,300.

On February 29, 2020, other current assets consisted of unamortized prepaid expense of

March 2017, we entered into a joint venture agreement with a Chinese partner, Jiangsu Shengfeng Mobile Power Technology Co., Ltd.

(“Jiangsu Shengfeng”), to address the Chinese market.

Under the Jiangsu Shengfeng joint venture agreement, the Company

owns 49% of the venture and our Chinese partner owns 51%.

The Chinese partner agreed to contribute a total of approximately $9.25

million to the venture ––

principally in the form of facilities and equipment as wells as approximately $500,000 in

The Company contributed $250,000 in cash as well as a limited license to the joint venture to manufacture, sell and service

the AuraGen ®

products within China.

The limited license sold to the Jiangsu Shengfeng joint venture, however, does

not permit Jiangsu Shengfeng to manufacture the AuraGen ®

rather, the joint venture is required to purchase

all rotor subassemblies as well as certain software elements directly from the Company.

During Fiscal 2020, the Company recorded

an impairment expense of $250,000 to write-off the joint venture investment due to operational and future cash-flow uncertainties

associated with AuraGen ®

/VIPER market development prospects in China.

NOTES PAYABLE

payable as of February 28, 2021 and February 29, 2020 consisted of the following:

Non-Related Party Promissory Notes

Demand promissory notes payable with 1 individual, carrying an interest rate of 10% (see Demand Promissory Notes below)

Abdou notes payable

Payroll Protection Plan loan program

Small Business Administration-Economic Injury Disaster Loan

Demand and Notes Payable

Convertible Promissory Note originally dated August 10, 2012, due January 11, 2023, convertible into shares of our common stock at a price of $0.76 per share, carrying interest rate of 5%.

See Convertible Promissory Notes –

Dalrymple August 2012 for further details.

Convertible Promissory Note originally dated October 2, 2012, due January 11, 2023, convertible into shares of our common stock at a price of $0.76 per share, carrying interest rate of 5%.

See Convertible Promissory Notes –

Dalrymple October 2012 for further details.

Senior secured convertible notes originally dated May 7, 2013, due January 11, 2023, convertible into shares of our common stock at a price of $0.75 per share, carrying interest rate of 5%.

See Convertible Debt –

Kenmont Capital Partners, LPD Investments and Guenther for further details.

Senior secured convertible notes originally dated June 20, 2013, due January 11, 2023, convertible into shares of our common stock at a price of $0.50 per share, carrying interest rate of 5%.

See Convertible Debt –

Dresner and Lempert for further details.

Total Convertible Promissory Notes

Accrued Interest - notes payable

Total Non-Related Party

Notes Payable-Related Party

Convertible Note payable –

related party, carrying an interest rate of 5% - see Note 6, Breslow Note, for further details

Kopple Notes Payable-related party, see Kopple Notes, Note 6 below:

Mel Gagerman Notes Payable, see Gagerman, Note 6 below:

November 20, 2019, the Company entered into a preliminary agreement with Jiangsu Shengfeng, the Company’s Chinese joint

Payment terms consist of a non-interest bearing promissory note and a payment plan pursuant to which the $700,000 is

paid over a 12-month period beginning March 15, 2020 through February 15, 2021.

Accrued Interest - notes payable- related party.

Total Related Party

Total notes payable and accrued interest

Current portion

$ (13,015,295 )

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of

the following:

Prepaid annual software licenses

Prepaid commissions

Vendor advances

Other prepaid expenses

Total other current assets

Equity method investment (written off in fiscal

In March 2017, the Company entered into a joint

venture (“Jiangsu Shengf”ng") with a Chinese company to build and distribute AuraGen® products in China.

partner owns 51 % of Jiangsu Shengfeng and contributed facilities and equipment of approximately $ 9.75 million, and approximately $ 500,000

of working capital.

The Company owns 49 % of Jiangsu Shengfeng and contributed $ 250,000 of working capital as well as a limited license.

In September, 2018, Jiangsu Shengfeng placed a $ 1,000,000 order with the Company which included an advance payment of $ 700,000 .

failed to deliver products in accordance with the order received.

In November 2019, the Company issued a note payable for the $ 700,000

due to Jiangsu Shengfeng (see Note 10) as part of an agreement for the repayment of the advance subject to Jiangsu Shengf’ng's continuance

of operations.

However, starting in January 2020, Jiangsu Shengfeng’s operations were shut down by governmental authorities due

to the COVID-19 virus, and as of the date of this filing, its operations have not restarted.

As of February 28, 2020, the Company wrote

off its equity interest in Jiangsu Shengfeng.

NOTE–6 - PROPERTY AND EQUIPMENT, NET

Property and equipment

consisted of the following:

Leasehold improvements

Machinery and equipment

Computer equipment

Furniture and fixtures

Less accumulated depreciation and amortization

Depreciation expense

for the years ended February 28, 2022 and 2021 was $ 14,765 and $ 743 , respectively:

7 – CONVERTIBLE NOTES PAYABLE

notes payable consisted of the following:

Convertible notes payable

( 1,402,971 )

Long-term portion

Promissory Notes and Notes Payable

promissory notes as of February 28, 2021 and February 29, 2020 are for one and four individuals, respectively, issued in September

2015 that are payable on demand with an interest rate of 10% per annum.

As of February 28, 2021, the one individual is for the

principal amount owed to the Mr.

Zeitlin, a former director of the Company, of $10,000.

the year ended February 28, 2021, $758,537 of demand notes principal and $385,349 of accrued interest were reversed as the related

statute of limitations were determined to have expired.

This reversal resulted in an aggregate reduction of current liabilities

of $1,143,886, the recording of an issuance of 192,641 shares of common stock on the Balance Sheet as of February 28, 2021, and

the recognition of $871,887 as gain on extinguishment of debt on the Statements of Operations for the year ended February 28,

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.

