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Item 9A. Controls and Procedures

2023-05-26 compared with 2022-06-21 · 1119 added, 1378 removed, 379 unchanged (87% of the section changed)

1 unchanged sentence

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.

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-15I 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, 2023, that our disclosure controls and procedures were effective..

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.

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

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 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.

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.

Management has assessed the

effectiveness of the Company’s internal control over financial reporting as of February 28, 2023.

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, 2023, the

Company’s internal control over financial reporting was effective to provide reasonable assurance

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

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.

Remediation of Prior Material Weaknesses

We previously identified and

disclosed in our Form 10-K filed for the year ended February 28, 2022, as well as, in our subsequent quarterly reports, a deficiency in

internal control over financial reporting that existed relating to (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.

We increased our personnel resources and technical accounting expertise

within the accounting function with the hiring of a new Chief Financial Officer in 2022.

We intend to hire one or more additional personnel

for the finance and accounting function which will provide additional manpower to perform timely and complete reviews of debt and equity

transactions consistent with control objectives to further improve our personnel resources and technical accounting expertise.

prepared written policies and procedures for accounting and financial reporting, establishing a formal process to account for all transactions,

including equity and debt transactions.

We plan to continue adding additional policies to further enhance reporting controls and procedures.

We have upgraded our existing financial system to a more robust enterprise resource planning and financial reporting system.

incorporate the processes specific to the new system into the aforementioned written procedures during the coming fiscal year.

of these actions, as described below, the management team has concluded that the material weaknesses identified for the year ended February

28, 2022, have been remediated as of February 28, 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.

There were no changes in the

Company’s internal control over financial reporting that occurred during the Company’s fiscal year ended February 28, 2023,

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

other than the improvements noted above.

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.

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.

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 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;

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.

OTHER INFORMATION

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

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.

David Mann, and Dr.

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.

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.

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

Lavut to succeed Mr.

Gagerman as President of Aura, appointed Mr.

Mann to succeed Mr.

Gagerman as Chief Financial Officer of the Company, and appointed

Gagerman as Chief Financial Officer of the Company,

and appointed Dr.

Lempert Secretary of Aura.

1 unchanged sentence

Steven Willett to succeed Mr.

Mann as the Company’s

Chief Financial Officer.

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 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.

12 unchanged sentences

Douglas and Mr.

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.

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.

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.

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.

In July 2019, the Board of Directors appointed Ms.

3 unchanged sentences

On February 14, 2022, Mr.

resigned as Chief Financial Officer.

Mann resigned as Chief Financial Officer.

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 .

Willett was appointed as Chief Financial Officer.

Biographical information with respect to our current directors and

executive officer is provided below.

Salvador Diaz-Versón,

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.

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.

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

Diaz-Versón, Jr.

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

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

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.

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.

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

Diaz-Versón, Jr.

has received two presidential

appointments to the Christopher Columbus Fellowship Foundation;

first by President George H.W.

in 1992 and subsequently by President Clinton in 2000.

Bush 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.

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.

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.

Gary Douglas .

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 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.

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.

Douglas 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.

Cipora Lavut .

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.

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

Lavut left Aura in 2002.

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.

Lavut presently provides marketing and business consulting to a variety of retail

and service-oriented businesses.

She holds a B.A.

Business degree from California State University, Northridge.

Robert Lempert .

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

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, 2018.

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.

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

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.

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

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.

Laurent, Montreal, Canada.

Steven Willett .

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 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

directors or executive officers is related to one another.

of the Board of Directors

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

Salvador Diaz Versón Jr., 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 a concentration in finance from Bentley University McCallum Graduate School of Business.

Delinquent Section 16(a) Reports

Our 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, 2023 and February 28, 2022.

Code of Ethics

We 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.

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.

Family Relationships

None of our directors or executive officers is

related to one another.

Committees of the Board of Directors

The Board maintains the following committees to assist it in discharging

its oversight responsibilities.

Audit Committee .

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

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,” 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;

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

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

Compensation Committee .

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

The Compensation Committee is currently comprised of Mr.

David Mann, Ms.

Cipora Lavut and Dr.

Lavut and Dr.

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.

Nominating Committee .

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.

The Nominating

Committee currently consists of Mr.

David Mann, Ms.

1 unchanged sentence

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.

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.

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

Director Compensation

Although 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 2023, no stock

compensation was awarded to any of the Company’s directors.

During Fiscal 2022, no stock

compensation was awarded to any of the Company’s directors.

EXECUTIVE COMPENSATION

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.

The 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, 2023 and February 28, 2022.

2022 Summary Compensation Table

Option Awards

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.

Non-Equity Incentive Compensation

All Other Compensation

Name and Principal Position

Steven Willett

Chief Financial Officer

For Fiscal 2022, Ms.

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

deferring the balance.

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

For Fiscal 2023, 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

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.

