What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-01-16 compared with 2023-10-18 · 78 added, 84 removed, 252 unchanged (39% of the section changed)

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Amounts in thousands, except share and per

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the following:

Our ability to generate positive cash flow from operations;

ability to generate positive cash flow from operations;

Our ability to obtain additional financing to fund our operations;

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the impact of COVID-19 on our operations.

Our engineering, research and development costs for the six months ended August 31, 2023, and

the six months ended August 31, 2022 were approximately $494 and $411, respectively.

During the three months ended May 31, 2021, we relocated

all administrative offices and operations to a new state-of-the-art facility consisting of approximately 18,000 square feet in Lake Forest,

Our engineering, research and development costs for the nine months ended November 30, 2023,

and the nine months ended November 30, 2022 were approximately $228 and $411, respectively.

During the three months ended May 31, 2021,

we relocated all administrative offices and operations to a new state-of-the-art facility consisting of approximately 18,000 square feet

in Lake Forest, California.

This new facility is wholly occupied by Aura.

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There were no changes to our critical accounting policies described

in the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023, that

impacted our condensed financial statements and related notes included herein.

in the financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023, that impacted our

condensed financial statements and related notes included herein.

Revenue Recognition

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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

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

in 2024 and 2025.

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Results of Operations

Three months ended August 31, 2023 compared

to three months ended August 31, 2022

Three months ended November 30, 2023 compared

to three months ended November 30, 2022

Net revenue was $47 for the three-months ended

August 31, 2023 compared to $10 for the three-months ended August 31, 2022.

November 30, 2023 compared to $54 for the three-months ended November 30, 2022.

Revenues continue to be negatively impacted due to a generally

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Cost of goods sold was $98 in the three-months

ended August 31, 2023 compared to $95 for the three-months ended August 31, 2022.

This resulted in a gross loss of $80 compared to a gross

loss of $85 for the three-months ended August 31, 2022.

The gross loss and related gross margin loss for both the three-month periods

were largely influenced by the low volume of shipments in this quarter which reduced our ability to fully absorb fixed operating costs.

In addition, the gross margin loss in the three-months ended August 31, 2023 included an increase in the inventory reserve of $58.

ended November 30, 2023 compared to $26 for the three-months ended November 30, 2022.

This resulted in a gross loss of $52 compared to

a gross profit of $28 for the three-months ended November 30, 2022.

The gross loss and related gross margin loss for both the three-month

periods were largely influenced by the low volume of shipments in this quarter which reduced our ability to fully absorb fixed operating

In addition, the gross margin loss in the three-months ended November 30, 2023 included an increase in the inventory reserve of

Engineering, research and development expenses

were $287 in the three-months ended August 31, 2023, compared to $244 for the three-months ended August 31, 2022.

The increase was due

to increased development by the engineering staff of the new prototype for our new product line.

were $34 in the three-months ended November 30, 2023, compared to $229 for the three-months ended November 30, 2022.

The decrease was

due to decreased development by the engineering staff of the new prototype for our new product line as we get closer to completion.

Selling, general and administration (“SG&A”)

expenses decreased by $213 or 38% to $342 in the three-month period ending August 31, 2023 compared to the three-months ended August 31,

The decrease was principally attributed to lower legal costs of $73, lower audit fees of $42 and lower selling fees of $83 due to

expenses decreased by $113 or 19% to $494 in the three-month period ending November 30, 2023 compared to the three-months ended November

The decrease was principally attributed to lower legal costs of $142, and lower selling fees of $5 due to lower sales.

Interest expense increased $71 during the three-months

ended August 31, 2023 compared to the three-months ended August 31, 2022 due principally to the settlement of the Kopple litigation which

resulted in the conversion of the Kopple notes payable into a new note.

The new note did not accrue interest until January 2023, so the

three-months ended August 31, 2022 did not include any Kopple-based interest.

Six months ended August 31, 2023 compared to

six months ended August 31, 2022

Net revenue was approximately $10 for the six-months

ended August 31, 2023 (“Fiscal Q2 2024”) compared to approximately $17 for the six-months ended August 31, 2022 (“Fiscal

Revenues continue to be negatively impacted by both the lingering effects of the COVID-19 pandemic, as well as a generally

low level of resources.

We cannot project with confidence the timing or amount of revenue that we can expect despite improvements in the

pandemic being under more control globally including a successful rollout of the vaccine programs.

To increase revenues which were impacted

by the economic effects of the pandemic, the Company needs to augment its marketing and sales efforts substantially.

As the Company’s

focus has been on new product engineering and development, the current limited resources prevent executing the increased selling efforts

in the near term.

Cost of goods sold was approximately $95 in Fiscal

Q2 2024 compared to approximately $30 in Fiscal Q2 2023.

This resulted in a gross loss of approximately $85 or a gross margin loss of

815%, and approximately $13 gross loss and a gross margin loss of 79%, in Fiscal Q2 2024 and Fiscal Q2 2023, respectively.

The gross loss

and related gross margin loss for both the six-month periods were largely influenced by the low volume of shipments in both quarters which

reduced our ability to fully absorb fixed operating costs.

In addition, the gross margin loss in Fiscal Q2 2024 included an increase in

the inventory reserve of $58.

ended November 30, 2023 compared to the three-months ended November 30, 2022 due principally to the settlement of the Kopple litigation

which resulted in the conversion of the Kopple notes payable into a new note.

The new note did not accrue interest until January 2023,

so the three-months ended November 30, 2022 did not include any Kopple-based interest.

