What changed in this filing

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Item 1. Financial Statements

2024-01-16 compared with 2023-10-18 · 392 added, 397 removed, 270 unchanged (75% of the section changed)

FINANCIAL STATEMENTS

AURA SYSTEMS, INC.

CONDENSED BALANCE SHEETS

SYSTEMS, INC.

BALANCE SHEETS

(amounts in thousands, except share data)

5 unchanged sentences

Operating lease right-of-use asset

Security deposit

Lease security deposit

Liabilities and Shareholders’ Deficit

19 unchanged sentences

150,000,000 shares authorized;

99,525,617 and 94,648,346 issued and outstanding at August 31, 2023 and February 28, 2023, respectively.

101,242,286 and 94,648,346 issued and outstanding at November 30, 2023 and February 28, 2023, respectively.

Additional paid-in capital

2 unchanged sentences

Total liabilities and shareholders’ deficit

The accompanying notes are an integral part of

these unaudited financial statements.

AURA SYSTEMS, INC.

CONDENSED STATEMENTS OF OPERATIONS

accompanying notes are an integral part of these unaudited financial statements.

SYSTEMS, INC.

STATEMENTS OF OPERATIONS

Three-Months Ended

Six-Months Ended

Nine-Months Ended

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

Cost of goods sold (includes inventory write-down of $ 58 for the three and six months ended August 31, 2023)

Cost of goods sold (includes inventory write-down of $ 32 and $ 90 for the three and nine months ended November 30, 2023)

Gross profit (loss)

Operating expenses

8 unchanged sentences

Basic and diluted weighted-average shares outstanding

See accompanying notes to these unaudited financial

AURA SYSTEMS, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS’

and Six Months Ended August 31, 2023

accompanying notes to these unaudited financial statements.

SYSTEMS, INC.

STATEMENTS OF SHAREHOLDERS’ DEFICIT

Months and Nine Months Ended November 30, 2023

(amounts in thousands, except share data)

3 unchanged sentences

Common shares issued for cash

Balance, May 31, 2023

Balance, May 31, 2023 (unaudited)

Common shares issued for cash

Balance, August 31, 2023 (unaudited)

Common shares issued for cash

Fair value of warrants issued with convertible notes payable

Balance, November 30, 2023 (unaudited)

$ ( 477,945 )

and Six Months Ended August 31, 2022

Months and Nine Months Ended November 30, 2022

(amounts in thousands, except share data)

4 unchanged sentences

Fair value of warrants issued for note settlement

Balance, May 31, 2022

Balance, May 31, 2022 (unaudited)

Common shares issued for cash

Balance, August 31, 2022 (unaudited)

Common shares issued for cash

Balance, November 30, 2022 (unaudited)

$ ( 473,947 )

See accompanying notes to these unaudited financial

AURA SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

accompanying notes to these unaudited financial statements.

SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

Nine Months Ended

(amounts in thousands)

15 unchanged sentences

Proceeds from issuance of common stock

Principal payments of notes payable

Proceeds from issuance of convertible notes payable

Payment of notes payable

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents-beginning of period

2 unchanged sentences

Supplemental schedule of non-cash transactions:

Reclassification of prepaid expense to property and equipment

Adjustment to interest expense to account for the effective interest rate of note payable

Note payable issued for software licensing agreement

Fair value of warrants issued for note settlement

See accompanying notes to these unaudited financial

AURA SYSTEMS, INC.

accompanying notes to these unaudited financial statements.

SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per

share amounts)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Aura Systems, Inc., (“Aura”, the “Company”)

a Delaware corporation, is engaged 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.

Basis of Presentation

The accompanying unaudited condensed financial

statements as of and for the three and six months ended August 31, 2023 and 2022, have been prepared in conformity with accounting principles

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

GAAP”) and the applicable rules and regulations of the Securities

and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures normally

included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring nature that are

necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as of February 28,

2023, was derived from the Company’s audited Financial Statements as of February 28, 2023, included in the Company’s Annual

Report on Form 10-K filed with the SEC on May 26, 2023.