Lavut has been accruing an annual salary of $250,000 and has been paid $269,315 in cash over the same period, as she was paid out a portion of her previously deferred wages balance.

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.

Outstanding Equity Awards at 2023 Fiscal Year-End

The Board 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, 2023.

Contractual Life

1 unchanged sentence

Price of Options

Cipora Lavut,

President and Board Chair

Salvador Diaz-Verson, Jr.,

Cipora Lavut, President and Board Chair

Salvador Diaz-Verson, Jr., Director

Gary Douglas, Director

1 unchanged sentence

Robert Lempert, Director

Exercises and Stock Vesting During Fiscal 2022

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

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.

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

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

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 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

Salvador Diaz-Verson,

Option Exercises and Stock Vesting During Fiscal 2023

No stock options were exercised during Fiscal 2023

by the individuals named in the Summary Compensation Table.

No stock options were granted nor was there any

vesting of previously granted stock options during Fiscal 2023 related to the individuals named in the Summary Compensation Table.

Option Exercises and Stock Vesting During Fiscal 2022

No stock options were exercised

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

Also, during Fiscal 2022, stock options granted in Fiscal

2021 became fully vested.

On 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.

The Company recognized approximately

$128,000 of share-based compensation expense for the vesting of the Directors’ common stock options in Fiscal 2022.

Employment Contracts, Termination of Employment Contracts and Change

in Control Arrangements

We do not currently have any

employment agreements with any of our Named Executive Officers.

Potential Payments to the Named Executive Officers Upon Termination

or Change in Control

None 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.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

The 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:

Beneficial Ownership Table

Beneficial Owner (1)

Salvador Diaz-Verson, Jr.

Gary Douglas (3)

3 unchanged sentences

Steven Willett (7)

All current executive officers

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

All current executive officers and Directors as a group

(six) (2) (3) (4) (5) (6) (7)

5% Stockholders

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

exercisable within 60 days of February 28, 2022.

Includes 700,000 warrants

exercisable within 60 days of February 28, 2021.

Includes 750,000 warrants

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.

Warren Breslow (8)

Elimelech Lowy (9)

BetterSea LLC (10)

Robert Kopple (11)

* Less than 1% of outstanding

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 94,648,346 shares of common stock outstanding on February 28, 2023.

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, 2023, 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 1,092,857 warrants exercisable within 60 days of February 28, 2023.

Includes 700,000 warrants exercisable within 60 days of February 28, 2023

Includes 750,000 warrants exercisable within 60 days of February 28, 2023.

Includes warrants to purchase 350,000 shares exercisable within 60 days of February 28, 2023.

Includes warrants to purchase 400,000 shares exercisable within 60 days of February 28, 2023, 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.

Includes common shares only as of February 28, 2022.

Includes the right to convert $3,000,000 and accrued interest of $712,911 convertible note payable to 2,652,079 common shares at a conversion price of $1.40.

Includes 5,018,252 common shares, which Mr.

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

Compensation Plan Information as of February 28, 2022

Includes warrants to purchase 3,331,664 shares exercisable within 60 days of February 28, 2023.

Securities Authorized for Issuance Under Equity Compensation Plans

as of February 28, 2023

Equity Compensation Plan Information as of February 28, 2023

Plan Category

Securities to be

Options, Warrants

Exercise Price

of Securities

For Future Issuances

Compensation Plans

(Excluding Securities Reflected in Column (a.)

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

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.

(Excluding Securities

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.

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, 2023 (See Note 13 to the Financial Statements).

For additional information regarding options and

warrants, see Note 13 to our financial statements appearing elsewhere in this report.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE

Review and Approval of Related Party Transactions

Our 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 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.

Director Independence

Using 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, 2022, and February 29, 2021:

Weinberg & Company, P.A.

(“Weinberg”) was engaged to be the Company’s principal accountant and auditor in April 2022.

Prior to the engagement

of Weinberg, BF Borgers, CPA, PC (“BFB CPA”) served as the Company’s principal accountant and auditor.

The following

table sets forth the aggregate fees billed to us by Weinberg for the year ended February 28, 2023, and by BFB CPA for the year ended February

(amounts in thousands)

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.”

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, 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

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.

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

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

As 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.”

Services provided to us by

Weinberg with respect the audit of our annual financial statements and review of our annual report on Form 10-K for the year ended February

28, 2022, and for reviews of the financial statements which are included in our quarterly reports on Form 10-Q for the first three quarters

of the year ended February 28, 2023.

Services provided to us by

BFB CPA with respect the audit of our annual financial statements and review of our annual reports on Form 10-K for February 28, 2021,

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

years ended February 28, 2022.

Audit Related Fees

Weinberg did not provide any

professional services to us during Fiscal 2023 which would constitute “audit related fees”.

BFB CPA did not provide any

professional services to us during Fiscal 2022 which would constitute “audit related fees”.

