What changed in this filing

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Item 1. Financial Statements

2023-01-13 compared with 2022-10-07 · 227 added, 183 removed, 626 unchanged (40% of the section changed)

16 unchanged sentences

Convertible notes payable, current portion

Convertible note payable-related party, current portion

Convertible note payable-related party

Notes payable-related parties, current portion

11 unchanged sentences

150,000,000 shares authorized;

89,179,437 and 83,119,104 issued and outstanding at August 31, 2022 and February 28, 2022, respectively.

92,616,529 and 83,119,104 issued and outstanding at November 30, 2022 and February 28, 2022, respectively.

Additional paid-in capital

11 unchanged sentences

Three-Months Ended

Six-Months Ended

Nine-Months Ended

(As Restated)

1 unchanged sentence

Cost of goods sold

Gross profit (loss)

Operating expenses

6 unchanged sentences

Other income (expense):

Interest expense, net (including $ 84,874 , $ 247,278 , $ 124,748 and $ 494,558 to related parties,

respectively)

Interest expense, net (including $ 199,441 , $ 244,593 , $ 324,189 and $ 739,151 to related parties, respectively)

Change in fair value of derivative warrant liability

5 unchanged sentences

( 1,957,577 )

( 2,582,358 )

( 3,796,020 )

Income tax provision

8 unchanged sentences

CONDENSED STATEMENTS OF SHAREHOLDERS’

and Six Months Ended August 31, 2022

Three Months and Nine Months Ended November

Shareholders’

13 unchanged sentences

$ ( 19,817,826 )

and Six Months Ended August 31, 2021

Common shares issued for cash

( 1,264,194 )

Balance, November 30, 2022 (unaudited)

$ 453,787,210

$ ( 473,946,727 )

$ ( 20,150,255 )

Three Months and Nine Months Ended November

Shareholders’

15 unchanged sentences

$ ( 21,090,386 )

Common shares issued for cash

Common shares issued for services

Share-based compensation

( 1,957,448 )

Balance, November 30, 2021 (unaudited) (As Restated)

$ 449,229,238

$ ( 471,168,526 )

$ ( 21,931,236 )

See accompanying notes to these unaudited financial

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(As Restated)

8 unchanged sentences

Gain on debt settlement

Common shares issued for services

Share-based compensation

4 unchanged sentences

Accrued interest on notes payable

Customer advances

Operating lease liability

17 unchanged sentences

Accrued expenses converted into shares of common stock

Acquisition of property and equipment with notes payable

See accompanying notes to these unaudited financial

1 unchanged sentence

NOTES TO CONDENSED FINANCIAL STATEMENTS

Three and Nine months ended November 30, 2022

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY

8 unchanged sentences

The accompanying unaudited condensed financial

statements as of and for the three months and six months ended August 31, 2022 and 2021, have been prepared have been prepared in conformity

statements as of and for the three months and nine months ended November 30, 2022 and 2021, have been prepared have been prepared in conformity

with accounting principles generally accepted in the United States of America (“U.S.

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with that report.

The results of operations for the three-month and six-month periods ended August 31, 2022, may not necessarily be indicative

of the results that may be expected for the full fiscal year ending February 28, 2023.

The results of operations for the three-month and nine-month periods ended November 30, 2022, may not necessarily be

indicative of the results that may be expected for the full fiscal year ending February 28, 2023.

The Company’s fiscal year ends on the last

5 unchanged sentences

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

During the six-month period ended August 31, 2022, the Company reported

a net loss of approximately $ 1,318,000 , and used cash in operating activities of approximately $ 1,499,000 , and at August 31, 2022, had

a stockholders’ deficit of approximately $ 19.8 million.

These factors raise substantial doubt about the Company’s ability

to continue as a going concern within one year of the date that the financial statements are issued.

During the nine-month period ended November 30, 2022, the Company

reported a net loss of approximately $ 2,582,000 , and used cash in operating activities of approximately $ 2,254,000 , and at November 30,

2022, had a stockholders’ deficit of approximately $ 20.2 million.

