What changed in this filing

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Item 9A. Controls and Procedures

2024-06-04 compared with 2023-05-26 · 862 added, 875 removed, 623 unchanged (74% of the section changed)

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effectiveness of the Company’s internal control over financial reporting as of February 29, 2024.

In making these assessments, management

used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated

Based on these assessments, and on those criteria, the Company’s management concluded that as of February 28, 2023, the

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

In making these assessments,

management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in

Internal Control-Integrated Framework.

Based on these assessments, and on those criteria, the Company’s management concluded that

as of February 29, 2024, the Company’s internal control over financial reporting was effective to provide reasonable assurance

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

generally accepted accounting principles.

Remediation of Prior Material Weaknesses

We previously identified and

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

internal control over financial reporting that existed relating to (1) ineffective controls over transactions for debt issuances to provide

for review of all terms in a timely and accurate manner, to ensure reporting is in conformity with generally accepted accounting principles

and properly reflected in the financial results;

and (2) ineffective controls over transactions for issuances of common stock, options,

and warrants to provide for review of all terms in a timely and accurate manner, to ensure reporting is in conformity with generally accepted

accounting principles and properly reflected in the financial results.

We increased our personnel resources and technical accounting expertise

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

We intend to hire one or more additional personnel

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

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

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

including equity and debt transactions.

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

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

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

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

28, 2022, have been remediated as of February 28, 2023.

Changes in Internal Control Over Financial Reporting

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

other than the improvements noted above.

Inherent Limitations on Effectiveness of Controls

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that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud.

control procedure, no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of

the control procedure are met.

Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute

assurance that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include

the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally,

controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of

The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events,

and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

control procedure, no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives

of the control procedure are met.

Because of the inherent limitations in all control procedures, no evaluation of controls can provide

absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations

include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management

override of the control.

The design of any control procedure also is based in part upon certain assumptions about the likelihood of future

events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures

may deteriorate.

Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur

and not be detected.

OTHER INFORMATION

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections.

Regarding Foreign Jurisdictions that Prevent Inspections.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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As a result of Aura’s refused to

recognize the legal effectiveness of the consents, in April 2019, stockholders filed suit in the Court of Chancery of the State of

Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking an order confirming the validity of the consents.

recognize the legal effectiveness of the consents, in April 2019, stockholders filed suit in the Court of Chancery of the State

of Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking an order confirming the validity of the consents.

On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur,

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Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

As a result of prior management’s unsuccessful opposition to this

stockholder action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs from

the Company under Delaware’s corporate benefit doctrine and/or other legal provisions.

To date, no final determination has been

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

As a result of prior management’s unsuccessful opposition to

this stockholder action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs

from the Company under Delaware’s corporate benefit doctrine and/or other legal provisions.

To date, no final determination has

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

In July 2019 the employment

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Mann to succeed Mr.

Gagerman as Chief Financial Officer of the Company,

and appointed Dr.

Gagerman as Chief Financial Officer of the

Company, and appointed Dr.

Lempert Secretary of Aura.

In February 2022, the Board of Directors appointed Mr.

Steven Willett to succeed Mr.

as the Company’s Chief Financial Officer.

Steven Willett to succeed

Mann as the Company’s Chief Financial Officer.

Mann remains on the Board of Directors.

The following table sets forth

the names, ages, and offices of all our current directors and executive officers.

Our officers are appointed by, and serve at the pleasure

of, the Board of Directors.

The following table sets

forth the names, ages, and offices of all our current directors and executive officers.

Our officers are appointed by, and serve at the

pleasure of, the Board of Directors.

The stockholders at the annual meeting elect our directors to serve until the next meeting.

Gary Douglas (1)

Director, Member of the Audit Committee

Salvador Diaz-Verson, Jr.

Diaz-Verson, Jr.

Director, Chairman of the Audit Committee

David Mann (2), (3)

Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of the Audit Committee, former Chief Financial Officer

Cipora Lavut (2)

Mann (2), (3)

Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of

the Audit Committee, former Chief Financial Officer

President, Chairman of the Board, Member of Nominating Committee and Member of the Compensation Committee

Robert Lempert (2)

Secretary, Director, Chairman of the Nominating Committee and Member of the Compensation Committee

Steven Willett (4)

Chief Financial Officer

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Diaz-Verson, Jr.

were appointed to the Board of Directors on March 29, 2018 by the written consent of stockholders holding a majority of the Company’s shares.

In March 2019, stockholders of the Company controlling a combined total of more than 27.5 million shares delivered signed written consents to the Company electing Ms.

were appointed to the Board of Directors on March 29, 2018, by the written consent of stockholders holding

a majority of the Company’s shares.

March 2019, stockholders of the Company controlling a combined total of more than 27.5 million shares delivered signed written consents

to the Company electing Ms.

Lempert to the Company’s Board of Directors.

Because of Aura’s refusal to recognize the legal effectiveness of the consents, in April 2019 the stockholders filed suit in the Court of Chancery of the State of Delaware seeking an order confirming the validity of the elections.

On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs, confirming that Ms.

Lempert had been validly elected by the holders of a majority of the Company’s outstanding stock acting by written consent.

Because of Aura’s refusal

to recognize the legal effectiveness of the consents, in April 2019 the stockholders filed suit in the Court of Chancery of the

State of Delaware seeking an order confirming the validity of the elections.

On July 8, 2019, the Court of Chancery entered final judgment

in favor of the stockholder plaintiffs, confirming that Ms.

Lempert had been validly elected by the holders of

a majority of the Company’s outstanding stock acting by written consent.

In July 2019, the Board of Directors appointed Ms.

Lavut President and Chairman of the Board, appointed Mr.

President and Chairman of the Board, appointed Mr.

Mann as Chief Financial Officer and appointed Dr.

Lempert as Secretary.

On February 14, 2022, Mr.

February 14, 2022, Mr.

Mann resigned as Chief Financial Officer.

On February 14, 2022, Mr.

Willett was appointed as Chief Financial Officer.

Biographical information with respect to our current directors and

executive officer is provided below.

August 15, 2023, Mr.

Campbell was appointed as Chief Financial Officer.

Biographical information with respect to our

current directors and executive officer is provided below.

Salvador Diaz-Versón,

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was elected as a director on March 29, 2018.

Previously, he served as a director of the Company

from 1997-2005 and again from June 2007 until January 2018.

Previously, he served as a director of the

Company from 1997-2005 and again from June 2007 until January 2018.

Diaz-Versón, Jr.

is the founder, Chairman and President of

Diaz-Verson Capital Investments, Inc., and was a registered investment advisor with the Securities and Exchange Commission until

is the founder, Chairman and President

of Diaz-Verson Capital Investments, Inc., and was a registered investment advisor with the Securities and Exchange Commission until

Diaz-Versón, Jr.

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first by President George H.W.

Bush in 1992 and subsequently by President

Clinton in 2000.

Bush in 1992 and subsequently by

President Clinton in 2000.

Diaz-Versón, Jr.

is a trustee of the Florida State University Foundation and is a national trustee of

the Boys and Girls Club of America.

is a trustee of the Florida State University Foundation and is a national

trustee of the Boys and Girls Club of America.

He also serves as a trustee of Clark Atlanta University.

Diaz-Versón, Jr.

is a graduate

of Florida State University and was selected as a director in view of his lengthy experience in managing companies and his knowledge

of capital investments.

is a graduate of Florida State University and was selected as a director in view of his lengthy experience in managing companies

and his knowledge of capital investments.

Gary Douglas .

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2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11, 2018.

been a significant investor, shareholder and an active advocate of Aura’s technology for more than 20 years.

has been a significant investor, shareholder and an active advocate of Aura’s technology for more than 20 years.

Mann has been Vice President of Marketing for Mann Marketing, a manufacturing and import company, since 1990 and the Vice President

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Laurent, Montreal, Canada.

Steven Willett .

Willett was previously employed by Govino, LLC, where he has served as CFO and Vice President of Finance since 2017.

Willett served as Director of Finance for the Americas of Identiv, Inc., and prior to that, as Director of Finance of aerospace

& defense contractor Trex Enterprises Corporation.

Willett holds a Bachelor of Science degree in accounting from the University

of Massachusetts and an M.B.A.

with a concentration in finance from Bentley University McCallum Graduate School of Business.

Gary Campbell .

Campbell has a BA degree in Business & Finance from University of Western Ontario in Canada.

He has obtained a professional CPA

designation in both Canada and the USA.

He spent 8 years in audit working for E&Y and Withey Addison in Canada.

He has international

business exposure in the reinsurance industry as VP of Finance for American Safety Insurance while living in Bermuda.

He served as CFO

for both a private boarding school and a payroll outsourcing company while living in Hawaii.

Since moving to California 11 years ago,

he has been doing contract work for many different industries as Controller or fractional CFO.

Prior to joining Aura Systems Inc., he

spent 4 years as the Controller for the public company Charlie’s Holdings Inc., which sells its products in 80 different countries.