The Notes had a 1-year maturity date and were convertible

into shares of common stock at the conversion price of $0.50 per share.

The warrants were subsequently exercised.

recorded $24,470 as a discount, which has been fully amortized.

There is a remaining balance of $125,000 as of February 28, 2019.

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 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 and Mr.

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

subsequently appealed this judgment and, in September 2019, reached a settlement agreement with these creditors for a principal

amount of $325,000, of which approximately $120,000 and $215,000 were outstanding as of February 28, 2021 and February 29, 2020,

respectively.

Protection Plan Loan

April 2020, the Company ceased operations for approximately 6 weeks in compliance with State of California and the County of Orange

public health pronouncements associated with the COVID-19 pandemic.

On April 23, 2020, we obtained a Paycheck Protection Program

(“PPP”) loan in the amount of approximately $74,400 pursuant to the Coronavirus Aid, Relief, and Economic Security

Act (the “CARES Act”).

Interest on the loan is at the rate of 1% per year, and all loan payments are deferred for

six months, at which time the balance is payable in 18 monthly installments if not forgiven in accordance with the CARES Act and

the terms of the promissory note executed by the Company in connection with the loan.

promissory note contains events of default and other provisions customary for a loan of this type.

As required, the Company

used the PPP loan proceeds for payroll, healthcare benefits, rent and other qualifying expenses.

program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly

forgiven in accordance with the requirements set forth in the CARES Act.

While we intend to apply for the forgiveness of the PPP

Loan, there is no assurance that we will obtain forgiveness of the PPP Loan in whole or in part (See Note 13 in which we were

notified of PPP loan forgiveness in April 2021).

As of February 28, 2021, $8,166 was classified as notes payable, non-current

and $66,239 was classified as part of notes payable, current portion.

Injury Disaster Loan

In Fiscal 2013 and 2014,

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

As of February 28, 2022 and 2021, the outstanding balance

of the convertible notes payable amounted to $ 1,402,971 .

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

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

The notes were originally due in 2014 to 2017, and were

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

At February 28, 2022

and 2021, accrued interest on convertible notes payable totaled $ 284,063 and $ 213,884 , respectively, and is included in accrued expenses

(See Note 11).

NOTE 8 – CONVERTIBLE NOTE PAYABLE-RELATED

note payable – related party consisted of the following:

Convertible note payable

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

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

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

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

At February 28, 2022

and 2021, accrued interest on convertible notes payable-related party totaled $ 562,911 and $ 412,911 , respectively, and is included in

accrued expenses (See Note 11).

NOTE 9 – NOTES PAYABLE

payable consisted of the following:

Secured notes payable

(a) Note payable-EID loan

(b) Notes payable-vehicles and equipment

Unsecured notes payable

(d) Note payable-Abdou

(e) Note payable-other-in default

Economic Injury Disaster (EID) Loan

negatively impacted by the COVID-19 pandemic were eligible to apply for loans sponsored by the United States Small Business Administration

(“SBA”) Economic Injury Disaster Loan (“EIDL Loan”) program.

On July 1, 2020, the Company received cash

proceeds of $149,900 under this program.

The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying

expenses, and the loan is not subject to a loan forgiveness provision.

The standard EIDL Loan repayment terms include interest

accrues at 3.75% per annum effective July 1, 2020;

the payment schedule contains a one-year deferral period on initial principal

and interest payments;

the loan term is thirty years;

The Company pledged the assets of

the Company as collateral for the loan;

and there is no prepayment penalty or fees.

As of February 28, 2021, the amount

outstanding including accrued interest of $3,768 is $153,668 and is classified as part of notes payable, non-current on the February

28, 2021 balance sheet.

Notes Payable

Capital Partners

May 7 and September 25, 2013, the Company entered into Securities Purchase Agreements for senior convertible notes in the aggregate

amount of approximately $1,807,000 (“New Kenmont Notes”) and warrants to Kenmont Capital Partners LP.

The New Kenmont

Notes had a 1-year maturity date and were convertible into shares of common stock at the conversion price of $0.75 per share.

The warrants were subsequently exercised.

On October 31, 2016, the Securities Purchase Agreements were amended and restated to

include a provision for mandatory redemption in which 80% of the principal and accrued interest amount of approximately $2,750,000,

or approximately $2,200,000, was converted into common shares at a conversion price of $0.75 per share.

There was a remaining

balance of $549,954 as of February 28, 2021 and February 29, 2020, respectively.

May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to

a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments,

The New LPD Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75

The warrants were subsequently exercised.

The Company recorded $175,793 as a discount, which has been fully amortized.

There is a remaining balance of $163,677 as of February 28, 2021 and February 29, 2020, respectively.

May 7, 2013, the Company entered into an agreement with an individual, Mr.

Guenther, for the sale of $750,000 of secured convertible

note payable (the “Note”) and warrants.

The Note had a 1-year maturity date and was convertible into shares of common

stock at the conversion price of $0.75 per share.

The warrants entitle the holder to acquire 1,000,000 shares and have an initial

exercise price of $0.75 per share and have a 7-year term.

The Company recorded $235,985 as a discount, which has been fully amortized.

There is a remaining balance of $232,194 as of February 28, 2021 and February 29, 2020, respectively.

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

Dresner and Dr.

Lempert, for the sale of $200,000

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

The Notes had a 1-year maturity date and were convertible

into shares of common stock at the conversion price of $0.50 per share.

The warrants were subsequently exercised.

recorded $39,152 as a discount, which has been fully amortized.

During Fiscal 2020, Dr.

Lempert converted his share of the amount

outstanding into common shares and the balance outstanding of $59,506 as of February 28, 2021 and February 29, 2020, respectively,

is for Dresner exclusively.

August 10, 2012, the Company entered into an agreement with an individual, Mr.

Dalrymple, for the sale of $1,000,000

of unsecured Convertible Promissory Note.

