What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-06-04 compared with 2023-05-26 · 216 added, 207 removed, 132 unchanged (76% of the section changed)

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this Report immediately prior to “Item 1”.

Our business is based on the

exploitation of our Axial Flux Induction Motor solution and mobile power known as the AuraGen ® for commercial and industrial

applications and the VIPER for military applications.

Our business is based on

the exploitation of our Axial Flux Induction Motor solution and mobile power known as the AuraGen ® for commercial and

industrial applications and the VIPER for military applications.

Our business model consists of two major components:

(i) sales and marketing, (ii)

design and engineering.

Our sales and marketing approaches are composed of direct sales in North America and the use of agents and distributors

in other areas.

In North America, our primary focus is in (a) mobile exportable power applications, (b) EV motor applications, (c) U.S.

(i) sales and marketing,

(ii) design and engineering.

Our sales and marketing approaches are composed of direct sales in North America and the use of agents and

distributors in other areas.

In North America, our primary focus is in (a) mobile exportable power applications, (b) EV motor applications,

Military applications and (d) industrial/commercial motor as well as mobile power applications.

The second component of our business model

is focused on the design of new products and engineering support for the sales activities described above.

The engineering support consists

of the introduction of new optimized power levels for electric motors and new features for our AuraGen ® /VIPER solution

The second component of our

business model is focused on the design of new products and engineering support for the sales activities described above.

The engineering

support consists of the introduction of new optimized power levels for electric motors and new features for our AuraGen ® /VIPER solution

such as higher power/torque solutions, and different input and output voltages (DC and AC input and output versions).

In Fiscal 2020 stockholders

of the Company successfully removed Ronald Buschur, William Anderson and Si Ryong Yu from the Company’s Board of Directors and elected

of the Company successfully removed Ronald Buschur, William Anderson and Si Ryong Yu from the Company’s Board of Directors and

Cipora Lavut, Mr.

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Robert Lempert as directors of the Company in their stead.

See Item 3, Legal Proceedings for

more information.

See Item 3, Legal Proceedings

for more information.

Also, in Fiscal 2020, Melvin Gagerman –– Aura’s CEO and CFO since 2006 –– was replaced.

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its engineering, manufacturing and marketing activities.

From July 8, 2019, the date of the change in management, through the end of Fiscal

2023, the Company shipped approximately 150 units to.

From July 8, 2019, the date of the change in management, through the end of

Fiscal 2023, the Company shipped approximately 150 units to.

Although our operations were impacted in Fiscal 2023, Fiscal 2022 and Fiscal

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During Fiscal 2018 and Fiscal

2019, the Company’s engineering, manufacturing, sales, and marketing activities were reduced while we focused on renegotiating numerous

financial obligations.

2019, the Company’s engineering, manufacturing, sales, and marketing activities were reduced while we focused on renegotiating

numerous financial obligations.

During this time, the Company’s agreements with numerous customers, third party vendors, and organizations

and entities material to the operation of the Company business were canceled, delayed or terminated.

During Fiscal 2018, the Company successfully

restructured in excess of $30 million of debt.

Robert Kopple, our former Vice Chairman of the Board, was the only significant unsecured

note holder that did not executed formal agreements regarding the restructure of his debt.

During Fiscal 2018, the Company

successfully restructured in excess of $30 million of debt.

Robert Kopple, our former Vice Chairman of the Board, was the only significant

unsecured note holder that did not executed formal agreements regarding the restructure of his debt.

Legal Proceedings”

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$10 million over a period of seven years, including $3 million initial payment to be paid in June 2022.

$150 was paid in June 2022, and the

balance of the initial payment of $2.85 million was extended to May 29, 2023.

$150 was paid in June 2022, and

the balance of the initial payment of $2.85 million was extended to May 29, 2023.

In exchange for the extension, the Company was required

to pay $165,000 in extension and forbearance fees in cash and $430 in accrued forbearance fees.

Beginning in January 2023, interest

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

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 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.

(See Part IV, Item 15, Notes 9 and 17 to the Financial Statements)

Beginning in January 2023, interest accrues

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

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 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.