These financial statements should be read in conjunction with that report.

results of operations for the period ended August 31, 2023, may not necessarily be indicative of the results that may be expected for

the full fiscal year ending February 28, 2024.

The Company’s fiscal year ends on the last

calendar day of February.

Accordingly, the current fiscal year will end on February 29, 2024 and is referred to as “Fiscal 2024”.

Our prior fiscal years ended February 28, 2023, February 28, 2022 and 2021, and are referred to as “Fiscal 2023”, “Fiscal

2022” and “Fiscal 2021”, respectively.

in thousands, except share and per share amounts)

1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Operations

Systems, Inc., (“Aura”, the “Company”) a Delaware corporation, is engaged 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

of Presentation

accompanying unaudited condensed financial statements as of and for the three and nine months ended November 30, 2023 and 2022, have

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

the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S.

GAAP have been

condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the unaudited condensed financial statements

reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as of February 28, 2023, was derived from the Company’s audited Financial Statements as

of February 28, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 26, 2023.

These financial

statements should be read in conjunction with that report.

The results of operations for the period ended November 30, 2023, may not

necessarily be indicative of the results that may be expected for the full fiscal year ending February 29, 2024.

Company’s fiscal year ends on the last calendar day of February.

Accordingly, the current fiscal year will end on February 29,

2024 and is referred to as “Fiscal 2024”.

Our prior fiscal years ended February 28, 2023, February 28, 2022 and 2021, and

are referred to as “Fiscal 2023”, “Fiscal 2022” and “Fiscal 2021”, respectively.

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

During the nine-month

period ended November 30, 2023, the Company recognized net loss of $ 3,171 and used cash in operating activities of $ 2,178 , respectively.

As of November 30, 2023, the Company also has a shareholder deficit of $ 21,247 and notes payable totaling $ 5,200 are also past due.

factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the

financial statements are issued.

In addition, the Company’s independent registered public accounting firm, in its report on the

Company’s February 28, 2023, financial statements, raised substantial doubt about the Company’s ability to continue as a

going concern.

The accompanying financial statements have been

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

During the six-month period ended August 31, 2023, the Company recognized

net loss of $ 2,261 and used cash in operating activities of $ 1,532 , respectively.

As of August 31, 2023, the Company also has a shareholder

deficit of $ 20,909 and notes payable totaling $ 5,200 are also past due.

These factors raise substantial doubt about the Company’s

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

In addition, the Company’s

independent registered public accounting firm, in its report on the Company’s February 28, 2023, financial statements, raised substantial

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

The financial statements do not include any adjustments that might

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

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

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

manufacturing and business development activities.

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

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

and ultimately to attain profitability.

During the next twelve months the Company intends

to continue to attempt to increase the Company’s operations and focus on the sale of our AuraGen ® /VIPER products

both domestically and internationally and to add to our existing management team.

In addition, the Company plans to source new suppliers

for manufacturing operations, rebuild the engineering and sales teams, and to the extent appropriate, utilize third party contractors

to support the operation.

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

Higher inflation, the actions by the Federal Reserve

Bank to address inflation, most notably continuing increases in interest rates, and rising energy prices create uncertainty about the

future economic environment.

The Company expects that the impact of these issues will continue to evolve.

The Company believes these factors

impacted the Company’s business in 2023 and the first six months of 2024 and will continue to impact the Company’s business

in 2024 and 2025.

The implications of higher government deficits and debt, tighter monetary policy, and higher long-term interest rates

may drive a higher cost of capital for the business and an increase in the Company’s operating expenses.

As of the date of this filing, the COVID-19 pandemic

has been declared to be officially over.

Despite this fact, there continues to be lingering impacts of the COVID-19 pandemic in the regions

in which the Company operates.

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 stemming from the outbreak and its lingering effects on the Company’s business or results of operations, financial

condition, or liquidity.