The Convertible Promissory Note balance together with all accrued interest thereon was

due and payable on August 10, 2017 and the annual interest rate was 7% per annum and was due to be repaid 5 years from the closing

On January 11, 2018, the note was renegotiated with a final payment date of January 11, 2023 with an annual interest

The Company recorded $310,723 as a debt discount, which will be amortized over the life of the note .

is a remaining balance of $264,462 as of February 28, 2021 and February 29, 2020, respectively.

October 2, 2012, the Company entered into an agreement with an individual, Mr.

Dalrymple, for the sale of $500,000 of

unsecured Convertible Promissory Note.

This Convertible Promissory Note balance together with all accrued interest thereon was

due and payable on October 2, 2017 and the annual interest rate was 7% per annum and was due to be repaid 5 years from the closing

On January 11, 2018, the note was renegotiated with a final payment date of January 11, 2023 with an annual interest

The Company recorded $137,583 as a debt discount, which will be amortized over the life of the note .

is a remaining balance of $133,178 as of February 28, 2021 and February 29, 2020, respectively.

January 30, 2017, the Company entered into an agreement entitled First Amendment to Transaction Documents with five of seven secured

creditors holding a security interest in all of the Company’s assets except for its patents and other intellectual properties.

All of the creditors entered into the January 30, 2017 agreement with the exception of Mr.

Abdou and Mr.

agreement dated May 7, 2013 provided that if at least 75% of the stock issuable upon conversion of the convertible notes votes

to amend the agreement and/or waive any conditions or defaults, then any such amendments or waivers shall be binding on all secured

The five secured creditors signing the amendment total in excess of 95% of the issuable stock upon conversion and,

therefore the agreement is binding on all seven of the secured creditors.

The agreement provided that all accrued and unpaid interest

will be added to the principal amount.

The amended note provided for no interest from November 1, 2016 to February 14, 2018, the

date at which the 1-for-7 reverse stock split became effective at which time 80% of the total debt including accrued interest

was converted into shares of common stock and a new five year 5% per annum convertible note was issued for the remainder.

new amended and restated senior convertible notes have a maturity date of January 30, 2022.

The five creditors and the Company

entered into a Second Amendment to Transaction Documents on March 14, 2017 and a Third Amendment to Transaction Documents on April

8, 2017, both of which extended the required date of the stockholder approval of the 1-for-7 reverse stock split, which approval

was obtained in January 2018.

The amended and restated senior convertible notes also require the Company to make a “Required

Cash Payment”

as defined in the agreement if the Company receives at least $4,000,000 in aggregate gross proceeds from the

sale of equity securities (including securities convertible into equity securities) of the Company in one or a series of related

transactions.

The Required Cash Payment is equal to the current outstanding balance of the notes, which was approximately $1,005,000

as of February 28, 2021 and February 29, 2020, respectively, plus any outstanding accrued interest.

RELATED PARTIES TRANSACTIONS

payable-related party, non-current - $3,000,000 on the balance sheets as of February 28, 2021 and February 29, 2020, respectively,

consists of the Breslow Note as described below:

January 24, 2017, the Company entered into a Debt Refinancing Agreement with Mr.

Breslow, a former Director of the Company.

to the agreement, both Mr.

Breslow and the Company acknowledged that total debt owed to Mr.

Breslow was $23,872,614 including

$8,890,574 of accrued interest.

Breslow agreed to cancel and forgive all interest due, waive all events of default and sign

a new five-year convertible note in the amount of $14,982,041 providing for no interest for six months and interest of 5% per

annum thereafter payable monthly in arrears.

The note also provides various default provisions.

In accordance with the agreement,

on February 14, 2018, the effective date of the 1-for-7 reverse stock split, $11,982,041 of the note was converted into 7,403,705

shares of common stock and the then accrued interest of $9,388,338 was forgiven.

A new $3,000,000 convertible five-year note representing

the remaining balance was entered into at a conversion rate of $1.40.

The note bears interest at a rate of 5% per annum payable

monthly in arrears with accrued interest of $412,911 and $262,911 recorded as accrued interest-related party (see Note 4) as of

February 28, 2021 and February 29, 2020, respectively.

payable and accrued interest-related party, current - $12,165,015 and $11,333,960 on the balance sheets as of February 28,

2021 and February 29, 2020, respectively, consists of the Kopple Notes, the Gagerman Note and the Jiangsu Shengfeng Note as set

of February 28, 2021, and February 29, 2020, the principal amount owed to Robert Kopple (former Vice-Chairman of our Board) of

$5,607,323 was unchanged.

As of February 28, 2021, accrued interest of $5,710,465 was owed to Mr.

Kopple for a total balance of

As of February 29, 2020, accrued interest of $4,887,611 was owed to Mr.

Kopple for a total balance of $10,494,934.

August 19, 2013, the Company entered into an agreement with Robert Kopple, a former member of its Board of Directors for the sale

of $2,500,000 of convertible notes payable (the “Kopple Notes”) and warrants.

The Kopple Notes carried a base interest

rate of 9.5%, have a 4-year maturity date and were convertible into shares of common stock at the conversion price of $3.50 per

share (conversion feature expired in 2017).

The warrants were subsequently exercised.

The Company recorded $667,118 as a discount,

which has been fully amortized.

The Company also entered into a demand note payable with this individual in the amount of $20,000,

which bears interest at a rate of 5% per annum.

February 28, 2021, the Gagerman note consisted of $82,000 of unsecured note payable plus accrued interest of $65,226 for a total

owed to Gagerman of $147,226, the Company’s former CEO and CFO, pursuant to a demand note entered into on April 5, 2014.

Interest accrues at 10% per annum.

On February 29, 2020, the amount owed to Gagerman was $138,526.

Shengfeng Note

November 20, 2019, the Company entered into a preliminary agreement with Jiangsu Shengfeng, the Company’s Chinese joint

venture, to return $700,000 previously advanced to the Company in September 2018 and recorded as part of customer advance on the

balance sheet as of February 28, 2019.