Weinberg did not provide any

professional services to us during Fiscal 2023 which would constitute “tax fees”.

BFB CPA did not provide any

professional services to us during Fiscal 2022 which would constitute “tax fees”.

All Other Fees

Weinberg did not provide any

professional services to us during Fiscal 2023 which would constitute “other fees”.

BFB CPA did not provide any

professional services to us during Fiscal 2022 which would constitute “other fees”.

Policy on Audit Committee Pre-Approval of Audit

and Permissible Non-Audit Services of Independent Auditors

Under 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.

Consistent with the SEC’s

rules, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent auditors.

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.

The Audit Committee may also pre-approve

particular services on a case-by-case basis.

During Fiscal 2023 all services provided by Weinberg were pre-approved by the Audit Committee

in accordance with this policy.

During Fiscal 2022 all services provided by BFB CPA were pre-approved by the Audit Committee in accordance

with this policy.

There 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.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

filed as part of this Form 10-K:

Documents filed as part of this Form 10-K:

Financial Statements

to Financial Statements at page F-1

Financial Statement

to Financial Statements at page F-1

See Index to Financial Statements at page F-1

Financial Statement Schedules

See Index to Financial Statements at page F-1

See Exhibit Index

FORM 10-K SUMMARY

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.

INDEX TO EXHIBITS

Description of Documents

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)

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

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)

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)

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)

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)

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

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

Indicates a management

contract or compensatory plan or arrangement.

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.

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.

Indicates a management contract or compensatory plan or arrangement.

In accordance with SEC Release 33-8238,

Exhibit 32.1 and 32.2 are being furnished and not filed.

Furnished herewith.

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.

Pursuant 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, INC.

/s/ Cipora Lavut

President (Principal Executive Officer),

June 21, 2022

/s/ Steven Willett

Pursuant 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), Board Chair

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.

to Financial Statements

Index 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

Balance Sheets as of February 28, 2023 and February 28, 2022 F-4

Statements of Operations - Years ended February 28, 2023 and February 28, 2022 F-5

Statements of Stockholders’ Deficit - Years ended February 28, 2023 and February 28, 2022 F-6

Statements of Cash Flows - Years ended February 28, 2023 and February 28, 2022 F-7

Notes to Financial Statements F-8 to F-24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

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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”).

(the “Company”) as of February 28, 2023 and 2022, the related statements of operations, stockholders’

deficit, and cash flows for the years 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

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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

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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

ended February 28, 2023, the Company incurred a net loss and used cash in operations, and at February 28, 2023, had a stockholders’

In addition, at February 28, 2023, notes payable and related accrued interest with an aggregate balance of $6.2 million have

reached maturity and are past due.

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 uncertainty.

Basis for Opinion

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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

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.

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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

Troubled debt restructuring

As described in Note 9 to the financial statements,

in March 2022, the Company signed an agreement with a noteholder to settle past due notes payable and accrued interest aggregating $12.1

million by the issuance of a new restructured note payable for $10 million.

As part of the agreement, the Company also issued warrants

with a fair value of $1.1 million to the noteholder.

Management assessed the settlement agreement and determined that the accounting

guidance under troubled debt restructuring should apply as the Company was experiencing financial difficulties and the noteholder granted

a concession.

We identified the accounting for the troubled

debt restructuring as a critical audit matter because of the significant judgements made by management in the application of troubled

debt restructuring accounting and the valuation of the notes payable, accrued interest, and warrants.

This required a high degree of

auditor judgement to assess the reasonableness of management’s c onclusions.

primary procedures we performed related to the troubled debt restructuring included:

We obtained supporting

agreements, and inquired of management to gain an understanding of the relevant facts and circumstances related to the

troubled debt restructuring.

We agreed amounts of the past due notes and accrued interest to supporting schedules.

We recalculated the fair

value of the warrants issued.

We evaluated management’s

accounting conclusions regarding the troubled debt restructuring.

We assessed the sufficiency

of management’s disclosures related to the troubled debt restructuring.

have served as th e Company’s auditor since 2022.

/s/ Weinberg & Company, P.A.

Los Angeles, California

June 21, 2022

AURA SYSTEMS, INC.

BALANCE SHEETS

(As Restated)

(amounts in thousands, except share data)

Current assets

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Notes payable, current portion

Convertible notes payable, current portion

Convertible note payable-related party, current portion

Notes payable-related parties, –in default

Convertible notes payable, current portion-past due

Convertible note payable-related party-past due

Notes payable-related parties, current portion (includes $ 700 past due)

Operating lease liability, current portion

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Total current liabilities

Notes payable

Operating lease liability

Convertible notes payable

Convertible note payable-related party

Notes payable, net of current portion

Note payable-related party, net of current portion

Operating lease liability, net of current portion

Total liabilities

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Accumulated deficit

( 471,364,369 )

( 467,372,506 )

Total shareholders’ deficit

( 21,219,535 )

( 21,116,125 )

Total liabilities and shareholders’ deficit

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

STATEMENTS OF OPERATIONS

SYSTEMS, INC.