Delinquent Section 16(a) Reports

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an amendment to, or a waiver from, the provision of our Code of Ethics that applies to our principal executive officer, principal financial

officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of such provision

of our Code of Ethics by posting such information on our website within four business days of the date of such amendment or waiver.

the case of a waiver, the nature of the waiver, the name of the person to whom the waiver was granted and the date of the waiver will

also be disclosed.

officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of such

provision of our Code of Ethics by posting such information on our website within four business days of the date of such amendment or

In the case of a waiver, the nature of the waiver, the name of the person to whom the waiver was granted and the date of the

waiver will also be disclosed.

Family Relationships

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Audit Committee .

Audit Committee does not have a formal charter but is responsible primarily for overseeing the services performed by our independent registered

public accounting firm, evaluating our accounting policies and system of internal controls, and reviewing our annual and quarterly reports

before filing with the Securities and Exchange Commission.

Audit Committee does not have a formal charter but is responsible primarily for overseeing the services performed by our independent

registered public accounting firm, evaluating our accounting policies and system of internal controls, and reviewing our annual and quarterly

reports before filing with the Securities and Exchange Commission.

The current members of the Audit Committee are Mr.

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an “audit committee financial expert” as such term is defined by the rules and regulations of the Securities and Exchange

While the Board recognizes that the Board members serving on the Audit Committee do not meet the qualifications required of

an “audit committee financial expert,” the Board believes that the appointment of a new director to the Board of Directors

and to the Audit Committee at this time is not necessary as the level of financial knowledge and experience of the current member of the

Audit Committee, including such member’s ability to read and understand fundamental financial statements, is sufficient to adequately

discharge the Audit Committee’s responsibilities

While the Board recognizes that the Board members serving on the Audit Committee do not meet the qualifications required

of an “audit committee financial expert,” the Board believes that the appointment of a new director to the Board of Directors

and to the Audit Committee at this time is not necessary as the level of financial knowledge and experience of the current member of

the Audit Committee, including such member’s ability to read and understand fundamental financial statements, is sufficient to

adequately discharge the Audit Committee’s responsibilities

Compensation Committee .

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to be paid to the Chairman and Chief Executive Officer;

reviews and approves the amounts and types of compensation to be paid to our other

executive officers and the non-employee directors;

reviews and approves, on behalf of the Board, salary, bonus and equity guidelines for

our other employees;

reviews and approves the amounts and types of compensation to be paid to our

other executive officers and the non-employee directors;

reviews and approves, on behalf of the Board, salary, bonus and equity guidelines

for our other employees;

and administers our equity plans.

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The Nominating Committee does not have a formal charter but assists the Board in identifying qualified individuals to become directors,

determines the composition of the Board and its committees, monitors the process to assess the Board’s effectiveness and helps develop

and implement our corporate governance guidelines.

determines the composition of the Board and its committees, monitors the process to assess the Board’s effectiveness and helps

develop and implement our corporate governance guidelines.

The Nominating Committee also considers nominees proposed by stockholders.

The Nominating

Committee currently consists of Mr.

The Nominating Committee currently consists of Mr.

David Mann, Ms.

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EXECUTIVE COMPENSATION

The following table sets forth

the compensation earned by or paid to the principal executive officer and the named executive officers during the Fiscal years ended February

28, 2023 and February 28, 2022.

The following table sets

forth the compensation earned by or paid to the principal executive officer and the named executive officers during the Fiscal years

ended February 29, 2024 and February 28, 2023.

2022 Summary Compensation Table

Option Awards

Non-Equity Incentive Compensation

All Other Compensation

Name and Principal Position

Steven Willett

and Principal Position

Gary Campbell

Chief Financial Officer

For Fiscal 2024, Ms.

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

has been accruing an annual salary of $250,000 and has been paid $204,713 in cash over the same period, deferring the balance.

For Fiscal 2023, Ms.

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

Willett began serving as Chief Financial Officer in February 2022.

The amount in the table for Fiscal 2022 represents the pro rata compensation received for the two-week period since his appointment.

has been accruing an annual salary of $250,000 and has been paid $269,315 in cash over the same period, as she was paid out a portion

of her previously deferred wages balance.

For Fiscal 2024, Mr.

began serving as Chief Financial Officer in August 2023.

The amount in the table represents the pro rata compensation received for

the seven-month period since his appointment.

Outstanding Equity Awards at 2024 Fiscal Year-End

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Price of Options

Cipora Lavut, President and Board Chair

Salvador Diaz-Verson, Jr., Director

Gary Douglas, Director

David Mann, Director

Robert Lempert, Director

Lavut, President and Board Chair

Salvador Diaz-Verson,

Jr., Director

Gary Douglas,

Robert Lempert,

Option Exercises and Stock Vesting During Fiscal 2024

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No stock options were exercised

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

Also, during Fiscal 2022, stock options granted in Fiscal

2021 became fully vested.

On December 10, 2020, the Board of Directors approved the grant of an aggregate total of 1,000,000 options to

acquire the Company’s common stock to four of the five current Board members in varying amounts for services provided outside of

standard Board responsibilities under the Company’s 2011 Plan.

The options were granted with pro rata monthly vesting over a one-year

vesting period, with a five-year expiration term, and with an exercise price of $0.25 per option share.

The Company recognized approximately

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

during Fiscal 2024 or Fiscal 2023 by the individuals named in the Summary Compensation Table.

Also, during Fiscal 2022, stock options

granted in Fiscal 2021 became fully vested.

On December 10, 2020, the Board of Directors approved the grant of an aggregate total of

1,000,000 options to acquire the Company’s common stock to four of the five current Board members in varying amounts for services

provided outside of standard Board responsibilities under the Company’s 2011 Plan.

The options were granted with pro rata monthly

vesting over a one-year vesting period, with a five-year expiration term, and with an exercise price of $0.25 per option share.

Employment Contracts, Termination of Employment Contracts and Change

in Control Arrangements

We do not currently have any

employment agreements with any of our Named Executive Officers.

We do not currently have

any employment agreements with any of our Named Executive Officers.

Potential Payments to the Named Executive Officers Upon Termination

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

The following table sets forth,

to the extent of our knowledge, certain information regarding our common stock owned as of June 30, 2020 (i) by each person who is known

to be the beneficial owner of more than 5% of our outstanding common stock, (ii) by each of our Directors and the named executive officers

in the Summary Compensation Table, and (iii) by all Directors and current executive officers as a group:

Beneficial Ownership Table

Beneficial Owner (1)

Salvador Diaz-Verson, Jr.

Gary Douglas (3)

Cipora Lavut (4)

The following table sets

forth, to the extent of our knowledge, certain information regarding our common stock owned as of February 29, 2024 (i) by each person

who is known to be the beneficial owner of more than 5% of our outstanding common stock, (ii) by each of our Directors and the named

executive officers in the Summary Compensation Table, and (iii) by all Directors and current executive officers as a group:

Ownership Table

Diaz-Verson, Jr.

Robert Lempert

David Mann (6)

Steven Willett (7)

All current executive officers and Directors as a group

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

Gary Campbell

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

5% Stockholders

Warren Breslow (8)

Elimelech Lowy (9)

BetterSea LLC (10)

Robert Kopple (11)

Less than 1% of outstanding

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Includes the right to convert $3,000,000 and accrued interest of $863,322 convertible note payable to 2,759,516 common shares at a conversion price of $1.40.

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

Lowy has sole dispositive power.

Includes common shares only as of February 29, 2024.

Includes warrants to purchase 3,331,664 shares exercisable within 60 days of February 29, 2024.

Securities Authorized for Issuance Under Equity Compensation Plans

as of February 28, 2023

Securities Authorized for Issuance Under Equity Compensation

Plans as of February 29, 2024

Equity Compensation Plan Information as of February 29, 2024

Plan Category

Securities to be

(Excluding Securities

Equity compensation plans approved by equity holders

Equity compensation plans not approved by equity holders

Reflects options under the 2006 Stock Option Plan and the 2011 Stock Option Plan, of which both were approved by Company shareholders.

Additionally, it includes options which were authorized by the Board but cannot be issued until the proposal for renewal of the employee stock option plan is approved by the shareholders.

The 2006 Stock Option Plan authorizes the Company to grant stock options exercisable for up to an aggregate number of shares of common stock equal to the greater of (i) 10,000,000 shares of common stock, or (ii) 10% of the number of shares of common stock outstanding from time to time.

The 2011 Stock Option Plan authorizes the Company to grant stock options or warrants to executive officers and directors exercisable for up to an aggregate number of shares equivalent to 15% of the number of shares of common stock outstanding from time to time.

The numbers in this table are as of February 28, 2023 (See Note 13 to the Financial Statements).

compensation plans approved by equity holders

compensation plans not approved by equity holders

Reflects options under

the 2006 Stock Option Plan and the 2011 Stock Option Plan, of which both were approved by Company shareholders.

Additionally, it

includes options which were authorized by the Board but cannot be issued until the proposal for renewal of the employee stock option

plan is approved by the shareholders.

The 2006 Stock Option Plan authorizes the Company to grant stock options exercisable for up

to an aggregate number of shares of common stock equal to the greater of (i) 10,000,000 shares of common stock, or (ii) 10% of the

number of shares of common stock outstanding from time to time.

The 2011 Stock Option Plan authorizes the Company to grant stock

options or warrants to executive officers and directors exercisable for up to an aggregate number of shares equivalent to 15% of

the number of shares of common stock outstanding from time to time.