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.

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

a going concern.

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.

Substantial additional capital resources will be required to fund continuing

expenditures related to our research, development, manufacturing and business development activities.

The Company’s continuation

as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to retain

its current financing, to obtain additional financing, and ultimately to attain profitability.

the next twelve months the Company intends to continue to attempt to increase the Company’s operations and focus on the sale of

our AuraGen ® /VIPER products both domestically and internationally and to add to our existing management team.

addition, the Company plans to source new suppliers for manufacturing operations, rebuild the engineering and sales teams, and to the

extent appropriate, utilize third party contractors to support the operation.

The Company anticipates being able to obtain new sources

of funding to support these actions in the upcoming fiscal year.

inflation, the actions by the Federal Reserve Bank to address inflation, most notably continuing increases in interest rates, and the

volatility of energy prices create uncertainty about the future economic environment.

The Company expects that the impact of these issues

will continue to evolve.

The Company believes these factors impacted the Company’s business in fiscal 2023 and the nine months

of fiscal 2024 and will continue to impact the Company’s business in the remaining months of fiscal 2024 and fiscal 2025.

The implications

of higher government deficits and debt, tighter monetary policy, and higher long-term interest rates may drive a higher cost of capital

for the business and an increase in the Company’s operating expenses.

of the date of this filing, the COVID-19 pandemic has been declared to be officially over.

Despite this fact, there continues to be lingering

impacts of the COVID-19 pandemic in the regions in which the Company operates.

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 stemming from the outbreak and its lingering effects on the Company’s

business or results of operations, financial condition, or liquidity.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the

reported periods.

Significant estimates include assumptions made for inventory reserve, impairment testing of long-lived assets, the

valuation allowance for deferred tax assets, assumptions used in valuing derivative liabilities, assumptions used in valuing share-based

compensation, and accruals for potential liabilities.

Amounts could materially change in the future.

Actual results could differ from those estimates.

Vendor Concentration

As of August 31, 2023 and February 28, 2023, there

were four vendors who accounted for over 10 % of the Company’s consolidated accounts payable.

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.

Our primary source of revenue is the manufacture

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

Our principal sales channel is sales to a domestic distributor.

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

domestic distributor (i.e.

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

our performance obligation to the customer.

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 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.

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 August 31, 2023 and February

Actual results could differ from

those estimates.

Concentration

of November 30, 2023 and February 28, 2023, there were four vendors who accounted for over 10 % of the Company’s accounts payable.

Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification

(“ASC”) Topic 606, Revenue from Contracts with Customers.

primary source of revenue is the manufacture and delivery of generator sets used primarily in mobile power applications.

Our principal

sales channel is sales to a domestic distributor.

In accordance with ASC 606, the Company recognizes revenue, net of discounts, for our

generator sets at time of product delivery to the domestic distributor (i.e.

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

legal title to the customer and the satisfaction of our performance obligation to the customer.

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.

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

November 30, 2023 and February 28, 2023:

in thousands)

August 31, 2023

Derivative warrant liability

February 28, 2023

Derivative warrant liability

The Company estimated the fair value of the derivative

warrant liability using the Binomial Model.

The following table provides a roll-forward of

the warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended August

31, 2023 as follows:

warrant liability

Company estimated the fair value of the derivative warrant liability using the Binomial Model.

following table provides a roll-forward of the warrant derivative liability measured at fair value on a recurring basis using unobservable

level 3 inputs for the period ended November 30, 2023 as follows:

(amounts in thousands, except share data)

4 unchanged sentences

Gain on extinguishment on expiration of warrants

August 31, 2023

November 30, 2023

Reclassifications

Certain February 28, 2023 balances have been reclassified

to conform with the August 31, 2023 presentation.

In presenting the Company’s consolidated balance sheet at February 28, 2023, the

Company originally presented accrued interest of $ 1,389 and accrued payroll and other expenses of $ 441 , totaling $ 1,830 as a separate

line item called Accrued Expenses.