OF OPERATIONS

Fiscal Years Ended

(As Restated)

(amounts in thousands, except share and per share data)

Cost of goods sold

Gross profit (loss)

Operating expenses:

Engineering, research and development

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

Engineering, research and development (including $ 150 and $ 138 to related party, respectively)

Selling, general and administration

Total operating expenses

Loss from operations

( 3,429,816 )

( 1,781,214 )

Other income (expense):

Interest expense, net

( 1,271,586 )

( 1,279,949 )

Gain on extinguishment of debt

Interest expense, net (including $ 545 and $ 981 to related parties, respectively)

Gain on extinguishment of derivative warrant liability

Change in fair value of derivative warrant liability

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

Net income (loss)

$ ( 3,991,863 )

Basic income (loss) per share

Diluted income (loss) per share

Basic weighted-average shares outstanding

Diluted weighted-average shares outstanding

See accompanying notes to these financial statements.

AURA SYSTEMS INC.

STATEMENTS OF SHAREHOLDERS’ DEFICIT

Basic and diluted loss per share

Basic and diluted weighted-average shares outstanding

accompanying notes to these financial statements.

OF SHAREHOLDERS’ DEFICIT

thousands, except share data)

Shareholders’

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$ ( 467,372 )

$ ( 467,417,254 )

$ ( 23,863,168 )

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

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Share-based compensation

( 3,991,863 )

Balance, February 28, 2022

$ 450,136,522

$ ( 471,364,369 )

Common shares issued for cash

Fair value of warrants issued for note settlement

Fair value of warrants issued for services

Balance, February 28, 2023

$ ( 474,774 )

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

accompanying notes to these financial statements.

SYSTEMS, INC.

OF CASH FLOWS

Fiscal Years Ended

(As Restated)

Net income (loss)

$ ( 3,991,863 )

(amounts in thousands)

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

3 unchanged sentences

Common stock issued for services

Common stock warrants issued for services

Share-based compensation

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Accrued interest on notes payable

Customer advances

Operating lease liability

Cash used in operating activities

( 2,640,774 )

( 1,888,796 )

Cash used in investing activities:

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Principal payments of notes payable

Proceeds from government assistance loans – PPP and EID loans

Proceeds from government assistance loans – PPP loan

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents-beginning of year

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Supplemental schedule of non-cash transactions:

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

Fair value of warrants issued for note settlement

Accounts payable converted into shares of common stock

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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 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.

accompanying notes to these financial statements.

SYSTEMS, INC.

TO FINANCIAL STATEMENTS

ended February 28, 2023 and 2022

thousands, except share and per share amounts)

1 – 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 technology.

Aura develops and sells AuraGen ® axial flux mobile induction power systems to the industrial, commercial, and defense

mobile power generation markets.

The accompanying financial

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

During the fiscal year ended February

28, 2023, the Company incurred a net loss of approximately $ 3.4 million and had negative cash flows from operating activities of approximately

$ 3.1 million and at February 28, 2023, had a stockholders deficit of approximately $ 20.3 million and a working capital deficit of approximately

$ 13.7 million.

In addition, as of February 28, 2023, notes payable with an aggregate balance of $ 5.1 million and accrued interest of

$ 1.1 million are past due.

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 issued.

The accompanying financial statements do not include any adjustments

that might be necessary if the Company is unable to continue as a going concern.

to February 28, 2023, the Company issued 2,334,847 shares of common stock in exchange for cash proceeds of $ 770 .

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 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

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, notes payable, 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;

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;

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(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.

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 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.

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.

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 $ 71 and $ 100 for the fiscal years ended February 28, 2023 and 2022, respectively.

Our principal

sales channel is sales to a domestic distributor.

accordance with ASC 606, we recognize revenue, net of discounts, for our generator sets at time of product delivery to the domestic distributor

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 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, 2023 and 2022, respectively;

however, we expect warranty claims to be immaterial.

of Goods Sold

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.

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.

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.

inventory has been written down, it creates a new cost basis for inventory that may not be subsequently written up.

During the years

ended February 28, 2023 and 2022, the Company wrote-down inventories of $ 4 and $ 36 , respectively.

and Equipment

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.

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 an indication of impairment, management prepares an estimate of future cash flows expected 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.

At February 28, 2023 and 2022, 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.

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, 2023 and 2022, the Company had

no impairment of long-lived assets.

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 term.

The Company uses its incremental borrowing rate based on the information available

at lease commencement in determining the present value of unpaid lease payments.

advances represent consideration received from customers under revenue contracts for which the Company has not yet delivered to the customer

the ordered goods or services.

Concentration

of Credit and Other Risks

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 .