Following this agreement which would consists of a non-interest-bearing promissory note

and a payment plan pursuant to which the $700,000 would be paid over a 12-month period.

Principal loan amount on February 28,

2021 and February 29, 2020 was $700,000, respectively, and is classified as part of notes payable and accrued interest-related

party, current on the balance sheets as of February 28, 2021 and February 29, 2020.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

expenses and other current liabilities on February 28, 2021 and February 29, 2020 consisted of the following:

(“SBA”) Economic Injury Disaster Loan (“EID Loan”) program.

On July 1, 2020, the Company received a $150,000

loan under this program.

The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying expenses, and the loan

is not subject to a loan forgiveness provision.

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

the assets of the Company .

Notes payable-vehicle and equipment

During fiscal 2022, the Company purchased two

pieces of equipment and a vehicle for $329,297 as a part of its efforts to expand its operations and research and development capacities.

The Company made down payments aggregating $41,300 with the balance financed by two notes payable aggregating $287,997.

The notes are

secured by the equipment and vehicle purchased.

One note is due in 36 equal monthly payments of approximately $6,100 each, including interest

at 2.9% per annum.

The second note is due in 72 equal monthly payments of approximately $1,500 each, including interest at 10.9% interest

As of February 28, 2022, the balance of the notes was $265,616.

Paycheck Protection Plan (PPP) Loans

April 23, 2020, the Company was granted a Paycheck Protection Program (“PPP”) loan in the amount of $ 74,405 pursuant to the

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The PPP matures on April 23, 2022, bears interest at

a rate of 1 % per annum, with the first six months of interest deferred, and is unsecured and guaranteed by the SBA.

The Company applied

ASC 470, Debt, to account for the PPP loan.

Funds from the PPP loan may only be used for qualifying expenses, including qualifying payroll

costs, qualifying group health care benefits, qualifying rent and debt obligations, and qualifying utilities.

The Company used the loan

amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying

The Company applied for the forgiveness of the PPP Loan, and in April 2021 the Company

was notified that the PPP loan, including accrued interest, was being forgiven under the terms of the PPP program.

As a result, the Company

recorded other income of approximately $ 75,100 , representing the forgiven principal and interest.

2021, the Company applied for and received a second PPP loan (“PPP-2”) in the amount of approximately $ 91,200 pursuant to

CARES Act, as amended to allow a second loan.

The terms of the PPP-2 loan were essentially the same as under the original PPP loan.

Company applied for the forgiveness of the PPP-2 loan, and in January 2022 we were notified that the PPP-2 loan, including accrued interest,

was being forgiven under the terms of the PPP program.

As a result, the Company recorded other income of approximately $ 92,000 , representing

the forgiven principal and interest.

Total gain on extinguishment of debt recorded for the PPP and PPP-2 loans is $ 167,104

June 20, 2013, the Company issued convertible notes payable to two individuals in the aggregate of $ 125,000 .

The notes were due June

The loans were not paid when due, and in September 2019, the note holders and the Company reached a settlement for past due

principal, accrued interest, and fees of approximately $325,000.

As of February 28, 2020, the outstanding balance of the settlement note

was $215,181.

During the year ended February 28, 2021, the Company paid $95,000 of the note, and as of February 28, 2021, the outstanding

balance was $120,181.

During the year ended February 28, 2022, the Company paid the remaining balance of $120,181.

Other notes payable

promissory notes as of February 28, 2022 and February 28, 2021 are for one individual issued in September 2015 that is payable on demand

with an interest rate of 10 % per annum.

During the year ended February 28, 2021, an aggregate

of $743,386, consisting of $491,537 of demand notes principal and $251,849 of accrued interest, was extinguished as the related statute

of limitations were determined to have expired (see Note 12).

At February 28, 2022

and 2021, accrued interest on notes payable totaled $ 36,541 and $ 28,822 , respectively, and is included in accrued expenses (See Note 11).

NOTE 10 – NOTES PAYABLE-RELATED PARTIES-IN

payable-related parties consisted of the following:

Unsecured notes payable

(a) Notes payable-Koppel-in default

Accrued interest-Koppel-in default

Subtotal-Koppel-in default

(b) Note payable- Gagerman-in default

Accrued interest-Gagerman-in default

Subtotal-Gagerman-in default

In fiscals 2013 through 2018, the Company issued

notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate of $ 6,107,323 .

Robert Kopple

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

The notes are unsecured,

bear interest at rates ranging from 5 % and 15 % per annum, and were due in fiscal 2014 through fiscal 2018.

At February 28, 2022 and 2021,

the accrued interest due to Kopple totaled $ 6,533,318 and $ 5,710,464 , respectively.

Due to its significance, the balance of accrued interest

is added to the note payable principal for presentation on the accompanying balance sheets.

As of February 28, 2022 and 2021, the outstanding

balance of the Kopple notes payable and accrued interest amounted to $ 12,140,641 and $ 11,317,787 , respectively.

brought suit against the Company beginning in 2017 for repayment of the notes.

On March 14, 2022, the Company reached an agreement

with Kopple to resolve all remaining litigation between them.

Under the terms of the settlement, the Company agreed to pay Kopple an aggregate

amount of $ 10,000,000 , and granted Koppel warrants exercisable into 3,331,664 shares of the Company’s common stock.

The fair value

of the warrants is estimated to be $ 1,000,000 , resulting in total consideration to Kopple of approximately $11,000,00 (see Note 19).

Note payable-Gagerman

April 2014, the Company issued a note payable to Gagerman, former CEO and CFO of the Company, for $ 82,000 .

The note is unsecured, bears

interest at a rate of 10 % per annum and matured in March 2019.