These factors raise substantial doubt about the Company’s

ability to continue as a going concern within one year of the date that the financial statements are issued.

In addition, the Company’s

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to support the operation.

The Company anticipates being able to obtain new sources of funding to support these actions in the upcoming

The Company anticipates being able to obtain new sources of funding to support these actions in the fourth fiscal

quarter of Fiscal 2023 and in the upcoming fiscal year.

As of the date of this filing, there continues

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from Contracts with Customers.

Our primary source of revenue is the manufacture

and delivery of generator sets used primarily in mobile power applications.

Our principal sales channel is sales to a domestic distributor.

In accordance with ASC 606, the Company recognizes 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 primary source of revenue is the

manufacture and delivery of generator sets used primarily in mobile power applications.

Our principal sales channel is sales to a

domestic distributor.

In accordance with ASC 606, the Company recognizes revenue, net of discounts, for our generator sets at time

of product delivery to the domestic distributor or directly to end users (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.

Use of Estimates

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The following table sets

forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of August 31, 2022 and February

August 31, 2022

forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of November 30, 2022 and

February 28, 2022:

November 30, 2022

Derivative warrant liability

16 unchanged sentences

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

For the six-months ended August 31, 2022 and August

31, 2021, the calculations of basic and diluted loss per share are the same because potentially dilutive securities would have had an

anti-dilutive effect.

For the nine-months ended November 30, 2022 and

November 30, 2021, the calculations of basic and diluted loss per share are the same because potentially dilutive securities would have

had an anti-dilutive effect.

The potentially dilutive securities consisted of the following:

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The Company does not believe the potential impact of the new guidance and related

codification improvements will be material to its financial position, results

codification improvements will be material to its financial position, results of operations, cash flows and related disclosures.

Other recent accounting pronouncements issued

3 unchanged sentences

NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED

UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED AUGUST 31, 2021

UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2021

The unaudited condensed financial statements for

the six months ended August 31, 2021 and certain balances as of February 28, 2021 have been restated.

During the fourth quarter of fiscal

2022, our management determined the following:

the nine months ended November 30, 2021 and certain balances as of February 28, 2021 have been restated.

During the fourth quarter of

Fiscal 2022, our management determined the following:

that the Company erroneously did not recognize a derivative warrant liability associated with warrants issued by prior management 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.

that the Company had

issued common stock in exchange for a settlement of debt to a former employee during Fiscal 2018 and had erroneously omitted

accounting for it until Fiscal 2021.

that the Company had granted stock options during Fiscal 2021 which were erroneously unrecorded.

The effects on the previously issued financial statements are as follows:

1 unchanged sentence

The Company determined the fair value of the warrant derivative liability, including its initial recording and revaluation for changes in fair value and expiring warrants, as of February 28, 2021, was $ 1,366,375 , and recorded the liability and its associated expense as a prior period adjustment to Accumulated Deficit in the amount of $ 1,366,375 .

Additionally, the warrant derivative liability was revalued at May 31, 2021 and August 31, 2021 and the net decreases in fair value of $ 56,640 and $ 127,420 were recorded as reductions to the liability.

The associated other income of $ 56,640 for the three-month period ended August 31, 2021 was recorded to the statement of operations as a gain for the decrease in the fair value of the derivative warrant liability.

The associated aggregate other income of $ 184,060 for the six-month period ended August 31, 2021 was recorded to the statement of operations and consisted of a gain for the decrease in fair value of $ 139,440 and a gain on expiring warrants of $ 44,620 .

Additionally, the warrant derivative liability was revalued at May 31, 2021, August 31, 2021 and November 30, 2021 and the net decreases in fair value of $ 56,640 at May 31, 2021 and $ 127,420 at August 31, 2021 were recorded as reductions to the liability.

The increase in fair value of $ 734,106 was recorded as an increase to the liability.

The associated other expense of $ 734,106 for the three-month period ended November 30, 2021 was recorded to the statement of operations as a loss for the increase in the fair value of the derivative warrant liability.