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, 2023, one customer accounted for 55 % and one customer accounted for 10 % of revenues.

During the year ended February 28, 2022, one

customer accounted for 18 %, two customers each accounted for 16 % and one customer accounted for 15 % of revenues.

of February 28, 2023, four vendors accounted for 38 %, 10 %, 10 % and 13 % of accounts payable.

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

and Development

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, and testing of preproduction

prototypes and models and are expensed as incurred.

Research and development costs for Fiscal 2023 and 2022 were approximately $ 850 and

$ 611 , respectively.

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 costs.

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.

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.

Warrant Liability

Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded

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.

Derivative 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.

Company uses Level 3 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.

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.

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:

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

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

or indirectly;

3 – Unobservable inputs.

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.

following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of

February 28, 2023 and 2022:

February 28, 2023

(amounts in thousands)

Derivative warrant liability

Total liabilities

February 28, 2022

Derivative warrant liability

Total liabilities

The Company estimated

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

Company estimated the fair value of the derivative warrant liability using the Binomial Model (see Note 12).

(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

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

1 unchanged sentence

Year Ended February 28,

Net income (loss)

$ ( 3,991,863 )

Adjustment for interest expense on convertible notes

Adjusted net income (loss)

$ ( 3,991,863 )

(amounts in thousands, except share and per share data)

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.

Basic loss per share:

Diluted loss per share

the years ended February 28, 2023 and 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

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;

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

Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the

accompanying financial statements.

Issued Accounting Pronouncements

August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

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”).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash

conversion and beneficial conversion models.

The diluted net income per share calculation for convertible instruments will require the

Company to use the if-converted method.

For contracts in an entity’s own equity, the type of contracts primarily affected by this

update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet

the settlement conditions of the derivative scope exception.

This update simplifies the related settlement assessment by removing the

requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required

to be posted, and (iii) assess shareholder rights.

ASU 2020-06 is effective March 1, 2024, for the Company and the provisions of this

update can be adopted using either the modified retrospective method or a fully retrospective method.

Early adoption is permitted, but

no earlier than January 1, 2021, including interim periods within that year.

Effective January 1, 2021, the Company early adopted ASU

2020-06 and that adoption did not have an impact on our financial statements and related disclosures.

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”).

ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions

or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification

or exchange as an exchange of the original instrument for a new instrument.

An issuer should measure 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 and then apply 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.

The Company adopted ASU 2021-04 effective March 1, 2022.

The adoption of ASU 2021-04

did not have any impact on the Company’s financial statement presentation or disclosures.

September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires

entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on

certain types of financial instruments, including trade receivables.

This may result in the earlier recognition of allowances for losses.

ASU 2016-13 is effective for the Company beginning March 1, 2023, and early adoption is permitted.

The Company does not believe the potential

impact of the new guidance and related codification improvements will be material to its financial position, results of operations and

recent accounting pronouncements and guidance 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.

3 – INVENTORIES

consisted of the following:

(amounts in thousands)

Raw materials

2 unchanged sentences

Total inventory

NOTE 5 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of

the following:

4 – PREPAID AND OTHER CURRENT ASSETS

and other current assets consisted of the following:

(amounts in thousands)

Prepaid annual software licenses

1 unchanged sentence

Vendor advances

Prepaid insurance

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:

Total prepaid and other current assets

- PROPERTY AND EQUIPMENT, NET

and equipment consisted of the following:

(amounts in thousands)

Leasehold improvements

3 unchanged sentences

Less accumulated depreciation and amortization

Depreciation expense

for the years ended February 28, 2022 and 2021 was $ 14,765 and $ 743 , respectively:

expense for the years ended February 28, 2023 and 2022 was $ 78 and $ 15 , respectively:

6 – CONVERTIBLE NOTES PAYABLE

notes payable consisted of the following:

Convertible notes payable

( 1,402,971 )

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

(amounts in thousands)

Convertible notes payable -past due

Fiscal 2013 and 2014, the Company issued six convertible notes payable in the aggregate of $ 4,000 .

As of February 28, 2022 and 2021,

the outstanding balance of the convertible notes payable amounted to $ 1,403 .

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.

As of February 28, 2023,

the convertible notes of $ 1,403 and accrued interest of $ 354 have reached maturity and are past due.

February 28, 2023 and 2022, accrued interest on convertible notes payable totaled approximately $ 354 and $ 284 , respectively, and is included

in accrued expenses (See Note 10).

7 – CONVERTIBLE NOTE PAYABLE-RELATED PARTY

note payable – related party consisted of the following:

Convertible note payable

(amounts in thousands)

Convertible note payable -past due

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 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

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.

February 28, 2023, the convertible note of $ 3,000 and related accrued interest of $ 713 has reached maturity and is past due.

February 28, 2023 and 2022, accrued interest on convertible notes payable-related party totaled approximately $ 713 and $ 563 , respectively,

and is included in accrued expenses (See Note 10).