At February 28, 2022 and 2021, accrued interest on notes payable-Gagerman

totaled $ 73,428 and $ 65,228 , respectively, and is added to the note principal for presentation on the accompanying balance sheets.

of February 28, 2022 and 2021, the outstanding balance of the Gagerman notes payable and accrued interest amounted to $ 155,428 and $ 147,228 ,

respectively.

Jiangsu Shengfeng Note

On November 20, 2019, the Company reached an agreement

with its joint venture partner Jiangsu Shengfeng (see Note 5) regarding the return of $ 700,000 that had been advanced to the Company,

and the Company issued a non-interest-bearing promissory note for $ 700,000 to be paid over a 11-month period beginning March 15, 2020,

through February 15, 2021.

As of February 28, 2022 and February 28, 2021, the principal due was $ 700,000 , respectively.

As of February

28, 2022, the note is past due and deemed in default.

NOTE 11 – ACCRUED EXPENSES

expenses consisted of the following:

(As Restated)

Accrued payroll and related expenses

Accrued payroll - related party

Customer advances

Accrued interest

Accrued interest-related party

Operating lease liability

Accrued interest-convertible notes payable

Accrued interest-convertible notes payable related party

Accrued interest-notes payable

Other accrued expenses

payroll and related expenses consist primarily of salaries and vacation time accrued but not paid to employees due to our lack

of financial resources.

Customer advances, which represent advanced payments received by the Company in connection with future

product deliveries in the amount of approximately $440,000 at February 28, 2021 and February 29, 2020, respectively.

Accrued interest

consists of amounts due (see Note 5) to holders of convertible promissory notes of $1.4 million and for demand and other promissory

notes of approximately $0.4 million.

The accrued interest-related party is related to principal amount due to Mr.

Breslow of $3.0

million as of February 28, 2021 (see Note 6).

The operating lease liability of approximately $111,000 is the current portion of

the lease liability recognized in accordance with ASC 842 (see Note 8).

COMMITMENTS & CONTINGENCIES

Fiscal 2020 and 2021, our facilities consisted primarily of approximately 20,000 square feet in Stanton, California and an additional

NOTE 12 – GAIN ON EXTINGUISHMENT

During fiscal 2021, the Company recorded a gain

on extinguishment of debt primarily related to the cancellation of liabilities following the expiration of the statute of limitations

on such debt.

The Company obtained a legal opinion with conclusions that support the Company’s position that the statute of limitations

for all potential claims owed by the Company on approximately $ 2,704,000 of accrued wages and vendor payables, and notes payable and accrued

interest of approximately $ 743,000 , had expired pursuant to various precedents.

Accordingly, the Company recorded a gain on extinguishment

of debt of $ 3,447,039 in the accompanying statement of operations for the year ended February 28, 2021.

NOTE 13 – LEASES

fiscal 2021, our facilities consisted primarily of an approximate 20,000 square feet facility in Stanton, California and an additional

storage facility in Santa Clarita, California.

Effective February 28, 2021, we vacated the Stanton facility and consolidated our

administrative offices, operations including warehousing within a 17,700 square foot facility in Lake Forest, California under

a 66-month rental agreement covering March 1, 2021 through August 31, 2026, with an initial monthly rental rate of approximately

$22,000 increasing to a monthly rate of approximately $26,000 in 2026.

The Stanton facility previously was used for final assembly

and testing of AuraGen ®

/VIPER systems under a month-to-month rental agreement for $10,000 per month.

rent for the Santa Clara storage facility that was terminated effective July 31, 2020 was also under a month-to-month rental agreement

for $5,000 per month.

Following the exit from the Santa Clarita facility to February 28, 2021, we rented temporary storage space

through February 28, 2021 for approximately $2,500 per month.

At February 28, 2021, in accordance with ASC Topic 842, we recognized

a ROU asset and an operating lease liability of approximately $1.2 million, respectively, of which approximately $0.1 million

was classified as a current liability and $1.1 million as non-current liability at February 28, 2021.

The lease liability is determined

by discounting the future lease payments under the lease terms and applying a 10% per annum discount rate to arrive at the current

lease liability.

Operating expenses estimated to be approximately $4,000 per month are considered a variable lease component and

excluded from the determination of the ROU asset and the lease liability.

Other operating expenses, such as utilities and property

taxes, are similarly excluded in the calculation of the ROU as they do not represent goods and services provided by the lessor

under the terms of the lease.

Contingencies

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 $5.7 million Mr.

Kopple claims to be

owed for interest, loan fees and late payment charges) 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.

Howsmon, 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.

Gagerman and as a result of these successful demurrers, all four of these defendants have been dismissed from the suit.

the Company believes that it has certain valid defenses in these matters, the Company is currently in settlement discussions with

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.

The Company 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.

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.

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

To-date, no final determination has been made as to the amount of recoupment, if any, to which such stockholders may

STOCKHOLDERS’

Effective February 28, 2021, we vacated the Stanton facility and consolidated our administrative,

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

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

The initial monthly base rental rate was approximately

$22,000 per month and escalates 3% each year to approximately $26,000 per month in 2026.

The lease liability was determined by discounting

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

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

payments over the lease term.

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

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

Generally, the implicit rate of interest in arrangements

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

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

components of lease expense and supplemental cash flow information related to leases for the period are as follows:

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

Other Information

Cash paid for amounts included in the measurement of lease liabilities for the years ended February 28, 2022

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

Average discount rate – operating leases

supplemental balance sheet information related to leases for the period is as follows:

Operating leases

Long-term right-of-use assets

Short-term operating lease liabilities

Long-term operating lease liabilities

Total operating lease liabilities

of the Company’s lease liability is as follows:

Year Ending February 28:

Total lease payments

Imputed interest/present value discount

Present value of lease liabilities

NOTE 14 – DERIVATIVE WARRANT LIABILITY

Company issued warrants in prior years that include a fundamental transaction provision that could give rise to an obligation to pay

cash to the warrant holder.

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

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

for as liabilities in accordance with ASC 815.