During the year ended February

29, 2024, the note was amended multiple times to extend the payment dates of the balance of the initial payment of $2,850, originally

due in June 2022, and the first installment payment of $1,000, originally due in June 2023 (collectively, the “past due principal”).

As a result of these amendments, the Company incurred additional extension and forbearance fees totaling $450 and adjustment to principal

balance of $23 that was recorded as part of interest expense.

As of February 29, 2024, outstanding principal balance amounted to $10,938,

including the $3,850 past due principal (see below).

In March 2024, the Company

and Kopple again amended the note payable.

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with

the requirement to pay $2,000 due December 15, 2024, effectively extending the payment of $1,850 to future periods;

(ii) increased the

stated interest rate to 10%;

(iii) added a fee of $15 monthly until the Company makes a principal payment of $2 million by December 2024;

(iv) effective August 30, 2024, the Company will grant Kopple a conversion right that gives Kopple the option to be able to convert the

note payable into equity of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted average

price of the Company’s common stock;

(v) during Fiscal 2025, will require the Company to pay 20% of all collected revenues within

10 days of the end of each fiscal quarter;

(vi) will require the Company to pay Kopple 20% of any amount raised in new capital in the

form of equity, debt or convertible debt above $3.5 million;

(vii) reduces the exercise price of the warrants granted to Kopple in March

2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date from March 8, 2029, to March 31, 2031.

The Company will account for this amendment in the first quarter ended March 31, 2024, for fiscal year 2025.

Critical Accounting Policies and Estimates

Our management’s discussion

and analysis of our financial conditions and results of operations are based upon our financial statements, which have been prepared in

accordance with accounting principles generally accepted in the United States of America.

The preparation of financial statements requires

management to make estimates and disclosures on the date of the financial statements.

In preparing our financial statements, we have made

our best estimates and judgments of certain amounts included in the financial statements.

We use authoritative pronouncements, historical

experience and other assumptions as the basis for making judgments.

The full impact of the COVID-19 pandemic is unknown and cannot be

reasonably estimated for these key estimates and assumptions.

However, we made appropriate accounting estimates based on the facts and

circumstances available as of the reporting date.

To the extent that there are differences between these estimates and actual results,

our financial statements may be materially affected.

and analysis of our financial conditions and results of operations are based upon our financial statements, which have been prepared

in accordance with accounting principles generally accepted in the United States of America.

The preparation of financial statements

requires management to make estimates and disclosures on the date of the financial statements.

In preparing our financial statements,

we have made our best estimates and judgments of certain amounts included in the financial statements.

We use authoritative pronouncements,

historical experience and other assumptions as the basis for making judgments.

The full impact of the COVID-19 pandemic is unknown and

cannot be reasonably estimated for these key estimates and assumptions.

However, we made appropriate accounting estimates based on the

facts and circumstances available as of the reporting date.

To the extent that there are differences between these estimates and actual

results, our financial statements may be materially affected.

Revenue Recognition

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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.

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.

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.

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.

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.

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

Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for services.

The COVID-19 global pandemic

has negatively affected the global economy, disrupted global supply chains, and created extreme volatility and disruptions to capital

and credit markets in the global financial markets.

We began to see the impact of COVID-19 during our fourth quarter of Fiscal 2020 with

our Chinese joint venture’s manufacturing facilities being required to close and many of our customers suspending their own operations

due to the COVID-19 pandemic.

As a result, net sales and production levels during the fourth quarter of Fiscal 2020, Fiscal 2021, Fiscal

2022 and Fiscal 2023 were significantly reduced, thus impacting our results of operations during these periods.

In response to the COVID-19

pandemic and business disruption, we implemented certain measures to manage costs, preserve liquidity and enhance employee safety.

measures included the following:

Reduction of payroll costs through temporary furloughs;

Enhanced cleaning and disinfection procedures at our facilities, temperature checks for our workers, promotion of social distancing at our facilities and requirements for employees to work from home where possible;

Reduction of capital expenditures;

Deferral of discretionary spending.