In presenting the Company’s consolidated balance sheet at August 31, 2023, the Company has reclassified

the balance of accrued interest of $ 1,389 as a separate line item, and the balance of accrued payroll and other expenses of $ 441 as part

of accounts payable and accrued expense.

Loss per share

The Company’s 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.

For the six-months ended August 31, 2023 and August

31, 2022, the calculations of basic and diluted loss per share are the same because potentially dilutive securities would have had an

anti-dilutive effect.

February 28, 2023 balances have been reclassified to conform with the November 30, 2023 presentation.

In presenting the

Company’s balance sheet at February 28, 2023, the Company originally presented accrued interest of $ 1,389 and accrued payroll

and other expenses of $ 441 , totaling $ 1,830 as a separate line item called Accrued Expenses.

In addition, $ 82 of accrued interest

was included in notes payable-related parties, current portion.

In presenting the Company’s balance sheet at November 30,

2023, the Company has reclassified the balance of accrued interest of $ 1,471 as a separate line item, and the balance of accrued

payroll and other expenses of $ 441 as part of accounts payable and accrued expense and reduced notes payable-related parties, current portion by $ 82 .

Company’s 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.

the nine-months ended November 30, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potentially

dilutive securities would have had an anti-dilutive effect.

The potentially dilutive securities consisted of the following:

Convertible notes

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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”).

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

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.

In 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.

Accounting Pronouncements

Adopted Accounting Pronouncements

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.

1 unchanged sentence

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

Other 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.

NOTE 2 – CONVERTIBLE NOTES PAYABLE, PAST

Convertible notes payable consisted of the following:

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 adopted ASU 2021-04 effective

March 1, 2023.

The adoption of ASU 2016-13 did not have any impact on the Company’s financial statement presentation or disclosures.

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.

2 – CONVERTIBLE NOTES PAYABLE

notes payable consisted of the following:

(amounts in thousands)

Convertible notes payable – past due

In Fiscal 2013 and 2014,

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

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 August 31, 2023

and February 28, 2023, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

NOTE 3 – CONVERTIBLE NOTE PAYABLE-RELATED

PARTY, PAST DUE

Convertible note payable – related party consisted of the following:

(a) Convertible notes payable 1 – past due

(b) Convertible notes payable 2

Unamortized debt discount

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

The notes are unsecured, bear interest

at 5 % per annum and are convertible into 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 February 28, 2023, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

the nine months ended November 30, 2023, the Company issued five convertible notes payable to unrelated individuals and entities totaling

$ 100,000 in exchange for cash.

The notes are unsecured, bear interest at rate of 10 % per annum, and mature in March 2024.

The notes payable

are convertible into shares of common stock at a conversion rate of $ 0.20 per share.

As part of the offering, the Company also

granted the note holders who participated in this offering, warrants to purchase a total of 60,000 shares of common stock, of which,

50,000 were issued to these noteholders.

The warrants are fully vested upon grant, expire in 18 months, and are exercisable into shares

of common stock at $ 0.50 per share.

The Company recorded a debt discount of $ 5 to account the relative fair value of the warrants granted.

The fair value of the warrants were computed using the BlackScholes Option Pricing Model with the following assumptions:

exercise price of $ 0.50 ;

expected life of 1.5 years;

volatility rate of 160 %;

and discount rate of 5 %.

will be amortized to interest expense over the expected term of the note payable.

of November 30, 2023, outstanding balance of convertible notes payable amounted to $ 1,503 , of which, $ 1,403 are past due.

3 – CONVERTIBLE NOTE PAYABLE-RELATED PARTY

note payable – related party consisted of the following:

(amounts in thousands)

Convertible note payable – past due

On 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, was due February 2, 2023,

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

As of August 31, 2023

and February 28, 2023, the convertible note of $ 3,000 and is past due.