The numbers in this table are as of February 29, 2024 (See Note

13 to the Financial Statements).

For additional information regarding options and

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for the review and approval of all related party transactions required to be disclosed to the public under SEC rules.

This procedure has

been established by our Board of Directors in order to serve the interests of our shareholders.

This procedure

has been established by our Board of Directors in order to serve the interests of our shareholders.

Related party transactions are reviewed

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

Prior to the engagement

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

The following

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

(amounts in thousands)

The following table sets

forth the aggregate fees billed to us by Weinberg for the year ended February 29, 2024, and for the year ended February 28, 2023:

in thousands)

Audit-related fees

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in connection with statutory and regulatory filings or engagements for those Fiscal years;

(ii) “audit-related fees” are fees

for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of

our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services

rendered by our principal accountant for tax compliance, tax advice, and tax planning;

and (iv) “all other fees” are fees

for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related

fees,” and “tax fees.”

(ii) “audit-related fees” are

fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review

of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional

services rendered by our principal accountant for tax compliance, tax advice, and tax planning;

and (iv) “all other fees”

are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,”

“audit-related fees,” and “tax fees.”

Services provided to us by

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of the year ended February 29, 2024.

Services provided to us by

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

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

years ended February 28, 2022.

Audit Related Fees

Weinberg did not provide any

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

BFB CPA did not provide any

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

Weinberg did not provide any

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

BFB CPA did not provide any

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

Weinberg did not provide

any professional services to us during Fiscal 2024 or Fiscal 2023 which would constitute “audit related fees”.

Weinberg did not provide

any professional services to us during Fiscal 2024 or Fiscal 2023 which would constitute “tax fees”.

All Other Fees

Weinberg did not provide any

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

BFB CPA did not provide any

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

Policy on Audit Committee Pre-Approval of Audit

and Permissible Non-Audit Services of Independent Auditors

Weinberg did not provide

any professional services to us during Fiscal 2024 or Fiscal 2023 which would constitute “other fees”.

Policy on Audit Committee Pre-Approval of

Audit and Permissible Non-Audit Services of Independent Auditors

Under the SEC’s rules,

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accounting firm in order to ensure that they do not impair the auditors’ independence.

The SEC’s rules specify the types of

non-audit services that an independent auditor may not provide to its audit client and establish the Audit Committee’s responsibility

The SEC’s rules specify the types

of non-audit services that an independent auditor may not provide to its audit client and establish the Audit Committee’s responsibility

for administration of the engagement of the independent registered public accounting firm.

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any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.

The independent

auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent

auditors in accordance with this pre-approval, and the fees for the services performed to date.

The Audit Committee may also pre-approve

particular services on a case-by-case basis.

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

in accordance with this policy.

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

with this policy.

independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided

by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date.

The Audit Committee

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

During Fiscal 2024 and Fiscal 2023 all services provided by Weinberg

were pre-approved by the Audit Committee in accordance with this policy.

There were no hours expended

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See Index to Financial Statements at page F-1

Financial Statement Schedules

Financial Statement

See Index to Financial Statements at page F-1

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

Indicates a management contract or compensatory plan or arrangement.

Indicates a management

contract or compensatory plan or arrangement.

In accordance with SEC Release 33-8238,

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XBRL (Extensible

Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of

Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange

Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes

of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Pursuant to the requirements of Section 13 or

15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,

thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15 (d) of the Securities

Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AURA SYSTEMS, INC.

/s/ Cipora Lavut

Pursuant to the requirements of the Securities

1 unchanged sentence

on the date indicated.

/s/ Cipora Lavut

President (Principal Executive Officer), Board Chair

/s/ Gary Campbell

Chief Financial Officer (Principal Financial Officer)

Steven Willett

Gary Campbell

/s/ David Mann

/s/ Robert Lempert

Robert Lempert

16 unchanged sentences

of Aura Systems, Inc.

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

deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February

28, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

(the “Company”) as of February 29, 2024, and February 28, 2023, the related statements of operations,

stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of February 29, 2024, and February 28, 2023, and the results of its operations and its cash flows for the years then ended, in conformity

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

Going Concern

2 unchanged sentences

As discussed in Note 1 to the financial statements, during the year

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

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

reached maturity and are past due.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1 to the financial statements.

The financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

ended February 29, 2024, the Company incurred 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 matters raise substantial doubt about the Company’s

ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1 to the financial

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

16 unchanged sentences

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

Our audits included performing procedures to

assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well

as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is

a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the

audit committee and that:

The critical audit matter communicated below

is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to

the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially

3 unchanged sentences

on the critical audit matters or on the accounts or disclosures to which it relates.

Troubled debt restructuring

Going Concern Analysis

As described in Note 1 to the financial statements,

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

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

As part of the agreement, the Company also issued warrants

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

Management assessed the settlement agreement and determined that the accounting

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

a concession.

We identified the accounting for the troubled

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

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

This required a high degree of

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

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

We obtained supporting

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

troubled debt restructuring.

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

We recalculated the fair

value of the warrants issued.

We evaluated management’s

accounting conclusions regarding the troubled debt restructuring.

We assessed the sufficiency

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

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

for the year ended February 29, 2024, the Company 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.

The conditions described in Note 1 raise substantial

doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance

of the financial statements.

We identified the going concern analysis and

evaluation of the related disclosures as a critical audit matter because of the significant judgements and assumptions made by management

in developing its cash flow forecast and the risk of bias in management’s judgments and assumptions in estimating these cash flows.

There was a high degree of auditor judgement and subjectivity in performing our procedures to evaluate the reasonableness of the cash

flow forecast.

The primary procedures we performed to address

this critical audit matter included:

● We obtained management’s

cash flow forecast and evaluated the reasonableness of the cash flow forecast by comparing

it to historical operating results, considering management’s ability to accurately

forecast and perform sensitivity analysis on revenue, cash expenditures and commitments.

● We performed sensitivity

analyses on the projected revenue and operating margins used in the Company’s cash

flow forecast to evaluate the impact on the conclusions reached by management.

● We assessed the appropriateness

and sufficiency of the disclosures included within the financial statements relating to liquidity

and going concern and compared to other audit evidence obtained to determine whether such

information is consistent with the Company’s disclosures.

We have served as the Company’s auditor

/s/ Weinberg & Company, P.A .

2 unchanged sentences

BALANCE SHEETS

(amounts in thousands, except share data)

(amounts in thousands, except

Current assets

5 unchanged sentences

Security deposit

Liabilities and Shareholders’ Deficit

and Shareholders’ Deficit

Current liabilities

Accounts payable (including $ 226 and $ 209 due to related party, respectively)

Accrued expenses (including $ 1,145 and $ 750 due to related party, respectively)

Accounts payable and accrued expenses (including $ 223 and $ 226 due to related party, respectively)

Accrued interest (including $ 2,076 and $ 1,145 due to related party, respectively)

Customer advances

8 unchanged sentences

Note payable-related party, net of current portion

Operating lease liability, net of current portion

Operating lease liability, net of current

Total liabilities

Commitments and contingencies

Shareholders’ deficit

Shareholders’

Common stock:

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Total shareholders’ deficit

Total liabilities and shareholders’ deficit

See accompanying notes to these financial statements.

SYSTEMS, INC.

OF OPERATIONS

Fiscal Years Ended

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

liabilities and shareholders’ deficit

See accompanying notes to

these financial statements.

AURA SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(amounts in thousands, except

share and per share data)

Cost of goods sold

8 unchanged sentences

Change in fair value of derivative warrant liability

Gain on extinguishment of PPP loans

Gain on debt settlement

Basic and diluted loss per share

Basic and diluted weighted-average shares outstanding

accompanying notes to these financial statements.

OF SHAREHOLDERS’ DEFICIT

thousands, except share data)

See accompanying notes to

these financial statements.

AURA SYSTEMS INC.

STATEMENTS OF SHAREHOLDERS’ DEFICIT

(in thousands, except share data)

Shareholders’

Balance, February 28, 2021 (As Restated)

$ ( 467,372 )

Common shares issued for cash

Common shares issued for settlement of debt-related parties

Common shares issued for services

Share-based compensation

Balance, February 28, 2022

$ ( 471,364 )

Common shares issued for cash

2 unchanged sentences

Balance, February 28, 2023

Common shares issued for cash

Common shares issued for services

Fair value of warrants issued with convertible notes payable

Balance, February 29, 2024

$ ( 478,990 )

accompanying notes to these financial statements.

SYSTEMS, INC.

OF CASH FLOWS

See accompanying notes to

these financial statements.

AURA SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

Fiscal Years Ended

2 unchanged sentences

Inventory write-down

Gain on extinguishment of PPP loans

Gain on extinguishment of derivative warrant liability, net

Change in fair value of derivative warrant liability

Gain on debt settlement

Common stock issued for services

Amortization of debt discount

Common stock warrants issued for services

Share-based compensation

Changes in operating assets and liabilities:

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Proceeds from issuance of common stock

Proceeds from issuance of notes payable

Principal payments of notes payable

Proceeds from government assistance loans – PPP loan

Cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents-beginning of year

2 unchanged sentences

Supplemental schedule of non-cash transactions:

Fair value of warrants issued for note payable

Fair value of warrants issued for note settlement

Accounts payable converted into shares of common stock

Accrued expenses converted into shares of common stock

Acquisition of property and equipment with notes payable

accompanying notes to these financial statements.