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.

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.

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 extent of the impact of

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approximately $56 as compared to the Fiscal 2023 period of approximately $71, a reduction of approximately 21%.

Fiscal 2023 revenues

consisted principally of the delivery of 9 AuraGen ® /VIPER systems, 7 of which were to a single distributor customer.

2022 revenues consisted principally of the delivery of 8 AuraGen ® /VIPER systems, including the initial units of the Company’s

We believe that the low levels of revenue in both Fiscal 2023 and Fiscal 2022 were the result of being impacted significantly

by the COVID-19 pandemic and its impact on the global economy.

Fiscal 2024 revenues consisted

principally of the delivery of 7 AuraGen ® /VIPER systems, 5 of which were to a single distributor customer.

revenues consisted principally of the delivery of 9 AuraGen ® /VIPER systems, 7 of which were to a single distributor customer.

We believe that the low levels of revenue in both Fiscal 2024 and Fiscal 2023 were the result of the company’s switch in focus to

the development of the new family of improved products.

Cost of Goods

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$193 and $88 in the years ended February 29, 2024, and February 28, 2023, respectively.

During Fiscal 2023, we benefited from

the utilization of fully reserved inventory to deliver 9 units and recorded material cost at 32% of sales value, direct labor at 43% of

sales value and other overheads at 44% of sales.

Additionally, the Company recorded an inventory write-down of $4,000 to cost of goods

sold, which resulted in a negative gross margin of approximately $17,000 in Fiscal 2023.

The disproportionate increase in manufacturing

overhead costs resulted from higher depreciation and systems costs without an offsetting increase in production volumes.

During Fiscal 2024, the Company recorded an inventory

write-down of $123 to cost of goods sold, which contributed to a negative gross margin of approximately $137 in Fiscal 2024.

During Fiscal

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Additionally, the Company recorded an inventory write-down of

$36,000 to cost of goods sold, which resulted in a negative gross margin of approximately $24,000 in Fiscal 2022.

While both the FY 2023

and FY 2022 periods benefited from the utilization of inventory that was previously fully reserved, the new design ECU units fabricated

in those periods did include the costs of new electronics boards.

As production levels increase over time, the amount of recoverable inventory

will decline and the amount of direct material recorded within cost of goods sold will increase, reducing the gross profit contribution

of units of sales.

$4,000 to cost of goods sold, which resulted in a negative gross margin of approximately $17,000 in FY 2023.

For both FY 2024 and FY

2023, the disproportionate increase in manufacturing overhead costs resulted from higher depreciation and systems costs without an offsetting

increase in production volumes.

While both the FY 2024 and FY 2023 periods benefited from the utilization of inventory that was previously

fully reserved, the new design ECU units fabricated in those periods did include the costs of new electronics boards.

Engineering, Research and Development

Engineering, research and

development costs increased to approximately $850,000 in Fiscal 2023 from approximately $611,000 in Fiscal 2022, an increase of approximately

$239,000 or 39%.

The increase is a result of the Company’s augmented engineering activities, including (i) successfully recruiting

development costs decreased to approximately $750 in Fiscal 2024 from approximately $850 in Fiscal 2023, a decrease of approximately

The decrease is a result of the Company’s augmented engineering activities, including (i) successfully recruiting

new additions to the engineering staff;

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expenses decreased approximately $763, or 29%, to $1,873 in Fiscal 2024 from $2,636 in Fiscal 2023 due to several factors.

Most notable of these was a decrease in non-cash share-based compensation of approximately $612,000 as all stock options completed vesting

in Fiscal 2022 with no new grants in Fiscal 2023.

This was partially offset by (i) increased salary and wage-related expenses of approximately

$400,000, including higher expenses related to the sales team as well as a full year of costs for the Company’s CFO;

and (ii) increased

depreciation and software license related costs of approximately $55,000 associated with equipment and computer systems acquired in late

Fiscal 2022 and in Fiscal 2023.