NOTE 4 – NOTES

Notes payable consisted of the following:

(a) Convertible note payable 1 – past due

(b) Convertible note payable 2

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,

and was due February 2, 2023.

The convertible note is convertible into shares of common stock at a conversion price of $ 1.40 per share,

As of February 28, 2023, outstanding balance of the convertible note amounted to $ 3,000 and is past due.

the nine months ended November 30, 2023, the Company issued a convertible note payable of $ 20,000 in exchange for cash to a member of

the Company’s Board of Directors.

The convertible note is unsecured, bears interest at rate of 10 % per annum and will mature in

The convertible note payable is convertible to common stock at a conversion rate of $ 0.20 per share.

As part of the

offering, the Company also granted the note holders who participated in this offering a total of 60,000 warrants, of which, 10,000 warrants

were issued to the related party note holder (see Note 2).

of November 30, 2023, outstanding balance of the convertible notes payable-related party amounted to $ 3,020 , of which, $ 3,000 is past

4 – NOTES PAYABLE

payable consisted of the following:

(amounts in thousands)

1 unchanged sentence

(a) Note payable-EID loan

(b) Notes payable-vehicles and equipment

(b) Notes payable-vehicle, equipment and software

Unsecured notes payable

(a) Economic Injury Disaster

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

under the United States Small Business Administration (“SBA”) Economic Injury Disaster Loan (“EID Loan”) program.

The loan is due July 1, 2050, interest accrues at 3.75 % per annum, and is secured by the assets

of the Company .

(b) Notes payable-vehicle and equipment

During Fiscal 2022, the Company issued notes payable

to purchase two pieces of equipment and a vehicle for $ 329 .

The notes are secured by the equipment and vehicle purchased.

$ 210 is due October 31, 2024, and requires 36 equal monthly payments of approximately $ 6 each, including interest at 2.9 % per annum.

second note for $ 78 is due January 20, 2027, and requires 72 equal monthly payments of approximately $ 1.5 each, including interest at

10.9 % interest per annum.

As of August 31, 2023 and February 28, 2023, the balance of the two notes was $ 147 and $ 188 , respectively.

As of August 31, 2023 and February 28, 2023, the

Company has one note payable due to an individual issued in September 2015 that is payable on demand with an interest rate of 10 % per

NOTE 5 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties consisted of the following:

Economic Injury Disaster (EID) Loan

July 1, 2020, the Company received a $ 150 loan under the United States Small Business Administration (“SBA”) Economic Injury

Disaster Loan (“EID Loan”) program.

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, equipment and software

Fiscal 2022, the Company issued two notes payable to purchase equipment and a vehicle for $ 329 .

The notes are secured by the equipment

and vehicle purchased.

The first note for $ 210 is due October 31, 2024, and requires 36 equal monthly payments of approximately $ 6 , including

interest at 2.9 % per annum.

The second note for $ 78 is due January 20, 2027, and requires 72 equal monthly payments of approximately

$ 1.5 , including interest at 10.9 % interest per annum.

Fiscal 2024, the Company financed the annual subscription for engineering software for $ 155 .

The note is unsecured, due October 15, 2026

and requires 36 equal payments of approximately $ 5 , including interest at 8 % per annum.

of November 30, 2023 and February 28, 2023, the balance of the three notes was $ 278 and $ 188 , respectively.

These notes payable are secured

by the assets of the Company.

Note payable-other

of November 30, 2023 and February 28, 2023, the Company has one note payable due to an individual issued in September 2015 that is payable

on demand with an interest rate of 10 % per annum.

5 – NOTES PAYABLE-RELATED PARTIES

payable-related parties consisted of the following:

(amounts in thousands)

2 unchanged sentences

(b) Note payable- Gagerman

Accrued interest-Gagerman

Subtotal-Gagerman

(a) Kopple Note

In fiscals 2013 through 2018, the Company issued

notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate principal amount 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.