SYSTEMS, INC.

TO FINANCIAL STATEMENTS

ended February 28, 2023 and 2022

thousands, except share and per share amounts)

1 – ORGANIZATION AND OPERATIONS

Systems, Inc., (“Aura”, “We” or the “Company”) a Delaware corporation, was founded to engage in the

development, commercialization, and sale of products, systems, and components, using its patented and proprietary electromagnetic technology.

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

mobile power generation markets.

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

Years ended February 29, 2024, and February

(In thousands, except share and per share amounts)

NOTE 1 – ORGANIZATION AND OPERATIONS

Aura Systems, Inc., (“Aura”,

“We” or 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.

Going Concern

The accompanying financial

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

During the fiscal year ended February

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

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

$ 13.7 million.

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

$ 1.1 million are past due.

These factors raise substantial doubts about the Company’s ability to continue as a going concern within

one year of the date that these financial statements are issued.

The accompanying financial statements do not include any adjustments

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

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

The Company’s

ability to continue as a going concern is dependent upon its ability to continue to implement its business plan.

During the next twelve

months we intend to continue to attempt to increase the Company’s sale of our AuraGen ® /VIPER products both

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

In addition, we plan to continue to rebuild the engineering

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

We anticipate being able to

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

No assurance can be given that any future financing,

if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company.

Even if the Company is

able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or

cause substantial dilution for its stockholders, in the case of equity financing.

In the event the Company is unable to generate profits

and is unable to obtain financing for its working capital requirements, it may have to curtail its business further or cease business

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

reported periods.

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

valuation allowance for deferred tax assets, assumptions used in valuing derivative liabilities, notes payable, assumptions used in valuing

In accordance with Accounting Standards

Codification (“ASC”) 205-40, Going Concern , the Company’s management has evaluated whether there are conditions

and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern

within one year after the date the accompanying financial statements were issued.

During the fiscal year ended February 29, 2024, the

Company incurred a net loss of $ 4.2 million, used cash in operating activities 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 factors raise substantial doubts about the Company’s ability to continue as

a going concern within one year of the date that these financial statements are issued.

The accompanying financial statements do not include

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

Subsequent to February 29,

2024, the Company issued 4,455,600 shares of common stock in exchange for cash proceeds of $ 1.1 million.

The Company’s ability to

continue as a going concern is dependent upon its ability to continue to implement its business plan.

During the next twelve months we

intend to continue to attempt to increase the Company’s sale of our AuraGen ® /VIPER products both domestically

and internationally and to add to our existing management team.

In addition, we plan to continue to rebuild the engineering and sales

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

No assurance can be given that any future

financing will be available or, if available, that it will be on terms that are satisfactory to the Company.

Even if the Company is able

to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause

substantial dilution for its stockholders, in the case of equity financing.

In the event the Company is unable to generate profits and

is unable to obtain financing for its working capital requirements, it may have to curtail its business further or cease business altogether.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial

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

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

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

assets and the related valuation allowance, assumptions used in valuing derivative liabilities, notes payable, assumptions used in valuing

share-based compensation, and accruals for potential liabilities.

Amounts could materially change in the future.

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

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

To determine revenue recognition under ASC 606, an entity performs

the following five-steps (i) identifies the contract(s) with a customer;

Revenue Recognition

The Company recognizes revenue

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

Topic 606, Revenue from Contracts with Customers .

To determine revenue recognition under ASC 606, an entity performs the following

five-steps (i) identifies the contract(s) with a customer;

(ii) identifies the performance obligations in the contract;

(iii) determines the transaction price;

(iii) determines

the transaction price;

(iv) allocates the transaction price to the performance obligations in the contract;

recognizes revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-steps to contracts when

it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to

the customer.

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

nearly 100 % of our revenues of approximately $ 71 and $ 100 for the fiscal years ended February 28, 2023 and 2022, respectively.

Our principal

sales channel is sales to a domestic distributor.

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

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

to the customer.

Our payment terms are cash payment due upon delivery and typically includes a 2 % price discount off the selling price

in accordance with this policy.

Our commercial terms and conditions do not include a right of return for reasons other than a defect

in performance or quality.

We offer a 24-month assurance-type warranty covering material and manufacturing defects, which we account

for under the guidance of ASC 460, Guarantees.

We have a limited history of shipments, and, as such, we have not recorded a warranty

liability on our balance sheets at February 28, 2023 and 2022, respectively;

and (v) recognizes revenue

when (or as) the entity satisfies a performance obligation.

The Company only applies the five-steps to contracts when it is probable

that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Our primary source of revenue

is the manufacture and delivery of generator sets used primarily in mobile power applications, which represented nearly 100 % of our revenues

of $ 56 and $ 71 for the fiscal years ended February 29, 2024, and February 28, 2023, respectively.

Our principal sales channel is sales

to a domestic distributor.

In accordance with ASC 606,

we recognize revenue, net of discounts, for our generator sets at time of product delivery to the domestic distributor (i.e.

point-in-time),

which also corresponds to the passage of legal title to the customer and the satisfaction of our performance obligations to the customer.

Our payment terms are cash payment due upon delivery and typically includes a 2 % price discount off the selling price in accordance with

Our commercial terms and conditions do not include a right of return for reasons other than a defect in performance or quality.

We offer a 24-month assurance-type warranty covering material and manufacturing defects, which we account for under the guidance of ASC

460, Guarantees.

We have a limited history of sales and warranty claims, and, as such, we have not recorded a warranty liability

on our balance sheets at February 29, 2024 and February 28, 2023, respectively;

however, we expect warranty claims to be immaterial.

of Goods Sold

of goods sold primarily consists of the salaries of certain employees and contractors, purchase price of consumer products, packaging

supplies, inventory reserve and customer shipping and handling expenses.

Shipping costs to receive products from our suppliers are included

in our inventory and recognized as cost of revenue upon sale of products to our customers.

and Cash Equivalents

and equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original

maturities of three months or less.

are valued at the lower of cost (first-in, first-out) or net realizable value, on an average cost basis.

We review the components of

inventory on a regular basis for excess or obsolete inventory based on estimated future usage and sales.

When evidence exists that the

net realizable value of inventory is lower than its cost, the difference is recognized as a loss in the period in which it occurs.

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

During the years

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

and Equipment

and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately

three years up to ten years once the individual assets are placed in service.

Leasehold improvements are amortized over the shorter of

the useful life or the remaining period of the applicable lease term.

assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may

not be recoverable.

If there is an indication of impairment, management prepares an estimate of future cash flows expected to result

from the use of the asset and its eventual disposition.

If these cash flows are less than the carrying amount of the asset, an impairment

loss is recognized to write down the asset to its estimated fair value at that time.

At February 28, 2023 and 2022, management determined

there were no impairments of the Company’s property and equipment.

Cost of Goods Sold

Cost of goods sold primarily

consists of the salaries of certain employees and contractors, purchase price of consumer products, packaging supplies, inventory reserve

and customer shipping and handling expenses.

Shipping costs to receive products from our suppliers are included in our inventory and

recognized as cost of revenue upon sale of products to our customers.

Cash and Cash Equivalents

Cash and equivalents include

cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three

months or less.

Inventories are valued at

the lower of cost (first-in, first-out) or net realizable value, on an average cost basis.

We review the components of inventory on a

regular basis for excess or obsolete inventory based on estimated future usage and sales.

When evidence exists that the net realizable

value of inventory is lower than its cost, the difference is recognized as a loss in the period in which it occurs.

Once inventory has

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

During the years ended February

29, 2024, and February 28, 2023, the Company wrote-down inventories of $ 123 and $ 4 , respectively.

Property and Equipment

Property and equipment are

recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately three years up

to ten years once the individual assets are placed in service.

Leasehold improvements are amortized over the shorter of the useful life

or the remaining period of the applicable lease term.

Management assesses the carrying

value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If there is an indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the

asset and its eventual disposition.

If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized

to write down the asset to its estimated fair value at that time.

At February 29, 2024 and February 28, 2023, management determined there

were no impairments of the Company’s property and equipment.

Impairment of Long-lived Assets

The Company reviews its property

and equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset group may not be recoverable.

Recoverability is measured by a comparison of the carrying amount of an

asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds

its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset

exceeds the fair value of the assets.

Fair value is generally determined using the asset’s expected future discounted cash flows

or market value, if readily determinable.

For the years ended February 29, 2024, and February 28, 2023, the Company had no impairment

of long-lived assets.

Company reviews its property and equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes

in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Recoverability is measured by a comparison

of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying

amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the

carrying amount of the asset exceeds the fair value of the assets.

Fair value is generally determined using the asset’s expected

future discounted cash flows or market value, if readily determinable.

For the years ended February 28, 2023 and 2022, the Company had

no impairment of long-lived assets.

Company determines whether a contract is, or contains, a lease at inception.

Right-of-use assets represent the Company’s right

to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments

arising from the lease.

Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present

value of unpaid lease payments over the lease term.

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

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

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

the ordered goods or services.

Concentration

of Credit and Other Risks

instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable.

Cash is deposited

with a limited number of financial institutions.

The balances held at any one financial institution at times may be in excess of Federal

Deposit Insurance Corporation (“FDIC”) insurance limits of up to $ 250 .

We have not experienced any losses in such accounts

and believe we are not exposed to any significant risk on cash and cash equivalents.

The Company determines whether

a contract is, or contains, a lease at inception.

Right-of-use assets represent the Company’s right to use an underlying asset

during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease

payments over the lease 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.

Customer Advances

Customer advances represent

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

goods or services.

Concentration of Credit and Other Risks

Financial instruments that

potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable.

Cash is deposited with a limited

number of financial institutions.

The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance

Corporation (“FDIC”) insurance limits of up to $ 250 .

We have not experienced any losses in such accounts and believe we are

not exposed to any significant risk on cash and cash equivalents.

During the year ended February

1 unchanged sentence

During the year ended February 28, 2023, one

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

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

As of February 28, 2022, three vendors accounted

for 44 %, 13 % and 15 % of accounts payable.

and Development

Company engages in research and development to stay current with changes in vehicle manufacture and design and to maintain an advantage

over potential competition.

Research and development expenses relate primarily to the development, design, and testing of preproduction

prototypes and models and are expensed as incurred.

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

$ 611 , respectively.

Company periodically issues stock options and warrants, and shares of common stock to employees and non-employees in non-capital raising

transactions for services and for financing costs.

Share-based compensation cost is measured at the grant date, based on the estimated

fair value of the award, and is recognized as expense over the requisite service period.

Recognition of compensation expense for non-employees

is in the same period and manner as if the Company had paid cash for services.

Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of

deferred tax assets based upon the likelihood of realization of tax benefits in future years.

Under the asset and liability approach,

deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for

financial reporting purposes and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets

if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility

is uncertain.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Warrant Liability

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

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded

at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated

at the end of each reporting period.

Derivative instrument liabilities are classified in the balance sheet as current or non-current

based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using

a Binomial pricing model.

The Company’s derivative liabilities are adjusted to reflect fair value at each reporting date, with

any increase or decrease in the fair value being recorded in the statement of operations.

Value of Financial Instruments

Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize

the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The classification of a financial

asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement.

ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the inputs into

three levels that may be used to measure fair value:

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

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

or indirectly;

3 – Unobservable inputs.

recorded amounts of inventory, other current assets, accounts payable, and accrued expenses approximate their fair value due to their

short-term nature.

The carrying amounts of notes payable and convertible notes payable approximate their respective fair values because

of their current interest rates payable in relation to current market conditions.

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

As of February 29, 2024,

four vendors accounted for 42 %, 11 %, 11 % and 10 % of accounts payable.

As of February 28, 2023, four vendors accounted for 38 %, 13 %, 10 %

and 10 % of accounts payable.

Research and Development

The Company engages in research

and development to stay current with changes in vehicle manufacture and design and to maintain an advantage over potential competition.

Research and development expenses relate primarily to the development, design, and testing of preproduction prototypes and models and

are expensed as incurred.

Research and development costs for Fiscal 2024 and 2023 were approximately $ 750 and $ 850 , respectively.

Share-Based Compensation

The Company periodically

issues stock options and warrants, and shares of common stock to employees and non-employees in non-capital raising transactions for

services and for financing 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 uses an asset

and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based

upon the likelihood of realization of tax benefits in future years.

Under the asset and liability approach, deferred taxes are provided

for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes

and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not

these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s

policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Derivative Warrant Liability

The Company evaluates its

financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value

and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

The classification

of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end

of each reporting period.

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether

or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3

inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing

The Company’s derivative liabilities are adjusted to reflect fair value at each reporting date, with any increase or decrease

in the fair value being recorded in the statement of operations.

Fair Value of Financial Instruments

The Company determines the

fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable

inputs and minimize the use of unobservable inputs when measuring fair value.

The classification of a financial asset or liability within

the hierarchy is based upon the lowest level input that is significant to the fair value measurement.

Under ASC 820, Fair Value Measurement

and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure

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

The recorded amounts of inventory,

other current assets, accounts payable, and accrued expenses approximate their fair value due to their short-term nature.

amounts of notes payable and convertible notes payable approximate their respective fair values because of their current interest rates

payable in relation to current market conditions.

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

February 28, 2023 and 2022:

February 28, 2023

February 29, 2024, and February 28, 2023:

(amounts in thousands)

Derivative warrant liability

February 28, 2022

Derivative warrant liability

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

(loss) per share

Company’s earnings (loss) per share amounts have been computed based on the weighted-average number of shares of common stock outstanding

for the period.

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted

average number of shares of common stock outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net

earnings (loss) available to common shareholders by the weighted average number of shares of common stock assuming all potential shares

had been issued, and the additional shares of common stock were dilutive.

Diluted earnings (loss) per share reflects the potential dilution,

using the as-if-converted method for convertible debt, and the treasury stock method for options and warrants, which could occur if all

potentially dilutive securities were exercised.

following information sets forth the computation of basic and diluted net increase in the Company’s net assets per share resulting from

operations for the years ended February 28, 2023 and 2022:

Year Ended February 28,

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

Denominator for basic weighted average share

The Company estimated the

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

Reclassifications

Certain February 28, 2023 balances have been reclassified to

conform with the February 29, 2024 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.

presenting the Company’s balance sheet at February 29, 2024, 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 .

Earnings (loss) per share

The Company’s earnings

(loss) per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period.

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average

number of shares of common stock outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net earnings

(loss) available to common shareholders by the weighted average number of shares of common stock assuming all potential shares had been

issued, and the additional shares of common stock were dilutive.

Diluted earnings (loss) per share reflects the potential dilution, using

the as-if-converted method for convertible debt, and the treasury stock method for options and warrants, which could occur if all potentially

dilutive securities were exercised.

The following information

sets forth the computation of basic and diluted net increase in the Company’s net assets per share resulting from operations for

the years ended February 29, 2024, and February 28, 2023:

(amounts in thousands, except

share and per share data)

Denominator for basic weighted average share

Earnings (loss)

Basic loss per share:

Diluted loss per share

the years ended February 28, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive

securities would have had an anti-dilutive effect.

For the years ended February

29, 2024, and February 28, 2023, the calculations of basic and diluted loss per share are the same because potential dilutive securities

would have had an anti-dilutive effect.

The potentially dilutive securities consisted of the following:

Convertible notes

Company operates in one segment for the manufacture and delivery of generator sets.

In accordance with the “ Segment Reporting ”

Topic of the ASC, the Company’s chief operating decision maker has been identified as the President, who reviews operating results

to make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a

management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually

entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and

reports revenue.

All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer

base and similarities in economic characteristics;

nature of products and services;

and procurement, manufacturing and distribution processes.

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

accompanying financial statements.

Issued Accounting Pronouncements

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

2020-06 “Debt—Debt with Conversion

and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU

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

conversion and beneficial conversion models.

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

Company to use the if-converted method.

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

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

the settlement conditions of the derivative scope exception.

This update simplifies the related settlement assessment by removing the

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

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

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

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

Early adoption is permitted, but

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

Effective January 1, 2021, the Company early adopted ASU

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

May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”

(“ASU 2021-04”).

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

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

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

An issuer should measure the effect of a modification or

exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately

before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding

accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance

and debt origination or modification).

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021,

including interim periods within those fiscal years.

An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications

or exchanges occurring on or after the effective date.

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

The adoption of ASU 2021-04

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

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

ASU 2016-13 requires

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

certain types of financial instruments, including trade receivables.

aftermath of the pandemic has had a significant negative impact on our overall operations including revenues, productivity, and liquidity.

The pandemic has resulted in labor shortages, disruptions in the chain of supply, and higher material costs.

We believe that COVID-19

will be an ongoing challenge for years to come and to adapt will require us to further globalize our vendors, engineering, and customers.

The Company’s business is directly dependent upon, and correlates closely with, the marketing levels and ongoing business activities

of its existing customers and suppliers.

The extent to which COVID-19 may impact the Company’s business activities and capital raising

efforts will depend on future developments, which are uncertain and cannot be predicted.

The continuing impact

of higher inflation, the actions by the Federal Reserve to address inflation, create uncertainty about the future economic environment

which will continue to evolve and, we believe, has impacted the Company’s business in 2024 and may continue to impact its business

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

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

ASC 280, Segment Reporting , operating segments are defined as components of an enterprise where discrete financial information

is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources

and in assessing performance.

The Company’s operating segment consists of one component, and the Company’s Chief Executive

Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.

Recently Issued Accounting Pronouncements

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.

The Company does not believe the potential

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

recent accounting pronouncements and guidance issued by the FASB, including its Emerging Issues Task Force, the American Institute of

Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management

to have a material impact on the Company’s present or future financial statements.

3 – INVENTORIES

consisted of the following:

The Company adopted ASU 2016-13 on

March 1, 2023, and there was no impact of the new guidance and related codification improvements to the Company’s financial position,

results of operations and cash flows.