The associated aggregate other expense of $ 550,046 for the nine-month period ended November 30, 2021 was recorded to the statement of operations and consisted of a loss for the increase in fair value of $ 594,666 and a gain on expiring warrants of $ 44,620 .

(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.

5 unchanged sentences

The resulting net impact of these prior period adjustments for the Fiscal 2022 beginning balance is an increase to Additional paid-in capital of $ 258,636 and a corresponding $ 258,636 increase in Accumulated Deficit.

Additionally, in order to correct the timing of the expense recognition as it continued into Fiscal 2022, the Company recorded an additional $ 67,592 and $ 84,526 of share-based compensation expense to the statement of operations for the three-month and the six-month periods ended August 31, 2021, respectively, as well as recording the associated increases to Additional paid-in capital in their respective periods.

Additionally, in order to correct the timing of the expense recognition as it continued into Fiscal 2022, the Company recorded an additional $ 68,862 and $ 153,388 of share-based compensation expense to the statement of operations for the three-month and the nine-month periods ended November 30, 2021, respectively, as well as recording the associated increases to Additional paid-in capital in their respective periods.

(D) In Fiscal 2022, the Company recognized that certain stock options granted during Fiscal 2021 were being recorded as payroll compensation expense in Fiscal 2022.

Restatement item (C) noted above properly recognizes the amount and timing of the share-based compensation expense, which results in the need to reverse the payroll compensation recorded in Fiscal 2022.

For the three-month and six-month periods ended August 31, 2021, payroll compensation expense of $ 92,624 and $ 185,250 , respectively, was reversed out of the statement of operations, and the associated liability in Accrued expenses was reduced by the same amount.

For the three-month and nine-month periods ended November 30, 2021, payroll compensation expense of $ 91,356 and $ 276,606 , respectively, was reversed out of the statement of operations, and the associated liability in Accrued expenses was reduced by the same amount.

Reclassifications

(1) In Fiscal 2021 and the six-months ended August 31, 2021, the Company presented interest accrued of $ 6,596 on its Economic Injury Disaster Loan as additional note payable principle.

In the accompanying condensed financial statements, the Company has reclassified the cumulative accrued interest of $ 6,596 recorded in Fiscal 2021 and the first six months of Fiscal 2022 from notes payable to accrued interest.

The following table presents the effect of the restatements and reclassifications

on the Company’s previously issued balance sheet:

As of August 31, 2021

(1) In Fiscal 2021 and the nine-months ended November 30, 2021, the Company presented interest accrued of $ 8,064 on its Economic Injury Disaster Loan as additional note payable principle.

In the accompanying condensed financial statements, the Company has reclassified the cumulative accrued interest of $ 8,064 recorded in Fiscal 2021 and the first nine months of Fiscal 2022 from notes payable to accrued interest.

The following table presents the effect of the

restatements and reclassifications on the Company’s previously issued balance sheet:

As of November 30, 2021

As Previously

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restatements and reclassifications on the Company’s previously issued statements of operations:

For the three months ended August 31, 2021

For the three months ended November 30, 2021

As Previously

3 unchanged sentences

Change in fair value of derivative warrant liability

$ ( 1,245,836 )

$ ( 711,612 )

$ ( 1,957,448 )

Net loss per share, basic and diluted

For the six months ended August 31, 2021

For the nine months ended November 30, 2021

As Previously

3 unchanged sentences

Change in fair value of derivative warrant liability

$ ( 3,369,192 )

$ ( 426,828 )

$ ( 3,796,020 )

Net loss per share, basic and diluted

4 unchanged sentences

$ 446,126,638

$ ( 465,883,499 )

$ ( 19,749,750 )

Prior period revisions

( 1,489,007 )

( 1,366,375 )

Corrections of errors

1 unchanged sentence

$ 446,249,272

Balance, August 31, 2021, as previously reported

$ ( 467,372,506 )

$ ( 21,116,125 )

Balance, November 30, 2021, as previously reported

$ 448,953,216

$ ( 469,252,691 )

$ ( 20,291,421 )

Prior period revisions

( 1,489,007 )

( 1,366,375 )