Non-Operating Income, Interest Expense and

Tax Provision

Net interest expense decreased

significantly to approximately $727,000 in Fiscal 2023 from approximately $1,272,000 in Fiscal 2022, a decrease of approximately $545,000,

of these was a decrease in legal expenses of approximately $628 as Fiscal 2023 had a lot of legal expenses relating to the Kopple settlement.

There was also a decrease in selling expenses of $100 due to lower sales and a decrease in outside services of $72.

This was partially

offset by (i) increased salary and wage-related expenses of approximately $100 due to new hires in the engineering department and (ii)

increased depreciation and software license related costs of approximately $85 associated with equipment and computer systems.

Other Income (Expense) and Interest Expense

Net interest expense increased

significantly to approximately $1,465 in Fiscal 2024 from approximately $727 in Fiscal 2023, an increase of approximately $738, or 102%.

This is principally a result of the settlement of the litigation with Robert Kopple and his affiliates.

Under the terms of the

settlement, no interest was to accrue until payment of the initial $3 million, which was extended to May 2023.

In exchange for the extensions,

the company recorded $335,000 of fees which are being categorized as interest, plus note interest of approximately $52,000.

The aggregate

Kopple-related interest in Fiscal 2023 of approximately $387,000 compares to the Fiscal year 2022 Kopple-related interest of approximately

$823,000, a 53% reduction.

Extinguishment gains and favorable

changes in the fair value of the Company’s derivative warrant liabilities aggregated to an approximately $819,000 positive impact

for the Company in Fiscal 2023, an approximate $281,000 increase from the aggregate approximately $538,000 positive impact in Fiscal 2022.

The favorable fair value changes and extinguishment gains in Fiscal 2023 were principally associated with the expiration of approximately

4.7 million warrants in February 2023.

During Fiscal 2022, the Company

recorded other income of approximately $167,000 for the forgiveness of principal and accrued interest on two Payroll Protection Program

(“PPP”) loans.

The PPP loans provided for up to 100% forgiveness of the debt if the proceeds were used for specifically authorized

expenditures.

Both of the PPP loans were forgiven at 100% of principal plus accrued interest.

Under the terms of the settlement,

no interest was to accrue until payment of the initial $3 million, which was extended to May 2023.

In exchange for the extensions, the

company recorded $335 of fees which are being categorized as interest, plus note interest of approximately $52.

The aggregate Kopple-related

interest in Fiscal 2023 of approximately $387 compares to the Fiscal year 2022 Kopple-related interest of approximately $823, a 53% reduction.

We recorded net losses of

approximately $3,410,000 and $3,992,000 in the Fiscal years ended February 28, 2023 and February 28, 2022, respectively, or an increase

of income of approximately $582,000 due to several factors as note above:

(i) Fiscal 2023 included the lower interest expense of approximately

(ii) approximately $110,000 greater non-operating gains related to changes in the fair value of derivatives liabilities and

extinguishment of warrants;

(iii) decreased operating expenses in selling, marketing and general and administrative of approximately $159,000;

and (iv)increased engineering and R&D expenses of approximately $239,000 partially offsetting the other income improvements,

approximately $4,216 and $3,410 in the Fiscal years ended February 29, 2024 and February 28, 2023, respectively, or a decrease of income

of approximately $806 due to several factors as note above:

(i) Fiscal 2024 included the higher interest expense of approximately $738;

(ii) decreased operating expenses in selling, marketing and general and administrative of approximately $159;

and (iii) increased engineering

and R&D expenses of approximately $239 partially offsetting the other income improvements.

Liquidity and Capital Resources

For the year ended February

28, 2023, we recorded a net loss of approximately $3.4 million and used cash in operations of approximately $3.1 million and at February

28, 2023, had a stockholders’ deficit of approximately $20.3 million.

These conditions raise substantial doubt regarding our ability

to continue as a going concern for a period of at least one year from the date of issuance of these financial statements.

the Company’s independent registered public accounting firm, in their report on the Company’s February 28, 2023, audited financial

statements, raised substantial doubt about the Company’s ability to continue as a going concern.