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

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

The warrant liability will ultimately be converted

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

The following tables summarize the derivative

warrant liability:

Risk free interest rate

Expected volatility

Expected life in years

Expected dividend yield

Number of warrants

Fair value of derivative warrant liability

Fair Value of Derivative Warrant Liability

February 29, 2020 (As Restated)

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

February 28, 2021 (As Restated)

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

February 28, 2022

NOTE 15 – STOCKHOLDERS’ DEFICIT

February 28, 2022 and February 28, 2021, the Company had 150,000,000 shares of $ 0.0001 par value common stock authorized for issuance.

During the year ended February 28, 2021, the Company issued a total of approximately 14.7 million shares of common stock, of which

14.1 million shares were issued for cash totaling approximately $2.1 million and the remainder of 0.6 million shares for settlement

of debt totaling $371,000.

During the year ended February 29, 2020, the Company issued 2.5 million shares of common stock for

cash totaling $525,000, 1.2 million shares for settlement of debt of $366,000, $50,000 shares of common stock for services rendered

to the Company of $10,000 and a cancellation of 1.1 million shares outstanding in October 2019 in connection with a settlement

the year ended February 28, 2022, the Company issued an aggregate of 12,016,095 shares of its common stock as follows:

● The Company sold 10,199,665 shares of common stock for net proceeds of $ 2,652,860 in a private placement.

● The Company issued 1,571,429 shares of common stock with a fair value of $ 550,000 for settlement of debt.

● The Company issued 245,001 shares of common stock for services with a fair value of $ 73,500 .

The common shares were valued based on the closing price of the Company’s shares of common stock on the respective dates of issuances.

the year ended February 28, 2021, the Company issued an aggregate of 14,513,963 shares of its common stock as follows:

● The Company sold 14,098,327 shares of common stock for net proceeds of $ 2,146,000 in a private placement.

● The Company issued 415,636 shares of common stock with a fair value

of $ 103,909 for settlement of debt.

Stock Options

2006 Employee Stock Option Plan

September 2006, our Board of Directors adopted the 2006 Employee Stock Option Plan (“2006 Plan”), subject to shareholder

approval, which was obtained at a special shareholders meeting in 2009.

Under the 2006 Plan, the Company may grant options for

up to the greater of Three Million (3,000,000) or 10% of the number of shares of the Common Stock of Aura outstanding from time

At the October 2011 shareholder meeting, the shares of Common Stock available under the 2006 Plan was increased to the

greater of Ten Million shares (10,000,000) or 15% of the number of shares of Common Stock of Aura outstanding from time to time.

The exercise price of each option shall be at least equal to the fair market value of such shares on the date of grant.

of the options may not be greater than ten years, and they typically vest over a three-year period.

No options under the 2006

Plan have been issued since 2016.

2011 Director and Executive Officers Stock Option Plan

October 2011 shareholders approved the 2011 Director and Executive Officers Stock Option Plan (“2011 Plan”) at the

Company’s annual meeting.

Under the 2011 Plan, the Company may grant options, or warrants, for up to 15% of the number of

shares of Common Stock of the Company from time to time outstanding.

Pursuant to this plan, the Board or a committee of the Board

may grant an option to any person who is elected or appointed a director or executive officer of the Company.

The exercise price

of each option shall be at least equal to the fair market value of such shares on the date of grant.

The term of the options may

not be greater than five years.

in the 2006 Plan is as follows for the fiscal years ended February 28, 2021 and February 29, 2020:

summary of the Company’s stock option activity is as follows:

Number of Shares

Exercise Price

Weighted Average

Intrinsic Value

Outstanding, February 28, 2019

February 29, 2020

February 28, 2021

Fiscal 2020, the remaining 647,000 stock options as of February 29, 2020 expired unexercised at an exercise price of $1.40 per

in the 2011 Plan for issued and outstanding options during Fiscal 2021 and 2020 is as follows:

Exercise Price

Average Intrinsic Value

Outstanding, February 28, 2019

Outstanding, February 29, 2020

Outstanding, February 28, 2021

Weighted Average Intrinsic Value

Total options, February 29, 2020 (As Restated)

Total options, February 28, 2021 (As Restated)

Total options, February 28, 2022

Exercisable, February 28, 2022

exercise prices and information related to options under the 2011 Plan outstanding on February 28, 2022 is as follows:

Range of Exercise Price

Stock Options

Contractual Life

$ 0.25 to $ 1.40

March 19, 2020, the Board of Directors approved the grant of 250,000 options to each of the five current members of the Board

under the Company’s 2011 Director and Executive Officers Stock Option Plan, in the aggregate amount of 1,250,000 options.

These options bear an exercise price of $0.25 per option and are exercisable for a period of five years, subject to earlier termination

per the terms of the 2011 Director and Executive Officers Stock Option Plan.

The closing price of the Company’s common stock

on the date of grant was $0.16.

A fair value of $193,750, or $0.155 per option, was determined by applying the Black-Scholes-Merton

option valuation model using a volatility rate of 225%, a risk-free interest rate of 0.57%, expected term of 4 years and an equity

fair value on the date of grant of $0.16.

The fair value of $193,750 was recorded as selling, general and administrative expense

on the Statement of Operations for the year ended February 28, 2021.

Number of Shares

Exercise Price

the year ended February 28, 2021, the Board of Directors granted options to purchase an aggregate of 2,750,000 shares of the Company’s

common stock to the Company’s President and members of the Board of Directors.

Options exercisable into 2,250,000 shares have an

exercise price of $ 0.25 per share, and options exercisable into 500,000 shares have an exercise price of $ 0.50 per share.

Options exercisable

into 2,000,000 shares vested immediately, and options exercisable into 750,000 shares vest over 12 months.

The 2,750,000 options expire

in five years .