Share-based compensation addition

Net loss reduction

Net loss addition

Corrections of errors

Balance, August 31, 2021, as restated

Balance, November 30, 2021, as restated

$ 449,229,238

$ ( 471,168,526 )

$ ( 21,931,236 )

The following table presents the effect of the

restatements and reclassifications on the Company’s previously issued statement of cash flows:

For the six months ended August 31, 2021

For the nine months ended November 30, 2021

As Previously

Reclassifications

Cash flows from operating activities:

$ ( 3,369,192 )

$ ( 426,828 )

$ ( 3,796,020 )

Gain on extinguishment of derivative warrant liability

7 unchanged sentences

NOTE 3 – INVENTORIES

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

net realizable value, net of write downs, and consisted of the following:

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

first-out) or net realizable value, net of write downs, and consisted of the following:

Raw materials

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Vendor advances

Prepaid insurance

Other prepaid expenses

9 unchanged sentences

Depreciation expense

for the six months ended August 31, 2022 and 2021 was $ 37,237 and $ 772 , respectively.

for the nine months ended November 30, 2022 and 2021 was $ 57,320 and $ 6,224 , respectively.

NOTE 6 – CONVERTIBLE NOTES PAYABLE

3 unchanged sentences

the Company issued six convertible notes payable in the aggregate of $ 4,000,000 .

As of May 31, 2022 and February 28, 2022, the outstanding

As of November 30, 2022 and February 28, 2022, the outstanding

balance of the convertible notes payable amounted to $ 1,402,971 .

3 unchanged sentences

all amended in 2018 and the maturity date for all the notes was changed to January 11, 2023.

At August 31, 2022 and

February 28, 2022, accrued interest on convertible notes payable totaled $ 319,394 and $ 284,063 , respectively, and is included in accrued

At November 30, 2022

and February 28, 2022, accrued interest on convertible notes payable totaled $ 336,884 and $ 284,063 , respectively, and is included in accrued

expenses (See Note 10).

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2023, and is convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

At August 31, 2022 and

February 28, 2022, accrued interest on convertible notes payable-related party totaled $ 638,527 and $ 562,911 , respectively, and is included

in accrued expenses (See Note 10).

At November 30, 2022

and February 28, 2022, accrued interest on convertible notes payable-related party totaled $ 675,925 and $ 562,911 , respectively, and is

included in accrued expenses (See Note 10).

NOTE 8 – NOTES PAYABLE

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The second note is due in 72 equal monthly payments of approximately $1,500 each, including interest at 10.9% interest

As of August 31, 2022 and February 28, 2022, the balance of the notes was $227,008 and $265,616, respectively.

As of November 30, 2022 and February 28, 2022, the balance of the notes was $207,295 and $265,616, respectively.

Demand promissory notes as of August 31, 2022

Demand promissory notes as of November 30, 2022

and February 28, 2022 are for one individual issued in September 2015 that is payable on demand with an interest rate of 10% per annum.

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(a) Kopple Notes

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

is the former Vice-Chairman of the Company’s Board of Directors and is a current shareholder in the Company.

The notes were unsecured,

bear interest at rates ranging from 5 % and 15 % per annum, and were due in fiscal 2014 through fiscal 2018.

Kopple brought suit against

the Company beginning in 2017 for repayment of the notes.

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 is the former Vice-Chairman

of the Company’s Board of Directors and is a current shareholder in the Company.

The notes were unsecured, bear interest at rates

ranging from 5 % and 15 % per annum and were due in fiscal 2014 through fiscal 2018.

Kopple brought suit against the Company beginning in

2017 for repayment of the notes.

At February 28, 2022, the accrued interest due

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Under the terms of

the settlement, the Company agreed to issue a new note and pay Kopple an aggregate amount of $ 10,000,000 , including $ 3,000,000 to be paid

in June 2022, which was subsequently extended to November 2022 (see Note 15), 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 Company used Black-Scholes modeling to compute the fair value of

the warrants which is estimated to be $ 1,051,473 .

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.

on the settled Note begins accruing in September 2022.