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 3 – INVENTORIES

Inventories consisted of

the following:

(amounts in thousands)

3 unchanged sentences

Total inventory

4 – PREPAID AND OTHER CURRENT ASSETS

and other current assets consisted of the following:

NOTE 4 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current

assets consisted of the following:

(amounts in thousands)

Prepaid annual software licenses

Prepaid commissions

Vendor advances

2 unchanged sentences

Total prepaid and other current assets

- PROPERTY AND EQUIPMENT, NET

and equipment consisted of the following:

NOTE 5 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted

of the following:

(amounts in thousands)

2 unchanged sentences

Computer equipment

Computer software

Furniture and fixtures

Less accumulated depreciation and amortization

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

Depreciation expense for the

years ended February 29, 2024, and February 28, 2023 was $ 105 and $ 78 , respectively.

NOTE 6 – CONVERTIBLE NOTES PAYABLE

Convertible notes payable

notes payable consisted of the following:

consisted of the following:

(amounts in thousands)

Convertible notes payable -past due

Unamortized debt discount

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

As of February 28, 2022 and 2021,

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

The notes are unsecured, bear interest at 5 % per annum and

are convertible to shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

The notes were originally due in 2014

to 2017, and were all amended in 2018 and the maturity date for all the notes was changed to January 11, 2023.

The notes are unsecured, bear interest

at 5 % per annum and are convertible to shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

The notes were originally

due in 2014 to 2017 and were all amended in 2018 and the maturity date for all the notes was changed to January 11, 2023.

As of February

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

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

in accrued expenses (See Note 10).

7 – CONVERTIBLE NOTE PAYABLE-RELATED PARTY

note payable – related party consisted of the following:

28, 2023, outstanding balance of the convertible notes payable amounted to $ 1,403

the year ended February 29, 2024, the Company issued convertible notes payable in the aggregate of $ 106 in exchange for cash.

are unsecured, bear interest at 10 % per annum and are convertible to shares of common stock at a conversion price of $ 0.20 per share and

matured in March 2024.

As part of the offering, the Company also granted the note holders warrants to purchase 50,000 shares of common

The warrants are exercisable at $ 0.50 per share, will expire in 1.5 years from grant date and with an estimated fair value of $ 5

using the BlackScholes Option Pricing Model.

The Company accounted the fair value of the warrants as a debt discount and is being amortized

to interest expense over the term of the convertible notes payable.

of February 29, 2024, the outstanding balance of the convertible notes payable amounted to $ 1,509 and unamortized debt discount of $ 1 ,

for a net balance of $ 1,508 .

As of February 29, 2024, the convertible notes of $ 1,403 have reached maturity and are past due.

date of this report, the entire convertible notes payable of $ 1,509 are past due and the Company is in negotiations with the noteholders

to convert or settle these convertible notes payable.

NOTE 7 – CONVERTIBLE NOTE PAYABLE-RELATED

Convertible note payable

– related party consisted of the following:

(amounts in thousands)

3 unchanged sentences

The convertible note is unsecured, bears interest at 5 % per annum,

is due February 2, 2023, and is convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

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

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

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

8 – NOTES PAYABLE

payable consisted of the following:

was due February 2, 2023, and is convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

February 28, 2023, the outstanding balance of the convertible note payable amounted to $ 3 million.

the year ended February 29, 2024, the Company issued convertible note payable of $ 20 in exchange for cash.

The note is unsecured, bear

interest at 10 % per annum and are convertible to shares of common stock at a conversion price of $ 0.20 per share and matured in March

As part of the offering, the Company also granted the note holder warrants to purchase 10,000 shares of common stock.

are exercisable at $ 0.50 per share, will expire in 1.5 years from grant date and with de minimis fair value using the BlackScholes Option

Pricing Model.

of February 29, 2024, the convertible note of $ 3,020 , of which, $ 3,000 is past due.

As of the date of this report, the entire convertible

notes payable of $ 3,020 are past due and the Company is in negotiations with the noteholders to convert or settle these convertible notes

NOTE 8 – NOTES PAYABLE

Notes 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 and equipment

Unsecured notes payable

Economic Injury Disaster (EID) Loan

negatively impacted by the COVID-19 pandemic were eligible to apply for loans sponsored by the United States Small Business Administration

(“SBA”) Economic Injury Disaster Loan (“EID Loan”) program.

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

under this program.

The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying expenses, and the loan is

not subject to a loan forgiveness provision.

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

assets of the Company .

Notes payable-vehicle and equipment

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

operations and research and development capacities.

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

financed by two notes payable aggregating to approximately $288.

(d) Note payable-other

(a) Economic Injury Disaster (EID) Loan

Entities negatively impacted

by the COVID-19 pandemic were eligible to apply for loans sponsored by the United States Small Business Administration (“SBA”)

Economic Injury Disaster Loan (“EID Loan”) program.

On July 1, 2020, the Company received a $ 150 loan under this program.

The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying expenses, and the loan is not subject to a loan

forgiveness provision.

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

(b) Notes payable-vehicle and equipment

During Fiscal 2022, the Company

purchased two pieces of equipment and a vehicle for approximately $ 329 as a part of its efforts to expand its operations and research

and development capacities.

The Company made down payments aggregating $ 41 with the balance financed by two notes payable aggregating

to approximately $ 288 .

The notes are secured by the equipment and vehicle purchased.

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

The second note is due in 72 equal

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

As of February 28, 2023, the balance of

the notes was approximately $188.

Other notes payable

promissory notes as of February 28, 2023 and February 28, 2022 are for one individual issued in September 2015 that is payable on demand

with an interest rate of 10 % per annum.

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

expenses (See Note 10).

One note is due in 36 equal monthly payments of

approximately $ 6 each, including interest at 2.9 % per annum.

The second note is due in 72 equal monthly payments of approximately $ 1.5

each, including interest at 10.9 % interest per annum.

As of February 29, 2024, the balance of the notes was approximately $ 106 .

During Fiscal 2024, the Company obtained a loan

of $ 155,000 from a financing institution to finance the use of a third-party software license by the Company.

The note payable is secured

by tangible and intangible assets of the Company, bears interest at an average rate of 8 % per annum and will mature in September 2026.

As of February 29, 2024, the balance of the loan was approximately $ 139 .

(d) Other notes payable

Demand promissory notes as of February 29, 2024,

and February 28, 2023, are for one individual issued in September 2015 that is payable on demand with an interest rate of 10 % per annum.

NOTE 9 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties

payable-related parties consisted of the following:

consisted of the following:

(amounts in thousands)

Unsecured notes payable

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

Accrued interest-Koppel (prior to restructuring)

Notes payable -Koppel (restructured)

Subtotal-Koppel

(a) Notes payable - Kopple (restructured)

(b) Note payable- Gagerman

Accrued interest-Gagerman

Subtotal-Gagerman

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

in the aggregate of $ 6,107 .

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

in the Company.

The notes were unsecured, bear interest at rates ranging from 5 % and 15 % per annum, and were due in fiscal 2014 through

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

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

Due to its significance, the balance of accrued interest

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

As of February 28,

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

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

owed to Kopple under the notes.

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

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

initial $ 3,000 is paid.

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

(see Note 17).

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

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

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

All amounts, including all accrued interest and

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

(a) Kopple Notes

In fiscals 2013 through 2018,

the Company issued notes payable to Robert Kopple and associated entities (collectively “Kopple”) in the aggregate of $ 6,107 .

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

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

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

As of February 28, 2022, the outstanding balance of the Kopple

notes payable and accrued interest amounted to approximately $ 12,141 .

On March 14, 2022, the Company

reached an agreement with Kopple to resolve all remaining litigation between them, including all amounts owed to Kopple under the notes.

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

installment, of which, $ 3,000 was due in June 2022, and the remaining $ 7,000 to be annually for seven years at $ 1,000 per year.

Additionally,

the settlement agreement granted Koppel warrants exercisable into 3,331,664 shares of the Company’s common stock at a price of

$ 0.85 per share.

The Company used Black-Scholes modeling to compute the fair value of the warrants which is estimated to be approximately

the settlement agreement granted Kopple warrants exercisable into 3,331,664 shares of the Company’s common stock at a price of $ 0.85

The Company used the Black-Scholes option pricing model to compute the fair value of the warrants of $ 1,051 .

The settlement provides for

1 unchanged sentence

remains in uncured default in its payment obligations.

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

a result the Company recorded approximately $ 52 of interest in Fiscal 2023.

Pursuant to the settlement agreement, the Company is also

subject to certain affirmative and negative covenants such as periodic submission of financial statements to Koppel and restrictions on

future financing and investing activities, as defined in the agreement, including the covenant to not create any indebtedness that is

senior in right of payment to the Kopple debt.

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

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

Interest on the new note also began accruing in January 2023 at 6 % per annum.

Company is also subject to certain affirmative and negative covenants such as periodic submission of financial statements to Kopple 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 the operations of the Company.

The Company assessed the settlement

6 unchanged sentences

recognized, and no adjustment was made to the carrying value of the debt, other than the adjustment for the fair value of the warrants.

Interest expense on the new Kopple note will be computed using a new effective rate that equates the present value of the future cash

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

Note payable-Gagerman

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, and the Company incurred extension and

forbearance fees totaling $ 335 that was recorded as part of interest expense.