July 2017 and March 2022, the Company was engaged in litigation with Kopple relating to more than $ 13,000 of principal and accrued interest

due under the notes, and the equivalent of the approximately 23 million warrants.

On March 14, 2022, the Company reached an agreement

with Kopple and resolved 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.

Additionally, the settlement agreement

granted Koppel a five year, fully vested warrant exercisable into 3,331,664 shares of the Company’s common stock at a price of $ 0.85

per share with a fair value of $ 1,100 .

The Company assessed the settlement with Kopple

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

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 is 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.

In June 2022, the first installment of $ 3,000

became due, of which $ 150 was paid and $ 2,850 is still outstanding.

Subsequently, the note was amended several times to extend the payment

date of the remaining balance of $ 2,850 of the initial payment through January 2023, and the Company incurred extension and forbearance

fees totaling $ 335 .

In January 2023, pursuant to the terms of the amended

note payable, the Company started accruing interest on the outstanding note balance at a rate of 6 % per annum, compounded annually.

of February 28, 2023, outstanding principal balance amounted to $ 10,915 .

During the six months ended August 31, 2023, the note

was amended multiple times to extend the payment term of the remaining balance of $ 2,850 of the initial payment and installment payment

of $ 1,000 , originally due in June 2023, through August 1, 2023.

As a result of these amendments, the Company incurred extension and forbearance

fees totaling $ 390 .

In addition, the Company recorded a reduction of $ 60 to the note to adjust stated interest of 6 % to an effective interest

rate of 4.5 %.

As of August 31, 2023, outstanding balance of the note payable amounted to $ 10,855 .

Subsequent to August 31, 2023, the Company and Kopple

have agreed in principle for another extension of the deadline for payment of the $ 2,850 of the initial payment and installment payment

of $ 1,000 and intend to memorialize such an agreement in writing by end of October 2023.

Such further amendment will also indicate that

by such extension, the Company is not in default of the agreement as of August 31, 2023, and through the date that the financial statements

The settlement agreement with Kopple provides

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

remains in unsecured default in its payment obligations.

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 August 31, 2023.

(b) Note payable-Gagerman

Melvin 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.

Gagerman claims that this

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

In 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.

The Company 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.

Although the Company

disputes Gagerman’s claims, under the guidance of ASC 450 – Contingencies , the Company has recorded the claimed notes

payable and accrued interest of approximately $ 167 and $ 164 as of August 31, 2023 and February 28, 2023, respectively.

On 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, 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 August 31, 2023 and February 28, 2023, the

principal due was $ 700 , and was past due.

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

in the aggregate principal amount 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.

Between July 2017 and March 2022, the Company was engaged in litigation with Kopple relating

to more than $ 13,000 of principal and accrued interest due under the notes, and the equivalent of the approximately 23 million warrants.

March 14, 2022, the Company reached an agreement with Kopple and resolved 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

Additionally, the settlement agreement granted Koppel a five year, fully vested warrant exercisable into 3,331,664 shares of

the Company’s common stock at a price of $ 0.85 per share with a fair value of $ 1,100 .

Company assessed the settlement with Kopple under ASC 470 and determined that the guidance under troubled debt restructuring should apply.

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 is 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.

June 2022, the first installment of $ 3,000 became due, of which $ 150 was paid and $ 2,850 is still outstanding.

Subsequently, the note

was amended several times to extend the payment date of the remaining balance of $ 2,850 of the initial payment through January 2023,

and the Company incurred extension and forbearance fees totaling $ 335 .In January 2023, pursuant to the terms of the amended note payable,

the Company started accruing interest on the outstanding note balance at a rate of 6 % per annum, compounded annually.

As of February

28, 2023, outstanding principal balance amounted to $ 10,915 .

the nine months ended November 30, 2023, the note was again amended multiple times to extend the payment term of the remaining balance

of $ 2,850 of the initial payment and installment payment of $ 1,000 , originally due in June 2023, through August 1, 2023.

of these amendments, the Company incurred additional extension and forbearance fees totaling $ 390 and adjustment to principal balance

of November 30, 2023, the outstanding principal balance of amounted to $ 10,938 .