Pursuant to the settlement agreement, the Company is also subject to certain affirmative

and negative covenants such as periodic submission of financial statements to Koppel and restrictions on future financing and investing

activities, as defined in the agreement.

Management believes such covenants are normal for this type of transaction and that management

believes meeting these covenants will not affect operations.

the settlement, the Company agreed to issue a new note and pay Kopple an aggregate amount of $ 10,000,000 , including $ 3,000,000 to be

paid in June 2022, which was subsequently extended to January 2023 (see Note 16), 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 Company used Black-Scholes modeling to compute the fair

value of the warrants which is estimated to be $ 1,051,473 .

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.

Interest on the settled Note begins accruing in February 2023.

Pursuant to the settlement agreement, the Company is also subject to certain

affirmative and negative covenants such as periodic submission of financial statements to Koppel and restrictions on future financing

and investing activities, as defined in the agreement.

Management believes such covenants are normal for this type of transaction and

that management believes meeting these covenants will not affect operations.

The Company assessed the settlement with Kopple

under ASC 470 and determined that the guidance under troubled debt restructuring should apply.

Per ASC 470-60, the carrying value of the

restructured note remains the same as before the restructuring, reduced only by the fair value of the warrants issued in connection with

the transaction.

The Company determined that the future undiscounted cash flows of the restructured new Kopple note exceeded the carrying

value, and accordingly, no gain was recognized, and no adjustment was made to the carrying value of the debt, other than the adjustment

for the fair value of the warrants.

Interest expense on the new Kopple note will be computed using a new effective rate that equates the

present value of the future cash payments specified by the new terms with the carrying value of the debt.

Per ASC 470-60, the carrying value of

the restructured note remains the same as before the restructuring, reduced only by the fair value of the warrants issued in connection

with the transaction.

The Company determined that the future undiscounted cash flows of the restructured new Kopple note exceeded the

carrying value, and accordingly, no gain was recognized, and no adjustment was made to the carrying value of the debt, other than the

adjustment for the fair value of the warrants.

Interest expense on the new Kopple note will be computed using a new effective rate that

equates the present value of the future cash payments specified by the new terms with the carrying value of the debt.

(b) Note payable-Gagerman

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Based on Gagerman’s

claims, as of August 31, 2022 and February 28, 2022, the outstanding balance of the Gagerman notes payable and accrued interest would

claims, as of November 30, 2022 and February 28, 2022, the outstanding balance of the Gagerman notes payable and accrued interest would

amount to $ 161,605 and $ 155,428 , respectively.

As of August 31, 2022 and February 28, 2022, despite the fact that the Company disputes

As of November 30, 2022 and February 28, 2022, despite the fact that the Company disputes

Gagerman’s claims, under ASC 450 - Contingencies , the Company has recorded the claimed notes payable and accrued interest

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February 15, 2021.

As of August 31, 2022 and February 28, 2022, the principal due was $ 700,000 .

As of November 30, 2022 and February 28, 2022, the principal due was $ 700,000 .

NOTE 10 – ACCRUED EXPENSES

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Accrued interest-convertible notes payable related party

Accrued interest-notes payable

Accrued interest-notes payable and other

Subtotal-accrued interest

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Other accrued expenses

As of August 31, 2022 and February 28, 2022, accrued expenses includes

accrued interest, accrued payroll and accrued consulting fees in the aggregate of $ 876,715 and $ 750,322 , respectively, which are due to

officers and shareholders and are considered related party transactions.

As of November 30, 2022 and February 28, 2022,

accrued expenses includes accrued interest, accrued payroll and accrued consulting fees in the aggregate of $ 998,188 and $ 750,322 , respectively,

which are due to officers and shareholders and are considered related party transactions.

NOTE 11 – LEASES

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The Lake Forest lease is

for 66-months effective February 2021 through August 31, 2026.

for 66-months effective February 2021 through November 30, 2026.

The initial monthly base rental rate was approximately $22,000 per month

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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 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

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Gain on extinguishment on expiration of warrants

August 31, 2022

November 30, 2022

NOTE 13 – STOCKHOLDERS’ DEFICIT

During the six-months ended August 31, 2022, the

Company issued 6,060,333 shares of common stock for approximately $ 1,668,000 in cash.