29, 2024, we recorded a net loss of $4.2 million.

used cash in operations of $3 million, and at February 29, 2024, had a stockholders’

deficit of $21.5 million.

In addition, at February 29, 2024, notes payable and related accrued interest with an aggregate balance of $6.7

million have reached maturity and are past due.

These conditions raise substantial doubt regarding our ability to continue as a going

concern for a period of at least one year from the date of issuance of these financial statements.

In addition, the Company’s independent

registered public accounting firm, in their report on the Company’s February 29, 2024, audited financial statements, raised substantial

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

The net loss in Fiscal 2024

was approximately $582,000 less as compared to Fiscal 2022 due to several offsetting items, but most notably reduced interest expense

was approximately $806 higher as compared to Fiscal 2023 due to several offsetting items, but most notably increased interest expense

of approximately $738.

Fiscal 2022 also included additional expenditures to ramp up the Company’s engineering, R&D, selling

and administrative activities.

A significant factor in both periods contributing to the negative operating cash flows is the low level

of operating activities caused principally by the COVID-19 pandemic.

As a result of the impacts of the COVID-19 pandemic, we may be required

to raise additional capital and our access to and cost of financing will depend on, among other things, global economic conditions, conditions

in the global financing markets, the availability of sufficient amounts of financing, and our future prospects.

At February 28, 2023, we had

cash of approximately $15,000, compared to cash of approximately $150,000 at February 28, 2022.

Subsequent to February 28, 2023, the Company

issued 2,334,847 shares of common stock in exchange for cash proceeds of $770,120.

Working capital deficit at February 28, 2023 was a

$13.7 million deficit as compared to an $21.7 million deficit at the end of the prior fiscal year.

The principal reasons for the decrease

in the deficit is the March 2022 settlement agreement the Company reached with a related party note holder (Kopple) to resolve all outstanding

litigation between them related to notes payable and accrued interest of $12.1 million.

The February 28, 2023 financial statements reflect

the reclassification to non-current of $7.1 million of the debt to Robert Kopple and his affiliated entities (collectively the “Kopple

Parties”) as a result of the settlement.

At February 28, 2023 and February 28, 2022, we had no significant accounts receivable.

Prior to Fiscal 2020, in order

to maintain liquidity, we relied upon external sources of financing, principally equity financing and private indebtedness.

bank line of credit and will require additional debt or equity financing to fund ongoing operations.

Based on a cash flow analysis performed

by management, we estimate that we will need an additional $6 million to maintain existing operations for Fiscal 2024 and increase the

volume of shipments to customers.

We cannot assure the reader that additional financing will be available nor that the commercial targets

will be met in the amounts required to keep the business operating.

The issuance of additional shares of equity in connection with such

financing could dilute the interests of our existing stockholders, and such dilution could be substantial.

If we cannot raise the needed

funds, we will also be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability

to implement our current business plan and ultimately our viability as a company.

Fiscal 2024 also included additional expenditures to ramp up the Company’s engineering, R&D, and administrative

A significant factor in both periods contributing to the negative operating cash flows is the low level of operating activities

caused principally by the company’s switch to the development of new products and the COVID-19 pandemic.

As a result of the impacts

of the COVID-19 pandemic, we may be required to raise additional capital and our access to and cost of financing will depend on, among

other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing,

and our future prospects.

At February 29, 2024, we had cash of approximately $123, compared to cash of approximately $15 at February 28,

Subsequent to February 29, 2024, the Company issued 4,455,600 shares of common stock in exchange for cash proceeds of $1,114.

capital deficit at February 29, 2024 was a $14.9 million deficit as compared to an $13.7 million deficit at the end of the prior fiscal

The principal reasons for the increase in the deficit is an increase in Accounts Payable of $308 and accrued interest of $767 mostly

relating to the Kopple settlement.

The February 28, 2023, financial statements reflect the reclassification to non-current of $7.1 million

of the debt to Robert Kopple and his affiliated entities (collectively the “Kopple Parties”) as a result of the settlement.