8 – NOTES PAYABLE

payable consisted of the following:

(amounts in thousands)

Secured notes payable

2 unchanged sentences

Unsecured notes payable

(d) Note payable-Abdou

(e) Note payable-other-in default

Economic Injury Disaster (EID) Loan

1 unchanged sentence

(“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 .

On July 1, 2020, the Company received a $150 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.

Fiscal 2022, the Company purchased two pieces of equipment and a vehicle for approximately $329 as a part of its efforts to expand its

operations and research and development capacities.

The Company made down payments aggregating to approximately $41 with the balance

financed by two notes payable aggregating to approximately $288.

The notes are secured by the equipment and vehicle purchased.

is due in 36 equal monthly payments of approximately $6 each, including interest at 2.9% per annum.

The second note is due in 72 equal

monthly payments of approximately $1.5 each, including interest at 10.9% interest per annum.

As of February 28, 2023, the balance of

the notes was approximately $188.

Other notes payable

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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

February 28, 2023 and 2022, accrued interest on notes payable totaled approximately $ 23 and $ 36 , respectively, and is included in accrued

expenses (See Note 10).

9 – NOTES PAYABLE-RELATED PARTIES

payable-related parties consisted of the following:

(amounts in thousands)

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.

(a) Notes payable-Koppel (prior to restructuring)

Accrued interest-Koppel (prior to restructuring)

Notes payable -Koppel (restructured)

Subtotal-Koppel

(b) Note payable- Gagerman

Accrued interest-Gagerman

Subtotal-Gagerman

fiscals 2013 through 2018, the Company issued notes payable to Robert Kopple and associated entities (collectively “Kopple”)

in the aggregate of $ 6,107 .

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

Kopple brought suit against the Company beginning in 2017 for repayment of the notes.

February 28, 2022, the accrued interest due to Kopple totaled approximately $ 6,534 .

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).

is added to the note payable principal for presentation on the accompanying balance sheet as of February 28, 2022.

As of February 28,

2022, the outstanding balance of the Kopple notes payable and accrued interest amounted to approximately $ 12,141 .

March 14, 2022, the Company reached an agreement with Kopple to resolve all remaining litigation between them, including all amounts

owed to Kopple under the notes.

Under the terms of the settlement, the Company agreed to issue a new note and pay Kopple an

aggregate amount of $ 10,000 , including $ 3,000 initially due in June 2022, and $ 1,000 to be paid annually for seven years after the

initial $ 3,000 is paid.

In June 2022, $ 150 of the new note was paid, and the balance of $ 2,850 has been extended to May 29, 2023

(see Note 17).

As of February 28, 2023, in exchange for the extended payment date, the Company has paid $ 105 in extension fees in

cash, and recorded an additional $ 230 in deferred forbearance fees all of which are included in interest expense.

forbearance fees are due with the final payment under the settlement agreement.

All amounts, including all accrued interest and

accrued forbearance fees, are to be paid no later than eight years from the date of the initial payment.

Additionally,

the settlement agreement 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 approximately

The settlement provides for

certain increases in the amounts payable to Kopple and the right of such parties to enter judgement against the Company if the Company

remains in uncured default in its payment obligations.

Interest on the new note began accruing in January 2023 at 6 % per annum, and as

a result the Company recorded approximately $ 52 of interest in Fiscal 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, including the covenant to not create any indebtedness that is

senior in right of payment to the Kopple debt.

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

believes meeting these covenants will not affect operations and the Company was in compliance with all covenants as of February 28, 2023.

The Company assessed the settlement

with Kopple under ASC 470 and determined that the guidance under troubled debt restructuring should apply as the Company was experiencing

financial difficulties and Kopple granted a concession.

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.

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.

Gagerman, the Company’s former CEO and CFO whose employment was permanently terminated in July 2019, claims that in April 2014

the Company issued an unsecured demand promissory note to him in the amount of $ 82 that bears interest at a rate of 10 % per annum.

claims that this note has not been repaid to date and is now owed.

June 2022, Gagerman brought suit against the Company for repayment of this alleged note.

Despite the fact that, based on Gagerman’s

allegations, the note was issued during a period when Gagerman was the Company’s CEO, CFO, Corporate Secretary and Chairman of

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

disputes that any amount is presently owed to Gagerman.

Additionally, the Company has filed a cross-complaint against Gagerman for, among

things, conversion, violation of California Business & Professions Code §17200, and various breaches of fiduciary duty that

the Company believes Gagerman committed against the Company.

on Gagerman’s claims, as of February 28, 2023 and February 28, 2022, the outstanding balance of the Gagerman notes payable and

accrued interest would amount to approximately $ 164 and $ 155 , respectively.