During the six-months ended August 31, 2021, the

Company issued 4,652,000 shares of common stock for net proceeds of approximately $ 988,000 .

Additionally, during the six-months ended

August 31, 2021, the Company issued 1,571,429 shares of common stock in settlement of accounts payable and accrued expenses to related

parties in the aggregate amount of $ 550,000 .

During the nine-months ended November 30, 2022,

the Company issued 9,497,425 shares of common stock for net proceeds of approximately $ 2,600,000 in cash.

During the nine-months ended

November 30, 2021, the Company issued 7,615,330 shares of common stock for net proceeds of approximately $ 1,868,000 .

Additionally, during

the nine-months ended November 30, 2021, the Company issued 1,571,429 shares of common stock in settlement of accounts payable and accrued

expenses to related parties in the aggregate amount of $ 550,000 and issued 245,001 shares of common stock in exchange for services valued

in the amount of $ 73,500 .

Stock Options

A summary of the Company’s stock option activity for the six-months

ended August 31, 2022 is as follows:

A summary of the Company’s stock option activity for the nine-months

ended November 30, 2022 is as follows:

Outstanding, February 28, 2022

Outstanding, August 31, 2022

Outstanding, November 30, 2022

The exercise prices and information related to options under the 2011

Plan outstanding on August 31, 2022 is as follows:

Exercise Price

Plan outstanding on November 30, 2022 is as follows:

Range of Exercise Price

Stock Options

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The Company granted no stock options under its

stock option 2011 Plan for the six-month period ended August 31, 2022 and the six-month period ended August 31, 2021.

As a result of stock

options granted during the Fiscal 2021 year, the Company recognized $ 163,218 and $ 326,436 in share-based compensation expense related

to the fair value of vested stock options in the three-month and six-month periods ended August 31, 2021.

stock option 2011 Plan for the nine-month period ended November 30, 2022 and the nine-month period ended November 30, 2021.

of stock options granted during the Fiscal 2021 year, the Company recognized $ 163,218 and $ 489,654 in share-based compensation expense

related to the fair value of vested stock options in the three-month and nine-month periods ended November 30, 2021.

A summary of the Company’s warrant activity

for the six-months ended August 31, 2022 is as follows:

for the nine-months ended November 30, 2022 is as follows:

Outstanding, February 28, 2022

Outstanding, August 31, 2022

There was no intrinsic value as of August 31,

Outstanding, November 30, 2022

There was no intrinsic value as of November 30,

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 as of August 31, 2022 is as follows:

Exercise Price

information related to the warrants as of November 30, 2022 is as follows:

Range of Exercise Price

Stock Warrants

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the fair value of the Kopple Warrants was $ 1,051,473 using Black-Scholes modeling with the assumptions as set forth in the table below:

Warrants Issued

Six-Months Ended

Exercise Price

3 unchanged sentences

NOTE 14 – RELATED PARTY TRANSACTIONS

As of August 31, 2022 and February 28, 2022, Bettersea

LLC (“Bettersea”) was an 10.3 % and 11.0 %, respectively, shareholder in the Company.

For the three-months and six-months ended

August 31, 2022 and August 31, 2021, the Company incurred total fees to Bettersea of $ 34,000 , $ 46,000 , $ 68,700 and $ 82,000 , respectively,

for various consulting services.

As of August 31, 2022 and February 28, 2022, a total of $ 218,107 and $ 218,507 , respectively, was due

to Bettersea and included in accounts payable and accrued expenses.

As of November 30, 2022 and February 28, 2022,

Bettersea LLC (“Bettersea”) was an 9.9 % and 11.0 %, respectively, shareholder in the Company.

For the three-months and nine-months

ended November 30, 2022 and November 30, 2021, the Company incurred total fees to Bettersea of $ 50,000 , $ 44,000 , $ 118,700 and $ 126,000 ,

respectively, for various consulting services.