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 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”) for a total installment due of $ 3,850 .

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.

(b) Note payable-Gagerman

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

13 unchanged sentences

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

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

Jiangsu Shengfeng Note

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

that had been advanced to the Company in prior years.

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

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

As of February 28, 2023 and 2022,

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

10 – ACCRUED EXPENSES

expenses consisted of the following:

the amount being claimed by Gagerman.

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, and the Company issued a non-interest-bearing promissory note for $ 700 to

be paid over an 11-month period beginning March 15, 2020, through February 15, 2021.

As of February 29, 2024, and 2023, the principal

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

NOTE 10 – ACCRUED INTEREST

Accrued interest consisted

of the following:

(amounts in thousands)

1 unchanged sentence

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

Accrued interest-notes payable – related party

Accrued interest-notes payable and other

Subtotal-accrued interest

Accrued payroll and related expenses

Other accrued expenses

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

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

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

facility in Santa Clarita, California.

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

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

foot facility in Lake Forest, California.

NOTE 11 – LEASES

In February 2021, the Company

consolidated our administrative and production operations, including warehousing, within an approximately 18 square foot facility in

Lake Forest, California.

The Lake Forest facility lease is for 66-months effective February 2021 through August 31, 2026.

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

The lease liability was determined by discounting the future lease payments under the lease terms using a 10 % per annum discount

rate to arrive at the current lease liability.

lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease

payments over the lease term.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent

the Company’s obligation to make lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements

is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments.

The operating lease ROU asset includes any lease payments made and excludes lease incentives.

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

monthly base rental rate was approximately $ 22 per month and escalates 3 % each year to approximately $ 26 per month in 2026.

liability was determined by discounting the future lease payments under the lease terms using a 10 % per annum discount rate to arrive

at the current lease liability.

Operating lease right-of-use (“ROU”)

assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

represent our right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make

lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements is not readily determinable and the Company

utilizes its incremental borrowing rate in determining the present value of lease payments.

The operating lease ROU asset includes any

lease payments made and excludes lease incentives.

The components of lease expense

and supplemental cash flow information related to leases for the period are as follows:

2024 Year ended

(amounts in thousands)

4 unchanged sentences

Average discount rate – operating leases 10.0 % 10.0 %

supplemental balance sheet information related to leases for the period is as follows:

The supplemental balance

sheet information related to leases for the period is as follows:

Operating leases

3 unchanged sentences

Total operating lease liabilities

of the Company’s lease liability is as follows:

Year Ending February 28:

Maturities of the Company’s lease liability is as follows:

Ending February 28:

Total lease payments

1 unchanged sentence

Present value of lease liabilities

12 – DERIVATIVE WARRANT LIABILITY

prior years under prior management, the Company issued warrants in prior years that include a fundamental transaction provision that

could give rise to an obligation to pay cash to the warrant holder.

The Company determined that the warrants do not satisfy the criteria

for classification as equity instruments due to the existence of the cash settlement feature that is not within the sole control of the

Company, and the warrants are accounted for as liabilities in accordance with ASC 815.

The fair value of the warrants is remeasured at

each reporting period, and the change in the fair value is recognized in earnings in the accompanying statements of operations.

liability will ultimately be converted into the Company’s equity when the warrants are exercised, or will be extinguished on the

expiration of the outstanding warrants.

following tables summarize the derivative warrant liability:

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

NOTE 12 – DERIVATIVE WARRANT LIABILITY

The Company issued warrants

in prior years that include a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder.

The Company determined that the warrants do not satisfy the criteria for classification as equity instruments due to the existence of

the cash settlement feature that is not within the sole control of the Company, and the warrants are accounted for as liabilities in accordance

with ASC 815.

The fair value of the warrants is remeasured at each reporting period, and the change in the fair value is recognized in

earnings in the accompanying statements of operations.

The warrant liability will ultimately be converted into the Company’s equity

when the warrants are exercised or will be extinguished on the expiration of the outstanding warrants.

The following tables summarize

the derivative warrant liability:

in thousands, except share and per share data)

Risk free interest rate

4 unchanged sentences

Fair value of derivative warrant liability

Fair Value of Derivative Warrant Liability

(amounts in thousands, except share data)

2 unchanged sentences

Gain on extinguishment on expiration of warrants

( 4,687,734 )

February 28, 2023

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

( 4,687,734 )

February 29, 2024

13 – STOCKHOLDERS’ DEFICIT

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

NOTE 13 – STOCKHOLDERS’ DEFICIT

On February 29, 2024, and

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

During the year ended February

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

During the year ended

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

Additionally,

during the year ended February 28, 2022, the Company issued 1,571,429 shares of common stock in settlement of accounts payable and accrued

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

in the amount of approximately $ 74 .

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

Number of Shares

Weighted Average Intrinsic Value

29, 2024, the Company issued 9,918,302 shares of common stock for net proceeds of approximately $ 2,943 in cash and services.

the Company also issued 25,000 shares of common stock for services rendered with a fair value of $ 6 .

During the year ended February 28, 2023, the Company issued 11,529,242

shares of common stock for net proceeds of approximately $ 3,270 in cash.

Stock Options

In October 2011, the Company’s

shareholders approved the 2011 Director and Executive Officers Stock Option Plan (the “2011 Plan”).

Under the 2011 Plan, the

Company may grant options, or warrants, for up to 15% of the number of shares of Common Stock of the Company outstanding from time to

Pursuant to this plan, the Board or a committee of the Board may grant an option to any person who is elected or appointed a director

or executive officer of the Company.

The exercise price of each option shall be at least equal to the fair market value of such shares

on the date of grant, and the term of the options may not be greater than five years.

A summary of the Company’s stock option activity

is as follows:

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

Total options, February 28, 2021 (As Restated)

Total options, February 28, 2022

Total options, February 28, 2023

Total options, February 29, 2024

Exercisable, February 29, 2024

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

Range of Exercise Price

The exercise prices and information

related to options under the 2011 Plan outstanding on February 29, 2024, are as follows:

Range of Exercise Price Stock

Contractual Life

$ 0.25 to $ 1.40 4,250,000 4,250,000 1.67 $ 0.37 $ 0.37

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

During the year ended February 28, 2022,

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

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

Stock Option Plans

October 2011, the Company’s shareholders approved the 2011 Director and Executive Officers Stock Option Plan (the “2011 Plan”).

Under the 2011 Plan, the Company may grant options, or warrants, for up to 15 % of the number of shares of Common Stock of the Company

outstanding from time to time.

Pursuant to this plan, the Board or a committee of the Board may grant an option to any person who is

elected or appointed a director or executive officer of the Company.

The exercise price of each option shall be at least equal to the

fair market value of such shares on the date of grant, and the term of the options may not be greater than five years.

Outstanding, February 28, 2022

( 4,687,734 )

Outstanding, February 28, 2023

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

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

Range of Exercise Price

Outstanding, February 29, 2024

There was no intrinsic value

as of February 29, 2024, as the exercise prices of these warrants were greater than the market price of the Company’s stock.

exercise prices and information related to the warrants under the 2011 Plan outstanding on February 29, 2024, are as follows:

Range of Exercise Price Stock

Outstanding Stock

Exercisable Weighted

Life Weighted

Outstanding Weighted

$ 0.50 to $ 1.40 3,521,664 3,521,664 4.9 $ 0.83 $ 0.83

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

As a part of the settlement,

the Company issued to Mr.

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

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

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

issuance was $ 0.317 per share.

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

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

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

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

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

was $ 0.425 per share.

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

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

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

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

Weighted Average Assumptions for Warrants

The fair values of warrants

issued during the year ended February 29, 2024, and February 28, 2023, were computed using various option pricing models including Black-Scholes

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

2024 Weighted

Exercise Price $ 0.50 $ 0.84

Share Price $ 0.164 $ 0.341

Volatility % 160 % 224.6 %

Risk-Free Rate 4.9 % 2.04 %

1 unchanged sentence

Dividend Rate 0 % 0 %

14 – INCOME TAXES

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

NOTE 14 – INCOME TAXES

For the years ended February 29, 2024, and February 28, 2023, the Company

had no income tax expense.

Total current

1 unchanged sentence

Total Provision

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

statutory rate is as follows:

For the years ended

February 29, 2024 and February 28, 2023, a reconciliation of the effective income tax rate to the U.S.

statutory rate is as

Federal tax benefit at statutory rate

1 unchanged sentence

Change in valuation allowance

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

As of February 29, 2024,

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

(amounts in thousands)

4 unchanged sentences

Net deferred tax asset (liability)

provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining

whether it is more likely than not that deferred tax assets are recoverable.

For the years ended February 28, 2023 and 2022, based on

all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not

that the net deferred tax assets were not fully realizable.

Accordingly, the Company established a full valuation allowance against its

net deferred tax assets.

The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive

evidence exists to support reversal of the valuation allowance.

During the years ended February 28, 2023 and 2022, the valuation allowance

The provisions of ASC Topic

740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely

than not that deferred tax assets are recoverable.

For the years ended February 29, 2024, and February 28, 2023, based on all available

objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net

deferred tax assets were not fully realizable.