Nine months ended November 30, 2023 compared

to nine months ended November 30, 2022

Net revenue was approximately $57 for the nine-months

ended November 30, 2023 (“Fiscal Q3 2024”) compared to approximately $70 for the nine-months ended November 30, 2022 (“Fiscal

Revenues continue to be negatively due to a generally low level of resources of our Legacy products as we concentrate

on building our new product line.

To increase revenues which were impacted by the economic effects of the pandemic, the Company needs

to augment its marketing and sales efforts substantially towards our new product line to be released in early Fiscal 2025.

Cost of goods sold was approximately $194 in

Fiscal Q3 2024 compared to approximately $56 in Fiscal Q3 2023.

This resulted in a gross loss of approximately $137 or a gross

margin loss of 239%, and approximately $15 gross profit and a gross margin gain of 21%, in Fiscal Q3 2024 and Fiscal Q3 2023,

respectively.

The gross loss and related gross margin loss for both the nine-month periods were largely influenced by the low volume

of shipments in both quarters which reduced our ability to fully absorb fixed operating costs.

In addition, the gross margin loss in

Fiscal Q3 2024 included an increase in the inventory reserve of $32.

Engineering, research and development expenses

were approximately $494 in Fiscal Q2 2024, compared to approximately $411 in the Fiscal Q2 2023, or an increase of 20%.

were approximately $528 in Fiscal Q3 2024, compared to approximately $640 in the Fiscal Q3 2023, or a decrease of 18%.

Fiscal Q2 2024

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Selling, general and administration (“SG&A”)

expenses decreased by approximately $556 or 40% to approximately $850 in the Fiscal Q2 2024 period from approximately $1,406 in the Fiscal

Q2 2023 period.

expenses decreased by approximately $684 or 34% to approximately $1,344 in the Fiscal Q3 2024 period from approximately $2,028 in the

Fiscal Q3 2023 period.

The decrease during Fiscal Q3 2024 was principally attributed to lower legal costs of $548 almost exclusively related

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Other income in the Fiscal Q3 2024 period was

approximately $8 which represents the favorable change in the fair value of the derivative warrant liability for the six-months, measured

as of August 31, 2023.

Comparatively, the revaluation of the derivative warrant liability in Fiscal Q2 2023, measured as of August 31,

2022, resulted in a favorable change in the fair value of approximately $741 for the six-month period.

Net loss for the six-month period of Fiscal Q2

2024 increased by approximately $943, to a loss of approximately $2,261 from a net loss of approximately $1,318 in the six-month period

approximately $9 which represents the favorable change in the fair value of the derivative warrant liability for the nine-months, measured

as of November 30, 2023.

Comparatively, the revaluation of the derivative warrant liability in Fiscal Q3 2023, measured as of November

30, 2022, resulted in a favorable change in the fair value of approximately $560 for the nine-month period.

Net loss for the nine-month period of Fiscal Q3

2024 increased by approximately $589, to a loss of approximately $3,171 from a net loss of approximately $2,582 in the nine-month period

of Fiscal Q3 2023.

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Going Concern

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

During the nine-month period ended November 30,

2023, the Company reported a net loss of $3,171 and used cash in operating activities of approximately $2,178.

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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.

At August 31, 2023, we had cash of approximately

anticipate being able to obtain new sources of funding to support these actions in the upcoming fiscal year.

At November 30, 2023, we had cash of approximately

$45, compared to cash of approximately $15 at February 28, 2023.

Subsequent to August 31, 2023, the Company issued 796,970 shares of common

stock in exchange for cash proceeds of approximately $263.

Working capital deficit at August 31, 2023 was a $14,400 deficit as compared

to an $13,700 deficit at February 28, 2023.

At August 31, 2023 and February 28, 2023, we had no accounts receivable.

Subsequent to November 30, 2023, the Company issued 766,668 shares of

common stock in exchange for cash proceeds of approximately $253.

Working capital deficit at November 30, 2023 was a $14,600 deficit as

compared to an $13,700 deficit at February 28, 2023.

At November 30, 2023 and February 28, 2023, we had no accounts receivable.

Prior to Fiscal 2020, in order to maintain liquidity,

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Kopple and his affiliated entities (collectively

the “Kopple”) 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 (the “Binding Term Sheet”) with Kopple that resolves

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

of the Company.

the “Kopple”) 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 (the “Binding Term Sheet”) with Kopple that resolves 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, we have agreed to pay an aggregate amount of $10,000 over a period of seven years;

of which was originally to be paid in June 2022, and subsequently extended to August 1, 2023.

Beginning in January 2023, interest

began to accrue on the unpaid balance at a rate of 6%, compounded annually.

All amounts, including all accrued interest and deferred

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

As of the date of this report, the Company

has not yet paid the full $3,000 installment due to Kopple;

Beginning in January 2023, interest began

to accrue on the unpaid balance at a rate of 6%, compounded annually.

All amounts, including all accrued interest and deferred forbearance

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

As of the date of this report, the Company has not

yet paid the full $3,000 installment due to Kopple;

having only made a partial payment of $150 in June 2022.

The Company and

Koppel have agreed in principle to another extension of the deadlines for payments owed by Aura to Plaintiffs 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 (See Part I, Note 5 to the Financial Statements).

The Company and Koppel have

agreed in principle to another extension of the deadlines for payments owed by Aura to Plaintiffs and intend to memorialize such an agreement

in writing on or before January 31, 2024.

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

on the Binding Term Sheet (See Part I, Note 5 to the Financial Statements).

Legal Proceedings” and

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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 2. Management’s Discussion and Analysis