Prior to Fiscal 2020, in

order to maintain liquidity, we relied upon external sources of financing, principally equity financing and private indebtedness.

have no bank line of credit and will require additional debt or equity financing to fund ongoing operations.

Based on a cash flow analysis

performed by management, we estimate that we will need an additional $6 million to maintain existing operations for Fiscal 2025 and increase

the volume of shipments to customers.

We cannot assure the reader that additional financing will be available nor that the commercial

targets will be met in the amounts required to keep the business operating.

The issuance of additional shares of equity in connection

with such financing could dilute the interests of our existing stockholders, and such dilution could be substantial.

If we cannot raise

the needed funds, we will also be forced to make further substantial reductions in our operating expenses, which could adversely affect

our ability to implement our current business plan and ultimately our viability as a company.

Between July 2017 and March

2022, the Company was engaged in litigation with a former director, Robert Kopple, relating to more than $13 million and the current equivalent

of the approximately 23 million warrants, exercisable for seven years at a price of $0.10 per share, which Mr.

Kopple and his affiliated

entities (collectively the “Kopple Parties”) claimed should have been originally issued to them pursuant to various agreements

with the Company entered to between 2013-2016.

In March 2022, the Company reached a settlement with the Kopple Parties that 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 million over a period of seven years,

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

$150 was paid in June 2022, and the balance of the initial payment of $2.85

million was extended to May 29, 2023.

In exchange for the extension, the Company was required to pay $165,000 in extension and forbearance

fees in cash and $430,000 in accrued forbearance fees.

Beginning in January 2023, interest accrues on the unpaid balance at a rate of

6%, compounded annually.

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 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.

2022, the Company was 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.

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 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 million over a period

of seven years, including $3 million initial payment to be paid in June 2022.

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

payment of $2.85 million was extended to May 29, 2023.

In exchange for the extension, the Company was required to pay $165,000 in extension

and forbearance fees in cash and $430,000 in accrued forbearance fees.

Beginning in January 2023, interest accrues on the unpaid balance

at a rate of 6%, compounded annually.

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 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.

During the year ended February

29, 2024, the note was amended multiple times to extend the payment dates of the balance of the initial payment of $2,850, originally

due in June 2022, and the first installment payment of $1,000, originally due in June 2023 (collectively, the “past due principal”).

As a result of these amendments, the Company incurred additional extension and forbearance fees totaling $450 and adjustment to principal

balance of $23 that was recorded as part of interest expense.

As of February 29, 2024, outstanding principal balance amounted to $10,938,

including the $3,850 past due principal (see below).

In March 2024, the Company

and Kopple again amended the note payable.

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with

the requirement to pay $2,000 due December 15, 2024, effectively extending the payment of $1,850 to future periods;

(ii) increased the

stated interest rate to 10%;

(iii) added a fee of $15 monthly until the Company makes a principal payment of $2 million by December 2024;

(iv) effective August 30, 2024, the Company will grant Kopple a conversion right that gives Kopple the option to be able to convert the

note payable into equity of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted average

price of the Company’s common stock;

(v) during Fiscal 2025, will require the Company to pay 20% of all collected revenues within

10 days of the end of each fiscal quarter;

(vi) will require the Company to pay Kopple 20% of any amount raised in new capital in the

form of equity, debt or convertible debt above $3.5 million;

(vii) reduces the exercise price of the warrants granted to Kopple in March

2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date from March 8, 2029, to March 31, 2031.

The Company will account for this amendment in the first quarter ended March 31, 2024, for fiscal year 2025.

We consider the transactions described above with

Kopple to be related party transactions.

Legal Proceedings”

and “Part IV, Item 15, Note 9 and Note 17 to the Financial Statements” included elsewhere in this Annual Report on Form 10-K

for information regarding the dispute and settlement with Mr.

Proceedings” and “Part IV, Item 15, Note 9 and Note 17 to the Financial Statements” included elsewhere in this Annual

Report on Form 10-K for information regarding the dispute and settlement with Mr.

Kopple regarding these transactions.

9 unchanged sentences

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 7. Management’s Discussion and Analysis