Accordingly, the Company established a full valuation allowance against its net deferred

The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists

to support reversal of the valuation allowance.

During the years ended February 29, 2024, and February 28, 2023, the valuation allowance

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

February 28, 2023, the Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future

taxable income.

For Federal purposes the amounts available were approximately $ 154.4 million and for state purposes the amounts available

were approximately $ 99.4 million.

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

various dates through 2043.

Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership

of companies with loss carryforwards, the utilization of the Company’s NOL may be limited as a result of changes in stock ownership.

Company’s operations are based in California and it is subject to Federal and California state income tax.

Tax years after 2017

are open to examination by United States and state tax authorities.

Company adopted the provisions of ASC 740, which requires companies to determine whether it is “more likely than not” that

a tax position will be sustained upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the

financial statements.

ASC 740 also provides guidance on the recognition, measurement, classification and interest and penalties related

to uncertain tax positions.

As of February 28, 2023 and 2022, no liability for unrecognized tax benefits was required to be recorded

or disclosed.

continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

As of February 28,

2023, and February 28, 2022, we have no accrued interest and penalties related to uncertain tax positions.

are subject to taxation in the U.S.

At February 29, 2024, the

Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income.

purposes the amounts available were approximately $ 144.7 million and for state purposes the amounts available were approximately $ 102.5

The Federal carryforwards expire on various dates through 2044 and the state carryforwards expire on various dates through 2044.

Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards,

the utilization of the Company’s NOL may be limited as a result of changes in stock ownership.

The Company’s operations

are based in California, and it is subject to Federal and California state income tax.

Tax years after 2017 are open to examination by

United States and state tax authorities.

The Company follows the guidance

of ASC 740, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained

upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements.

provides guidance on the recognition, measurement, classification and interest and penalties related to uncertain tax positions.

February 29, 2024, and February 28, 2023, no liability for unrecognized tax benefits was required to be recorded or disclosed.

Our continuing practice is

to recognize interest and/or penalties related to income tax matters in income tax expense.

As of February 29, 2024, and February 28,

2023, we have no accrued interest and penalties related to uncertain tax positions.

We are subject to taxation

and California.

Our tax years for 2014 and forward are subject to examination by our tax authorities.

We are not currently under examination by any tax authority.

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

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

The balance of accrued income taxes related to unpaid California

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

15 – RELATED PARTY TRANSACTIONS

We are not currently

under examination by any tax authority.

The Company has failed to

file its California tax returns for the years ended February 28, 2015, through February 29, 2024, due to its inability to pay the minimum

annual franchise tax payment of eight hundred dollars.

The balance of accrued income taxes related to unpaid California franchise tax

of $ 5.6 represents six years of minimum taxes due.

NOTE 15 – RELATED PARTY TRANSACTIONS

As of February 29, 2024, and

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

For the years ended February

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

As of February

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

During Fiscal 2022, the Company

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

of Four hundred fifty thousand dollars due to Bettersea.

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

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

There were no gains or losses recognized on these transactions.

16 – CONTINGENCIES

Company is subject to legal proceedings and claims that have arisen in the ordinary course of business.

Our management evaluates our

exposure to these claims and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount

of the loss is estimable and the loss is probable.

However, the outcome of legal proceedings and claims brought against the Company is

subject to significant uncertainty.

Although management considers the likelihood of such an outcome to be remote, if one or more of these

legal matters were resolved against the Company for amounts in excess of management’s expectations, the Company’s financial

statements for that reporting period could be materially adversely affected.

2017, the Company’s former COO was awarded approximately $ 238 in accrued salary and related charges by the California labor board.

In August 2021, the Company reached a settlement by which the Company agreed to pay approximately $ 330 , representing the principal award

plus accrued interest.

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

The remaining

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

July 2017 and March 2022, the Company had been engaged in litigation with a former director, Robert Kopple, relating to more than $ 13

million and the current equivalent of the approximately 23 million warrants, exercisable for seven years at a price of $ 0.10 per share,

Kopple and his affiliated entities (collectively the “Kopple Parties”) claimed should have been originally issued

to them pursuant to various agreements with the Company entered to between 2013-2016.

In March 2022, the Company reached a settlement

with the Kopple Parties that resolves all claims asserted against the Company without any admission, concession or finding of any fault,

liability or wrongdoing on the part of the Company.

Under the terms of the settlement, the Company agreed to pay an aggregate amount

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

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

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

of the initial payment.

The settlement also provides for standard mutual general release provisions and includes customary representations,

warranties, and covenants, including certain increases in the amount payable to the Kopple Parties and the right of such parties to enter

judgment against the Company if the Company remains in uncured default in its payment obligations under the settlement.

As of the date

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

March 26, 2019, various stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed

written consent to the Company removing Ronald Buschur as a member of the Company’s Board and electing Cipora Lavut as a director

of the Company.

On March 27, 2019, those same stockholders delivered a further signed written consent to the Company removing William

Anderson and Si Ryong Yu as members of the Company’s Board and electing Robert Lempert and David Mann as directors of the Company.

These written consents represented a majority of the outstanding shares of the Company’s common stock as of March 26, 2019

and March 27, 2019, respectively.

Because of Aura’s refusal to recognize the legal effectiveness of the consents, on April 8,

2019 the stockholders filed suit in the Court of Chancery of the State of Delaware pursuant to Section 225 of the Delaware General

Corporations Law, seeking an order confirming the validity of the consents and declaring that Aura’s Board consists of Ms.

February 28, 2023, Bettersea LLC (“Bettersea”) was an 8.8 % and 9.7 %, respectively, shareholder in the Company.

For the years

ended February 29, 2024, and February 28, 2023, the Company incurred total fees to Bettersea of $ 151 and $ 150 , respectively, for consulting

As of February 29, 2024, and February 28, 2023, a total of approximately $ 223 and $ 226 , respectively, was due to Bettersea and

included in accounts payable and accrued expenses.

As of February 29, 2024, and

February 28, 2023, accrued expenses includes accrued payroll due to officers and shareholders of $ 213 and $ 141 , respectively.

NOTE 16 – CONTINGENCIES

The Company is subject to

legal proceedings and claims that have arisen in the ordinary course of business.

Our management evaluates our exposure to these claims

and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable

and the loss is probable.

However, the outcome of legal proceedings and claims brought against the Company is subject to significant

Although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were

resolved against the Company for amounts in excess of management’s expectations, the Company’s financial statements for that

reporting period could be materially adversely affected.

In June 2022 Melvin Gagerman

(the Company’s former CEO, CFO and Secretary) brought suit against the Company alleging approximately $ 150,000 being owed to him

pursuant to an April 2014 promissory note.

The Company denies that any amount is owed to Mr.

Gagerman and has filed a cross-complaint

Gagerman in that action alleging, among other things, breach of fiduciary duty, conversion and violations of various California

Business and Professions Codes.

Trial in this case is currently scheduled for October 2024.

In March 2023, Mr.

Gagerman offered to settle

the matter for $ 120,000 but the Company has rejected that offer (See Note 9).

On March 26, 2019, various

stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed written consent to the Company

removing Ronald Buschur as a member of the Company’s Board and electing Cipora Lavut as a director of the Company.

27, 2019, those same stockholders delivered a further signed written consent to the Company removing William Anderson and Si Ryong Yu

as members of the Company’s Board and electing Robert Lempert and David Mann as directors of the Company.

These written consents

represented a majority of the outstanding shares of the Company’s common stock as of March 26, 2019, and March 27, 2019,

respectively.

Because of Aura’s refusal to recognize the legal effectiveness of the consents, on April 8, 2019, the stockholders

filed suit in the Court of Chancery of the State of Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking

an order confirming the validity of the consents and declaring that Aura’s Board consists of Ms.

Douglas and Mr.

Diaz-Versón, Jr.

On July 8, 2019 the Court of Chancery entered

final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been

validly removed by the holders of a majority of the Company’s outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority of the Company’s outstanding stock acting by written consent,

and (c) the Company’s Board of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador

Diaz-Versón, Jr.

As a result of prior management’s unsuccessful opposition to this stockholders’ action filed in the

Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s

corporate benefit doctrine and/or other legal provisions.

To date, no final determination has been made as to the amount of recoupment,

if any, to which such stockholders may be entitled.

17 – SUBSEQUENT EVENTS

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

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

In exchange for the additional amendments, the Company

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

payment under the settlement agreement.

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

On July 8, 2019 the Court of Chancery entered final judgment in favor of the

stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of

a majority of the Company’s outstanding stock acting by written consent (b) Ms.

Lempert had been validly

elected by the holders of a majority of the Company’s outstanding stock acting by written consent, and (c) the Company’s Board

of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

of prior management’s unsuccessful opposition to this stockholders’ action filed in the Court of Chancery, such stockholders

may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or

other legal provisions.

To date, no final determination has been made as to the amount of recoupment, if any, to which such stockholders

may be entitled.

NOTE 17 – SUBSEQUENT EVENTS

Subsequent to February 29,

2024, the Company issued 4,455,600 shares of common stock in exchange for cash proceeds of $ 1.1 million.

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

What changed 10-K

Item 9A. Controls and Procedures