As of November 30, 2023 and the date of this report,

the Company and Kopple are currently in negotiations for another extension of the deadline for payment of the $ 3,850 , consisting of the

$ 2,850 initial payment and the installment payment of $ 1,000 .

Currently, Kopple has agreed in principle that such further amendment will

also indicate that the Company is not in default of the agreement as of November 30, 2023, and through the date that the financial statements

Based upon the foregoing no adjustments have been made to reflect the Kopple debt in default.

settlement agreement with Kopple provides for certain increases in the amounts payable to Kopple and the right of such parties to enter

a judgement against the Company if the Company remains in unsecured default in its payment obligations.

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.

Note payable-Gagerman

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.

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

claimed note payable $ 82 and corresponding accrued interest.

Jiangsu Shengfeng Note

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, 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 November 30, 2023 and February

28, 2023, the outstanding balance of this note payable amounted to $ 700 .

Company is currently in negotiations with the noteholder to settle or extinguish the note payable.

NOTE 6 – ACCRUED INTEREST

Accrued expenses consisted of the following:

Accrued interest consisted of the following:

(amounts in thousands)

Accrued interest-convertible notes payable (past due)

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

Accrued interest and fees- Kopple note payable (related party)

Accrued interest-notes payable

Accrued interest- other

Convertible notes payable (past due)

Convertible notes payable related party (past due)

Notes payable (related party)

Notes payable

NOTE 7 – LEASES

48 unchanged sentences

warrant liability:

in thousands, except share and per share data)

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

Risk free interest rate

8 unchanged sentences

Gain on extinguishment on expiration of warrants

August 31, 2023

November 30, 2023

NOTE 9 – SHAREHOLDERS’ DEFICIT

During the six-months ended August 31, 2023, the

Company issued 4,877,271 shares of common stock for approximately $ 1,610 in cash.

During the six-months ended August 31, 2022 the

Company issued 6,060,333 shares of common stock for approximately $ 1,669 .

During the nine-months ended November 30, 2023,

the Company issued 6,593,940 shares of common stock for approximately $ 2,177 in net cash.

During the nine-months ended November 30, 2022

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

Stock Options

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

ended August 31, 2023 is as follows:

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

ended November 30, 2023 is as follows:

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

Outstanding, February 28, 2023

Outstanding, August 31, 2023

There was no intrinsic value as of August 31,

Outstanding, November 30, 2023

There was no intrinsic value as of November 30,

2023, as the exercise prices of these options were greater than the market price of the Company’s stock.

The exercise prices and

information related to options under the 2011 Plan outstanding on August 31, 2023 is as follows:

information related to options under the 2011 Plan outstanding on November 30, 2023 is as follows:

Range of Exercise Price

4 unchanged sentences

Weighted Average

Exercise Price

Exercise Price of

Options Outstanding

2 unchanged sentences

Options Exercisable

$ 0.25 to $ 1.40

The Company granted no stock options under its

stock option 2011 Plan for the six-month period ended August 31, 2023 and the six-month period ended August 31, 2022.

stock option 2011 Plan for the nine-month period ended November 30, 2023 and the nine-month period ended November 30, 2022.

A summary of the Company’s warrant activity

for the six-months ended August 31, 2023 is as follows:

for the nine-months ended November 30, 2023 is as follows:

Outstanding, February 28, 2023

Outstanding, August 31, 2023

There was no intrinsic value as of August 31, 2023, as the exercise

prices of these warrants were greater than the market price of the Company’s stock.

The exercise prices and information related

to the warrants as of August 31, 2023 is as follows:

Outstanding, November 30, 2023

There was no intrinsic value as of November 30,

2023, as the exercise prices of these warrants were greater than the market price of the Company’s stock.