As of February 28, 2022 and February 28, 2022, despite the

fact that the Company disputes Gagerman’s claims, under the guidance of ASC 450 - Contingencies , the Company has recorded

the claimed notes payable and accrued interest amounts of approximately $ 164 and $ 155 , respectively, in the accompanying balance sheets.

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

November 20, 2019, the Company reached an agreement with a former joint venture partner Jiangsu Shengfeng regarding the return of $ 700

that had been advanced to the Company in prior years.

As a result, in November 2019, and the Company issued a non-interest-bearing promissory

note for $ 700 to be paid over an 11-month period beginning March 15, 2020, through February 15, 2021.

As of February 28, 2023 and 2022,

the principal due was $ 700 , respectively, and was past due.

10 – ACCRUED EXPENSES

expenses consisted of the following:

(As Restated)

(amounts in thousands)

Accrued interest-convertible notes payable (past due)

Accrued interest-convertible notes payable related party (past due)

Accrued interest-notes payable and other

Subtotal-accrued interest

Accrued payroll and related expenses

Accrued interest-convertible notes payable

Accrued interest-convertible notes payable related party

Accrued interest-notes payable

Other accrued expenses

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,

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.

of February 28, 2023 and February 28, 2022, accrued expenses includes accrued interest, accrued payroll and accrued consulting fees in

the aggregate of $ 1,145 and $ 750 , respectively, which are due to officers and shareholders and are considered related party transactions.

Fiscal 2021, our facilities consisted primarily of an approximate 20 square feet facility in Stanton, California and an additional storage

facility in Santa Clarita, California.

Effective February 28, 2021, the Company vacated these facilities and terminated the corresponding

leases and consolidated our administrative and production operations, including warehousing, are housed within an approximately 18 square

foot facility in Lake Forest, California.

The Lake Forest facility lease is for 66-months effective February 2021 through August 31,

The initial monthly base rental rate was approximately $22 per month and escalates 3% each year to approximately $26 per month

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

6 unchanged sentences

components of lease expense and supplemental cash flow information related to leases for the period are as follows:

(amounts in thousands)

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

Cash paid for amounts included in the measurement of lease liabilities for the years ended February 28, 2023 and 2022, respectively

Weighted average remaining lease term – operating leases (in years)

11 unchanged sentences

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:

12 – DERIVATIVE WARRANT LIABILITY

prior years under prior management, the 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.

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.

following tables summarize the derivative warrant liability:

(amounts in thousands, except share and per share data)

Risk free interest rate

5 unchanged sentences

Fair Value of Derivative Warrant Liability

February 29, 2020 (As Restated)

(amounts in thousands, except share data)

February 29, 2021

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

February 28, 2021 (As Restated)

February 28, 2022

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

( 4,687,734 )

February 28, 2023

NOTE 15 – STOCKHOLDERS’ DEFICIT

13 – STOCKHOLDERS’ DEFICIT

February 28, 2023 and February 28, 2022, the Company had 150,000,000 shares of $ 0.0001 par value common stock authorized for issuance.

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

During the year ended February

28, 2023, the Company issued 11,529,242 shares of common stock for net proceeds of approximately $ 3,270 in cash.

During the year ended

February 28, 2022, the Company issued 10,199,665 shares of common stock for net proceeds of approximately$ 2,653 in cash.

Additionally,

during the year ended February 28, 2022, 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 and issued 245,001 shares of common stock in exchange for services valued

in the amount of approximately $ 74 .

summary of the Company’s stock option activity is as follows:

1 unchanged sentence

Weighted Average Intrinsic Value

Total options, February 29, 2020 (As Restated)

(amounts in thousands, except share and per share data)

Total options, February 28, 2021 (As Restated)

Total options, February 28, 2022

Total options, February 28, 2023

Exercisable, February 28, 2023

exercise prices and information related to options under the 2011 Plan outstanding on February 28, 2022 is as follows:

exercise prices and information related to options under the 2011 Plan outstanding on February 28, 2023 are as follows:

Range of Exercise Price

1 unchanged sentence

$ 0.25 to $ 1.40

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.

Company granted no stock options under its stock option 2011 plan during Fiscal 2023 and 2022.

During the year ended February 28, 2022,

the Company recognized approximately $ 612 in share-based compensation expense related to the fair value of vested stock options.

aggregate fair value of the options was determined at the time of grant using a Black-Scholes option pricing model.

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”).

5 unchanged sentences

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, 2021

Outstanding, February 28, 2022

( 4,687,734 )

Outstanding, February 28, 2023

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:

was no intrinsic value as of February 28, 2023, as the exercise prices of these warrants were greater than the market price of the Company’s

The exercise prices and information related to the warrants under the 2011 Plan outstanding on February 28, 2023 are as follows:

Range of Exercise Price

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

$ 0.85 to $ 1.40

March 2022, the Company reached a settlement agreement with its former Director, Robert Kopple, (see Note 9).

As a part of the settlement,

the Company issued to Mr.