The aggregate fair value of the options was determined to be $ 576,879 using a Black-Scholes option pricing model based

on the following assumptions:

(i) volatility rate of 222 % to 226 %, (ii) discount rate of 0.16 % to 0.57 %, iii) zero expected dividend

yield, and (iv) expected life of 2.5 years to 3 years.

In February 2021, the Company’s Board of

Directors authorized the grant of 1,500,000 stock options at an exercise price of $ 0.50 per share as compensation for advisors to the

As of February 28, 2022 and 2021, these options have not been issued as the proposal to renew the employee stock option plan needs

to be approved by the shareholders at an annual meeting.

Upon approval, the 1,500,000 stock options will be issued.

The options vest over

12 months, and expire in five years .

Although the options have not been issued, the commitment to issue existed when granted by the Board.

As a result, the fair value of the authorized grant was determined to be $ 487,600 using a Black-Scholes option pricing model based on

the following assumptions:

(i) volatility rate of 226 %, (ii) discount rate of 0.34 %, iii) zero expected dividend yield, and (iv) expected

life of 3 years.

risk-free interest rate was based on rates established by the Federal Reserve Bank.

The Company uses the historical volatility of its

common stock to estimate the future volatility for its common stock.

The expected life of the stock options granted is estimated using

the “simplified” method, whereby the expected term equals the average of the vesting term and the original contractual term

of the stock option.

The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders

in the past and does not expect to pay dividends to its common stockholders in the future.

the years ended February 28, 2022 and 2021, the Company recognized stock-based compensation of $ 612,093 and $ 452,386 related to the fair

value of vested stock options.

Stock Option Plans

September 2009, the Company’s shareholders approved the 2006 Employee Stock Option Plan (as amended, the “2006 Plan”).

Under the 2006 Plan, the Company may grant options for up to 10,000,000 or 15 % of the number of shares of Common Stock of Aura outstanding

from time to time.

As of February 28, 2022 and 2021, no options remain outstanding under the 2006 Plan as the last remaining options

expired during fiscal 2020, and no options are available for grant under the 2006 Plan as the authorized term of the plan has expired.

October 2011, the Company’s shareholders approved the 2011 Director and Executive Officers Stock Option Plan (the “2011 Plan”).

Under the 2011 Plan, the Company may grant options, or warrants, for up to 15 % of the number of shares of Common Stock of the Company

outstanding from time to time.

Pursuant to this plan, the Board or a committee of the Board may grant an option to any person who is

elected or appointed a director or executive officer of the Company.

The exercise price of each option shall be at least equal to the

fair market value of such shares on the date of grant, and the term of the options may not be greater than five years.

the year ended February 28, 2022, there were no options granted under the 2011 Plan.

During the year ended February 28, 2021, the Company

issued 2,750,000 stock options under the 2011 Plan.

Outstanding, February 29, 2020

1 unchanged sentence

Outstanding, February 28, 2022

10,000 warrants granted in Fiscal 2020, fully vested, with an exercise price of $1.40, and expiring after five years, to three

investors who were issued 250,000 shares in exchange for $50,000 of cash.

A fair value of $2,668 was determined by applying the

Black-Scholes-Merton option valuation model using a volatility rate of 246%, a risk-free interest rate of 1.76%, expected term

of 4 years and a range of equity fair values on the dates of grant of $0.258 to $0.30.

exercise prices and information related to the warrants under the 2011 Plan outstanding on February 28, 2021 is as follows:

There was no intrinsic value as of February 28, 2022, as the exercise

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

The exercise prices and information related

to the warrants under the 2011 Plan outstanding on February 28, 2022 is as follows:

Range of Exercise Price

Stock Warrants

Contractual Life

At February 28, 2021, the weighted average intrinsic value for the

stock warrants outstanding is zero.

Company recorded an income tax expense of $800 attributable to the Fiscal 2021 state franchise taxes being unpaid.

In Fiscal 2020,

the Company recorded a total of $4,000 in unpaid state franchise taxes for fiscal years 2016 to 2020.

NOTE 16 – INCOME TAXES

For the year ended February 28, 2022, the Company

had no income tax expense.

For the year ended February 28, 2021, the Company recorded an income tax expense of $ 800 for state franchise

Total current

Total deferred

Total Provision

Company has provided full valuation allowance for the deferred tax assets on the expected future tax benefits from the net operating

loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the near future.

Expected tax benefit

The following is a reconciliation of the statutory federal income tax

rate to the Company’s effective tax rate:

Federal tax benefit at statutory rate

State tax benefit, net of federal benefit

Changes in valuation allowance

following table summarizes the significant components of our deferred tax asset at February 28, 2021 and February 29, 2020:

Change in valuation allowance

The following table summarizes our deferred tax

asset at February 28, 2022, and February 28, 2021:

Deferred tax asset

Primarily relating to net operating loss carry-forwards, but also reserves for inventory and accounts receivable, stock-based compensation and other

Net operating loss carryforwards

Gross deferred tax assets

Valuation allowance

(38,104,000 )

(40,984,000 )

Net deferred tax asset

recorded an allowance of 100% for deferred tax assets due to the uncertainty of its realization.

February 28, 2021, we had operating loss (NOL) carry-forwards of approximately $167,200,000 for federal purposes, of which $164,600,000

may be available to reduce future years’

taxable income through 2037, and $2,600,000 may be available to offset future taxable

income indefinitely.

There is approximately $42,800,000 for state purposes, which expire through 2039.

follow FASB ASC 740 related to uncertain tax positions.

Under FASB ASC 740, the impact of an uncertain tax position on the income

tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing

An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

February 28, 2021 and February 29, 2020, we have no unrecognized tax benefits.

Net deferred tax asset (liability)

The provisions of ASC Topic 740, Accounting for

Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred

tax assets are recoverable.

For the years ended February 28, 2022 and 2021, based on all available objective evidence, including the existence

of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable.

Accordingly, the Company established a full valuation allowance against its net deferred tax assets.