The exercise prices and

information related to the warrants as of November 30, 2023 is as follows:

Range of Exercise Price

4 unchanged sentences

Weighted Average

Exercise Price

Exercise Price of

Warrants Outstanding

9 unchanged sentences

a Black-Scholes model using the assumptions as set forth in the table below:

Warrants issued during the Six-Months Ended August 31, 2022

Warrants issued during the Nine-Months Ended November 30, 2022

Exercise Price

3 unchanged sentences

NOTE 10 – RELATED PARTY TRANSACTIONS

As of August 31, 2023 and February 28, 2023, Bettersea

LLC (“Bettersea”) was an 9.2 % and 9.7 %, respectively, shareholder in the Company.

For the six-months ended August 31, 2023 and August

31, 2022, the Company incurred total fees to Bettersea of $ 88 and $ 69 , respectively, for various consulting services.

As of August 31, 2023 and February 28, 2023, a

total of $ 229 and $ 216 , respectively, was due to Bettersea and included in accounts payable and accrued expenses.

As of November 30, 2023 and February 28, 2023,

Bettersea LLC (“Bettersea”) was an 9 % and 10 %, respectively, shareholder in the Company.

For the nine-months ended November 30, 2023 and

November 30, 2022, the Company incurred total fees to Bettersea of $ 117 and $ 119 , respectively, for various consulting services.

As of November 30, 2023 and February 28, 2023,

a total of $ 222 and $ 223 , respectively, was due to Bettersea and included in accounts payable and accrued expenses.

NOTE 11 – CONTINGENCIES

15 unchanged sentences

The remaining balance of approximately $ 12 is to be

paid no later than December 31, 2023 , and accrues interest of 10 % per annum until paid.

Between July 2017 and March 2022, the Company

was engaged in litigation with a former director, Robert Kopple, relating to more than $ 13,000 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

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

between 2013-2016.

In March 2022, the Company reached a settlement (the “Binding Term Sheet”) with Kopple that resolved all

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

Under the terms of the settlement, the Company agreed to pay an aggregate amount of $ 10,000 over a period of seven years ,

including $ 3,000 initial payment to be paid in June 2022.

$ 150 was paid in June 2022, and the balance of the initial payment of $ 2,850

was extended to August 1, 2023 .

The Company and Koppel have agreed in principle to another extension of the deadlines for payments owed

by the Company to Kopple and intend to memorialize such an agreement in writing on or before October 31, 2023.

Such further amendment

will also indicate that by such extension the Company is not in default on the Binding Term Sheet as of September 30, 2023, and through

the date that the financial statements are issued.

All amounts, including all accrued interest and deferred 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 (see Note 5).

paid no later than January 31, 2024, and accrues interest of 10 % per annum until paid.

July 2017 and March 2022, the Company was engaged in litigation with a former director, Robert Kopple, relating to more than $ 13,000 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 “Kopple”) claimed should have been originally issued to them pursuant to

various agreements with the Company entered into between 2013 and 2016.

In March 2022, the Company reached a settlement (the “Binding

Term Sheet”) with Kopple that resolved 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 over a period of seven years , including $ 3,000 initial payment to be paid in June 2022.

$ 150 was paid in June 2022,

and the balance of the initial payment of $ 2,850 was extended to August 1, 2023.

The Company and Koppel have agreed in principle to another

extension of the deadlines for payments owed by the Company to Kopple and intend to memorialize such an agreement in writing in January

Such further amendment will also indicate that by such extension the Company is not in default on the Binding Term Sheet

as of November 30, 2023, and through the date that the financial statements are

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

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 (see Note 5).

On March 26, 2019, various stockholders of the

33 unchanged sentences

NOTE 12 – SUBSEQUENT EVENTS

Subsequent to August 31, 2023, the Company issued

Subsequent to November 30, 2023, the Company issued

766,668 shares of common stock in exchange for cash proceeds of approximately $ 253 .

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

What changed 10-Q

Item 1. Financial Statements