Kopple warrants to purchase 3,331,664 shares of the Company’s common stock (the “Kopple Warrants”)

with a term of 7 years at an exercise price of $ 0.85 per share.

The closing price of the Company’s common stock on the date of

issuance was $ 0.317 per share.

The fair value of the Kopple Warrants was approximately $ 1,051 and was recorded as a reduction to the

outstanding balance of notes payable due Kopple and an increase in the additional paid-in capital of the Company.

December 2022, the Company issued warrants to purchase 120,000 of the Company’s common stock with a term of 5 years at an exercise

price of $ 0.50 per share in exchange for consulting services.

The closing price of the Company’s common stock on the date of issuance

was $ 0.425 per share.

The fair value of the warrants issued for services was approximately $ 50,000 and was recorded as a general and

administrative expense in the statement of operations and an increase in the additional paid-in capital of the Company.

fair values of warrants issued during Fiscal 2023 were computed using various option pricing models including Black-Scholes model (Kopple

warrants) and binomial model (services warrants) using the weighted average assumptions as set forth in the table below:

Weighted Average Assumptions for Warrants

Exercise Price

Risk-Free Rate

Expected Term (yrs)

Dividend Rate

14 – INCOME TAXES

the years ended February 28, 2023 and 2022, the Company had no income tax expense.

Total current

1 unchanged sentence

Total Provision

The following is a reconciliation of the statutory federal income tax

rate to the Company’s effective tax rate:

the years ended February 28, 2023 and 2022, a reconciliation of the effective income tax rate to the U.S.

statutory rate is as follows:

Federal tax benefit at statutory rate

1 unchanged sentence

Change in valuation allowance

The following table summarizes our deferred tax

asset at February 28, 2022, and February 28, 2021:

of February 28, 2023, and February 28, 2022, the following table summarizes our deferred tax asset:

(amounts in thousands)

Deferred tax asset

3 unchanged sentences

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.

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, 2023 and 2022, 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, 2023 and 2022, the valuation allowance

decreased by $ 2.7 million and $ 4.8 million, respectively.

February 28, 2023, 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 $ 154.4 million and for state purposes the amounts available

were approximately $ 99.4 million.

The Federal carryforwards expire on various dates through 2043 and the state carryforwards expire on

various dates through 2043.

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.

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.

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, 2023 and 2022, 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, 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.

Company has failed to file its California tax returns for the years ended February 28, 2015 through February 28, 2023 due to its inability

to pay the minimum annual franchise tax payment of eight hundred dollars.

The balance of accrued income taxes related to unpaid California

franchise tax of $4.8 represents six years of minimum taxes due.

15 – RELATED PARTY TRANSACTIONS

As of February 28, 2023 and

2022, Bettersea LLC (“Bettersea”) was a 9.7 % and 11.0 %, respectively, shareholder in the Company.

For the years ended February

28, 2023 and 2022, the Company incurred total fees to Bettersea of $ 150 and $ 138 , respectively, for consulting services.

As of February

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.

28, 2023 and 2022, a total of approximately $ 226 and $ 219 , respectively, was due to Bettersea and included in accounts payable and accrued

During Fiscal 2022, the Company

issued 1,285,714 shares of common stock with a fair value of Four hundred fifty thousand dollars for the settlement of accounts payable

of Four hundred fifty thousand dollars due to Bettersea.

Also, during fiscal 2022, the Company issued 285,715 shares of common stock with

a fair value of One hundred thousand dollars for the settlement of accounts payable of One hundred thousand dollars due to the Company’s

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.

16 – CONTINGENCIES

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.

2017, the Company’s former COO was awarded approximately $ 238 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 , representing the principal award

plus accrued interest.

As of the time of this filing, the Company has paid approximately $ 272 toward the settlement amount.

The remaining

balance of approximately $ 58 is to be paid no later than September 1, 2023 , and accrues interest of 10 % per annum until paid.

July 2017 and March 2022, the Company had 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,

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 agreed to pay an aggregate amount

of $10,000 (see Note 9), including an initial amount of $3,000 due in June 2022.

In June, 2022, the Company paid $150 of the initial

All amounts, including all accrued interest and accrued forbearance fees, are to be paid no later than eight years from the date

of the initial payment.

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 the date

of this report, the Company has not yet paid the $2,850 balance of the initial installment (see Note 17).

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 .

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.

17 – SUBSEQUENT EVENTS

to February 28, 2023, additional amendments to the settlement agreement with Kopple (see Note 9) were entered into extending the due

date for the $ 2,850 balance due on the initial payment to May 29, 2023.

In exchange for the additional amendments, the Company

agreed to pay additional extension fees of $ 60 in cash and an additional $ 200 in deferred forbearance fees to be paid with the final

payment under the settlement agreement.

to February 28, 2023, the Company issued 2,334,847 shares of common stock in exchange for cash proceeds of $ 770 .

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