The Company intends to maintain a

full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

During the years ended February 28, 2022 and 2021, the valuation allowance decreased by $ 4.8 million and $ 5.8 million, respectively.

At February 28, 2022, the Company had available

Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income.

For Federal purposes the amounts

available were approximately $ 168.4 million and for state purposes the amounts available were approximately $ 96.8 million.

carryforwards expire on various dates through 2042 and the state carryforwards expire through 2039.

Due to restrictions imposed by Internal

Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s

NOL may be limited as a result of changes in stock ownership.

The Company’s operations are based in California and it is subject

to Federal and California state income tax.

Tax years after 2017 are open to examination by United States and state tax authorities.

The Company adopted the provisions of ASC 740,

which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination

by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements.

ASC 740 also provides guidance

on the recognition, measurement, classification and interest and penalties related to uncertain tax positions.

As of February 28, 2022

and 2021, no liability for unrecognized tax benefits was required to be recorded or disclosed.

continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

5 unchanged sentences

We are not currently under examination by any tax authority.

Company has failed to file its California tax returns for the years ended February 28, 2015 thru February 28, 2021 due to its

inability to pay the minimum annual franchise tax payment of $800.

The tax provision for Fiscal 2020 includes an accrual for the

California minimum franchise tax amounts for five-years from 2016 to 2021, or $4,800.

EMPLOYEE BENEFIT PLANS

Company had previously sponsored two employee benefit plans:

The Employee Stock Ownership Plan (the “ESOP”) and a

Neither of these plans is active nor being funded.

NON-RECURRING TRANSACTIONS

Fiscal 2021, the Company recorded non-recurring transactions due primarily to the cancellation of liabilities following the expiration

of the statute of limitations on such debt.

Notes payable and accrued interest of approximately $877,000 were cancelled on debt

previously reported as owed to McCleod ($692,000), Veen ($134,000) and Sook ($51,000) and recorded as a gain on extinguishment

of debt in the Statement of Operations for Fiscal 2021.

Other income for Fiscal 2021 of approximately $2,720,000 consists primarily

of the cancellation of accrued payroll of $2,345,000 and accounts payable of $339,000 due to the expiration of the statute of

limitations on such debt.

Included in other income was a legal settlement of $46,000.

SUBSEQUENT EVENTS

April 2021, the Company received notification that the Payroll Protection Plan (“PPP”) loan in the principal amount

of $74,405 was forgiven.

On April 23, 2020, we obtained this PPP loan pursuant to the Coronavirus Aid, Relief, and Economic Security

Act (the “CARES Act”).

Interest on the loan is at the rate of 1% per year, and all loan payments are deferred for

six months, at which time the balance is payable in 18 monthly installments if not forgiven in accordance with the CARES Act and

the terms of the promissory note executed by the Company in connection with the loan.

Company has failed to file its California tax returns for the years ended February 28, 2015 thru February 28, 2022 due to its inability

to pay the minimum annual franchise tax payment of $800.

The balance of accrued income taxes related to unpaid California franchise tax

of $4,800 represents six years of minimum taxes due.

NOTE 17 – RELATED PARTY TRANSACTIONS

As of February 28, 2022 and 2021, Bettersea LLC

(“Bettersea”) was an 11.0 % and 10.4 %, respectively, shareholder in the Company.

For the years ended February 28, 2022 and

2021, the Company incurred total fees to Bettersea of $ 137,500 and $ 131,300 , respectively, for consulting services.

As of February 28,

2022 and 2021, a total of $ 218,507 and $ 602,501 , respectively, was due to Bettersea and included in accounts payable and accrued expenses..

During fiscal 2022, the Company issued 1,285,714 shares of common stock

with a fair value of $450,000 for the settlement of accounts payable of $450,000 due to Bettersea.

Also during fiscal 2022, the Company

issued 285,715 shares of common stock with a fair value of $100,000 for the settlement of accounts payable of $100,000 due to the Company’s

During fiscal 2021, the Company issued 415,636 common shares with a fair value of $103,909 for the settlement of accounts payable

of $103,909 due to a 50% owner of Bettersea.

There were no gains or losses recognized on these transactions.

NOTE 18 – CONTINGENCIES

The Company is subject to legal proceedings and claims that have arisen

in the ordinary course of business.

Our management evaluates our exposure to these claims and proceedings individually and in the aggregate

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

However, the outcome

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

Although management considers the likelihood

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

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

In 2017, the Company’s former COO was awarded

approximately $ 238,000 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 interest.

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 until paid.

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.

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.

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 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 Note 19)

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.

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.

NOTE 19 – SUBSEQUENT EVENTS

In fiscals 2013 through 2018, the Company issued

notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate of $ 5,607,323 (see Note 10).

The notes were due in fiscal 2014 through fiscal 2018.

As of February 28, 2022 and 2021, the outstanding balance of the Kopple notes payable

and accrued interest amounted to $ 12,140,641 and $ 11,317,787 , respectively.

Kopple brought suit against the Company beginning in 2017

for repayment of the notes.

On March 14, 2022, the Company reached an agreement

with Kopple to resolve all remaining litigation between them.

Under the terms of the settlement, the Company agreed to pay Kopple an aggregate

amount of $10,000,000, including $3,000,000 to be paid by June 8, 2022, and granted Koppel warrants exercisable into 3,331,664 shares

of the Company’s common stock at a price of $0.85 per share.

The fair value of the warrants is estimated to be $1,000,000, resulting

in total consideration to Kopple of approximately $11,000,00.

Pursuant to current accounting guidelines, the Company will only recognize

any gain on the settlement of the Kopple notes and accrued interest of $12,140,161 upon completion of all settlement payments.

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.

The settlement provides for certain increases in the amount

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

payment obligations.

Subsequent to February 28, 2022, the Company issued

1,153,666 shares of common stock in exchange for cash proceeds of $ 346,100 .

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 9A. Controls and Procedures