As of November 30, 2022 and February 28, 2022, a total of $ 222,614 and $ 218,507 , respectively,

was due to Bettersea and included in accounts payable and accrued expenses.

NOTE 15 – CONTINGENCIES

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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 $ 187,000 toward the settlement amount.

The remaining balance of approximately $ 171,000 ,

included in accrued expenses, is to be paid no later than March 1, 2023 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

As of the time of

this filing, the Company has paid approximately $ 254,000 toward the settlement amount, including accrued interest.

The remaining balance

of approximately $ 101,000 , included in accrued expenses, is to be paid no later than March 1, 2023 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.

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

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

Under the terms

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

$3 million of which

was originally to be paid in June 2022 and subsequently extended to November 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”) claimed should have been originally issued to them pursuant to various agreements with the Company

entered to between 2013-2016.

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

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

the terms of the settlement, the Company has agreed to pay an aggregate amount of $10 million over a period of seven years;

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

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.

In March 2019, various stockholders of the Company

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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.

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’

1 unchanged sentence

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.

To date, no final determination has been made as to

the amount of recoupment, if any, to which such stockholders may be entitled.

In June 2022, Melvin

Gagerman, the Company’s former CEO and CFO whose employment with Aura was permanently terminated in July 2019, brought suit against

the Company for repayment of an allegedly unsecured demand promissory note presumably in the principal amount of $ 82,000 which he claims

was entered into in April 2014 and bears interest at a rate of 10 % per annum.

Despite the fact that, based on Gagerman’s allegations,

the note was issued during a period when he was the Company’s CEO, CFO, Corporate Secretary and Chairman of Aura’s Board of

Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note.

The Company disputes that any amount is

presently owed to Gagerman and has filed a cross-complaint against him for, among things, conversion, violation of California Business

& Professions Code §17200, and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura,

including without limitation, Gagerman’s actions in opposing the valid 2019 stockholder consent action.

the Company for repayment of an allegedly unsecured demand promissory note in the principal amount of $ 82,000 which he claims was entered

into in April 2014 and bears interest at a rate of 10 % per annum.

Despite the fact that, based on Gagerman’s allegations, the note

was issued during a period when he was the Company’s CEO, CFO, Corporate Secretary and Chairman of Aura’s Board of Directors,

Gagerman has stated that he does not possess a copy of the alleged promissory note.

The Company disputes that any amount is presently

owed to Gagerman and has filed a cross-complaint against him for, among things, conversion, violation of California Business& Professions

Code §17200, and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura, including without

limitation, Gagerman’s actions in opposing the valid 2019 stockholder consent action.

NOTE 16 – SUBSEQUENT EVENTS

In March 2022, the Company reached a settlement agreement with Kopple

to settle certain debt and accrued interest (see Note 9).

In June and July 2022, the Company entered into two amendments to the settlement

agreement, pursuant to which the Company agreed to pay extension fees and make a partial payment of $150,000 on a first installment of

$3,000,000 initially due in June 2022.

For the additional consideration and partial payment, Kopple agreed to extend the due date for

the balance of the first installment to September 2022.

In September 2022, the Company made an additional extension fee payment to Kopple,

in exchange for Kopple’s agreement to further extend the due date of the balance of the first installment to November 2022.

the date of this report, the Company has not yet paid the balance of the first installment of $2,850,000 due to Kopple.

Subsequent to August 31, 2022, the Company issued

1,492,000 shares of common stock in exchange for cash proceeds of approximately $ 373,000 .

In December 2022, the Company executed a fourth amendment

to the March 2022 settlement to extend the balance due on the initial $3,000,000 payment to January 2023 (see Note 9).

The Company paid

an additional $30,000 to the Kopple Parties for the extension, bringing the aggregate total to $105,000 for cash payments related to the

Additionally, the Company agreed to pay an additional $ 100,000 forbearance fee to be paid with the final interest payment

under the settlement, bringing the aggregate total to $ 230,000 in these deferred forbearance fees.

Subsequent to November 30, 2022, the Company

issued 442,424 shares of common stock in exchange for cash proceeds of approximately $ 146,000 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements