What changed in this filing

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Item 1A. Risk Factors

2025-06-13 compared with 2024-06-04 · 139 added, 190 removed, 224 unchanged (59% of the section changed)

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As discussed in Note 1 to the financial

statements, during the year 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 factors raise substantial doubt

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

statements, during the year ended February 28, 2025, the Company incurred a net loss of $21.1 million, used cash in operations of $3.2

million, and at February 28, 2025, had a stockholders’ deficit of $37.6 million.

In addition, at February 28, 2025, notes payable

and related accrued interest with an aggregate balance of $5.2 million have reached maturity and are past due.

These factors raise substantial

doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued.

In addition, the Company’s independent registered public accounting firm, in their report on the Company’s February 29, 2024,

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The effects of a pandemic or widespread

outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have a material adverse impact on our business,

results of operations and financial condition.

outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have a material adverse impact on our business, results

of operations and financial condition.

While the impact of the COVID-19

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to the various risks and uncertainties described above is included elsewhere within this “Risk Factors” section of our Form

We derive a substantial portion of our revenues from customers

in industries susceptible to trends and factors affecting those industries, including the COVID-19 pandemic.

Our axial flux induction

technology is geared toward industrial, commercial and EV motor users, and in addition, our mobile power solution is geared to end-markets

such as commercial vehicles, communications, transportation industries, and consumer and industrial equipment markets.

Factors negatively

affecting these industries also negatively affect our business, financial condition and results of operations.

Any adverse occurrence,

including industry slowdown, recession, costly or constraining regulations, excessive inflation, prolonged disruptions in one or more

of our customers’ production schedules or labor disturbances, that results in significant decline in the volume of sales in these

industries, or in an overall downturn in the business and operations of our customers in these industries, could materially adversely

affect our business, financial condition and results of operations.

We derive a substantial portion of our revenues

from customers in industries susceptible to trends and factors affecting those industries, including the COVID-19 pandemic.

Our axial flux induction technology

is geared toward industrial, commercial and EV motor users, and in addition, our mobile power solution is geared to end-markets such as

commercial vehicles, communications, transportation industries, and consumer and industrial equipment markets.

Factors negatively affecting

these industries also negatively affect our business, financial condition and results of operations.

Any adverse occurrence, including

industry slowdown, recession, costly or constraining regulations, excessive inflation, prolonged disruptions in one or more of our customers’

production schedules or labor disturbances, that results in significant decline in the volume of sales in these industries, or in an overall

downturn in the business and operations of our customers in these industries, could materially adversely affect our business, financial

condition and results of operations.

As a result of the COVID-19

pandemic, global vehicle production has decreased, and some manufacturers have completely shut down manufacturing operations in some

countries and regions, including the United States and Europe.

As a result, we have experienced, and are likely to continue to experience,

delays in the production and distribution of our products and the loss of sales.

If the global economic effects caused by the COVID-19

pandemic continue or increase, overall customer demand may continue to decrease which could have a further adverse effect on our business,

results of operations and financial condition.

We will need additional capital in the

future to meet our obligations and financing may not be available.

pandemic, global vehicle production has decreased, and some manufacturers have completely shut down manufacturing operations in some countries

and regions, including the United States and Europe.

As a result, we have experienced, and are likely to continue to experience, delays

in the production and distribution of our products and the loss of sales.

If the global economic effects caused by the COVID-19 pandemic

continue or increase, overall customer demand may continue to decrease which could have a further adverse effect on our business, results

of operations and financial condition.

We will need additional capital in the future

to meet our obligations and financing may not be available.

During Fiscal 2025 and Fiscal 2024, the Company increased its engineering

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that case, our business and results of operations would be materially and adversely affected.

Our capital requirements

have been and will continue to be significant.

We will require substantial additional funds in excess of our current financial resources

for research, development and commercialization of products, to obtain and maintain patents and other intellectual property rights in

these technologies and products, and for working capital and other purposes, the timing and amount of which are difficult to ascertain.

When and as we need additional funds, such funds may not be available on commercially reasonable terms or at all.

If we cannot obtain

additional funding when and as needed, our business and results of operation would be materially and adversely affected.

Our capital requirements have

been and will continue to be significant.

We will require substantial additional funds in excess of our current financial resources for

research, development and commercialization of products, to obtain and maintain patents and other intellectual property rights in these

technologies and products, and for working capital and other purposes, the timing and amount of which are difficult to ascertain.

and as we need additional funds, such funds may not be available on commercially reasonable terms or at all.

If we cannot obtain additional

funding when and as needed, our business and results of operation would be materially and adversely affected.

Our intellectual property rights are valuable,

and any inability or failure to protect them could reduce the value of our products, services and brand, which would have a material

adverse effect on our business.

Our patents, trademarks,

and all of our other intellectual property rights are important assets for us.

There are events that are outside of our control that

pose a threat to our intellectual property rights.

For example, effective intellectual property protection may not be available in every

country in which our products and services are distributed or made available.

Also, the efforts we have taken to protect our proprietary

rights may not be sufficient or effective.

Due to our lack of financial resources, we may not be able to adequately protect our technology

portfolio or apply for new patents to extend our intellectual property portfolio.

The expiration of patents in our patent portfolio may

also have an adverse effect on our business.

Any significant impairment of our intellectual property rights could harm our business and

or our ability to compete.

Protecting our intellectual property rights is costly and time consuming and we may need to resort to litigation

to enforce our patent rights or to determine the scope and validity of third-party intellectual property rights and we may not have the

financial resources to pay for such litigation.

Some of our competitors may be able to sustain the costs of complex patent litigation

more effectively than we can because they have substantially greater resources.

We seek to obtain patent

protection for our innovations.

and any inability or failure to protect them could reduce the value of our products, services and brand, which would have a material adverse

effect on our business.

Our patents, trademarks, and

all of our other intellectual property rights are important assets for us.

There are events that are outside of our control that pose

a threat to our intellectual property rights.

For example, effective intellectual property protection may not be available in every country

in which our products and services are distributed or made available.

Also, the efforts we have taken to protect our proprietary rights

may not be sufficient or effective.

Due to our lack of financial resources, we may not be able to adequately protect our technology portfolio

or apply for new patents to extend our intellectual property portfolio.

The expiration of patents in our patent portfolio may also have

an adverse effect on our business.

Any significant impairment of our intellectual property rights could harm our business and or our ability

Protecting our intellectual property rights is costly and time consuming and we may need to resort to litigation to enforce

our patent rights or to determine the scope and validity of third-party intellectual property rights and we may not have the financial

resources to pay for such litigation.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively

than we can because they have substantially greater resources.

We seek to obtain patent protection

for our innovations.

It is possible, however, that some of these innovations may not be protectable.

In addition, given the

costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important.

there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued

patent may be deemed invalid or unenforceable.

Our inability or failure to protect our intellectual property rights could have a material

adverse effect on our business by reducing the value of our products, services and brand.

In addition, given the costs of obtaining

patent protection, we may choose not to protect certain innovations that later turn out to be important.

Furthermore, there is always

the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed

invalid or unenforceable.

Our inability or failure to protect our intellectual property rights could have a material adverse effect on

our business by reducing the value of our products, services and brand.

We occasionally become subject to commercial

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operating results and financial condition.

We have been and may in the

future become subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

Certain current

lawsuits and pending proceedings are described under Part I, Item 3.

We have been in the past and

may in the future become subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

current pending proceedings are described under Part I, Item 3.

“Legal Proceedings.”

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and future legal proceedings cannot be predicted with certainty.

Also, our insurance coverage may be insufficient or not provide any

coverage at all for certain claims, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may

have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims.

Also, our insurance coverage may be insufficient or not provide any coverage

at all for certain claims, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have to

pay damage awards or otherwise may enter into settlement arrangements in connection with such claims.

Any such payments or settlement

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our flexibility to adjust to market conditions, and place us at a competitive disadvantage.

As of February 29, 2024, we had total notes

payable debt outstanding plus accrued interest of approximately $19.3 million, of which $11.9 million was short term.

As of February

29, 2024, notes payable with an aggregate balance of $5.3 million and accrued interest of $1.4 million are past due,

In March 2022, the

Company reached a settlement that resolved the various claims asserted against us by former director, Robert Kopple, and his

affiliated entities.

In July 2017, Mr.

Kopple and his affiliates brought suit against the Company relating to more than $13 million

and the current equivalent of more than approximately 23 million warrants, exercisable for seven years at a price of $0.10 per

share, which Mr.

Kopple and his affiliated entities (collectively the “Kopple Parties”) claimed to be owed to them

pursuant to various agreements with the Company entered into between 2013-2016.

Under the terms of the settlement, the Company

agreed to pay an aggregate amount of $10 million over a period of seven years, including $3 million initial payment in June 2022.

$150,000 was paid in June 2022, and the balance of the initial payment of $2.85 million was extended to May 29, 2023.

for the extension, the Company paid extension and forbearance fees of $165,000 in cash and accrued deferred forbearance fees of

Beginning January 2023, interest accrues on the unpaid balance at a rate of 6%, compounded annually.

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

Kopple Parties have also received seven-year warrants to purchase up to an aggregate of approximately 3.3 million shares of our

common stock at a price of $0.85 per share.

The settlement also provides for standard mutual general release provisions and includes

customary representations, warranties, and covenants, including certain increases in the amount payable to the Kopple Parties and

the right of such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations

under the settlement.

“Legal Proceedings”, “Liquidity and Capital Resources” in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and Footnote 9 “Notes

Payable-Related Parties” in the Notes to Financial Statements included

elsewhere in this Annual Report on Form 10-K for additional information regarding the transactions.

During the year ended February

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

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

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

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

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

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

In March 2024, the Company

and Kopple again amended the note payable.

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

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

(ii) increased the

stated interest rate to 10%;

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

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

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

price of the Company’s common stock;

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

10 days of the end of each fiscal quarter;

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

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

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

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

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

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

On February 28, 2025, we had

total liabilities of $39.0 million, of which $17.6 million was due to a derivative liability related to debt conversion rights to a related

The current liability portion was $38.4 million, of which $17.6 million was due to a derivative liability related to debt conversion

rights to a related party.

After adjusting for the derivative liability, the current liabilities are $20.9 million as compared to $15.2

million on February 29, 2024.

We expect to obtain the money

to pay our expenses and pay the principal and interest on our indebtedness from cash flow from our operations and from securities offerings.

Accordingly, our ability to meet our obligations depends on our future performance and capital-raising activities, which will be affected

Accordingly, our ability to meet our obligation depends on our future performance and capital-raising activities, which will be affected

by financial, business, economic and other factors, many of which are beyond our control.

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Our business is not diversified.

cannot increase market acceptance of our products, modify our products and services, or compete with new technologies, we may never be

increase market acceptance of our products, modify our products and services, or compete with new technologies, we may never be profitable.

We currently focus all of

our resources on the successful commercialization of our axial flux induction motors and AuraGen ® mobile power family

Because we have elected to focus our business on a single technology line rather than diversifying into other areas, our

success will be dependent upon the commercial success of these products.

If we are unable to increase market acceptance of our products,

if we are unable to modify our products and services on a timely basis so that we lose customers, or if new technologies make our technology

our resources on the successful commercialization of our axial flux induction motors and AuraGen ® mobile power family of

Because we have elected to focus our business on a single technology line rather than diversifying into other areas, our success

will be dependent upon the commercial success of these products.

If we are unable to increase market acceptance of our products, if we

are unable to modify our products and services on a timely basis so that we lose customers, or if new technologies make our technology

obsolete, we may never be profitable.

Most of our competitors are larger and better financed than

we are and have a greater presence in the marketplace.

Most of our competitors are larger and better

financed than we are and have a greater presence in the marketplace.

Our business may be adversely affected by industry competition.

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Furthermore, we must compete with many larger and better-established companies in the hiring and retention of qualified personnel.

we believe we have significant technological advantages over our competitors, realizing and maintaining such advantages will require

us to develop customer relationships and will also depend on market acceptance of our products.

we believe we have significant technological advantages over our competitors, realizing and maintaining such advantages will require us

to develop customer relationships and will also depend on market acceptance of our products.

We may not have the financial resources,

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not focus adequate resources on selling our products or may otherwise be unsuccessful in selling them.

In addition, we cannot assure

you that we will be able to establish OEM relationships on favorable terms or at all.

In addition, we cannot assure you

that we will be able to establish OEM relationships on favorable terms or at all.

The lack of success of distributors or OEM customers

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or an inability to replace certain suppliers could have a material adverse effect on our business and results of operations.

We currently do not have

the capability to manufacture most of the AuraGen ® components on a commercial scale.

Therefore, we rely extensively on

contracts with third party manufacturers for such components.

The use of third-party manufacturers increases the risk of delay of shipments

to our customers and increases the risk of higher costs if our manufacturers are not available when required.

We currently do not have the

capability to manufacture most of the AuraGen ® components on a commercial scale.

Therefore, we rely extensively on contracts

with third party manufacturers for such components.

The use of third-party manufacturers increases the risk of delay of shipments to our

customers and increases the risk of higher costs if our manufacturers are not available when required.

Our suppliers and manufacturers

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for our products, some of our components are currently available only from limited sources.

We may experience delays

in production of the AuraGen ® if we fail to identify alternate vendors, or if any parts supply is interrupted or reduced

or if there is a significant increase in production costs, each of which could materially adversely and affect our business and operations.

We may experience delays in

production of the AuraGen ® if we fail to identify alternate vendors, or if any parts supply is interrupted or reduced or

if there is a significant increase in production costs, each of which could materially adversely and affect our business and operations.

We will need to renew sources of component

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prior manufacturers and suppliers or locate other suitable manufacturers and suppliers for subassemblies and other components.

we entered into discussions with several of our prior suppliers and we are in the process of negotiating settlements of old payables

and arranging new supply contracts.

we entered into discussions with several of our prior suppliers and we are in the process of negotiating settlements of old payables and

arranging new supply contracts.

Although we believe that there are a number of potential manufacturers and suppliers of the components,

we cannot guarantee that contracts for components can be obtained on favorable terms or at all.

Any material adverse change in terms

of the purchase of these components could increase our cost of goods.

We need to invest in tooling to have a

more extensive line of products.

Any material adverse change in terms of

the purchase of these components could increase our cost of goods.

We need to invest in tooling to have a more

extensive line of products.

If we cannot expand our tooling, it may not be possible for us to expand our operations.

We are currently limited

in the products that we are able to manufacture because of the limitations of our tooling capabilities.

In order to have a broader line

of products that address industrial and commercial needs, we must make a significant investment in additional tooling or pursue new alternatives

We are currently limited in

the products that we are able to manufacture because of the limitations of our tooling capabilities.

In order to have a broader line of

products that address industrial and commercial needs, we must make a significant investment in additional tooling or pursue new alternatives

to replace traditional tooling.

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or to sell our products into certain countries.

obtain the required approval from government agencies, then our business may be adversely affected.

We depend on third party

suppliers for our parts and components, some of which are located outside of the United States.

In the event that some of these suppliers

are barred from selling their products in the United States, or cannot meet other U.S.

government regulations, we would need to locate

other suppliers, which could delay or prevent us from shipping product to our customers.

We use copper, steel and aluminum in our product

and in the event of government regulations or restrictions of these materials we may experience a shortage of these materials to manufacture

If we cannot obtain

the required approval from government agencies, then our business may be adversely affected.

We depend on third party suppliers

for our parts and components...

We use copper, steel and aluminum in our product and in the event of government regulations or restrictions

of these materials we may experience a shortage of these materials to manufacture our product.

Furthermore, U.S.

law restricts us from selling products in some potential foreign markets without U.S.

law restricts us from

selling products in some potential foreign markets without U.S.

government approval.

If we cannot obtain the required approvals from government agencies to obtain materials or contract with suppliers or if we are restricted

by government regulation from selling our products into certain countries, our business may be adversely affected.

We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel

or hire qualified personnel, we may not be able to grow effectively.

If we cannot obtain the required approvals from government

agencies to obtain materials or contract with suppliers or if we are restricted by government regulation from selling our products into

certain countries, our business may be adversely affected.

We rely on highly skilled personnel and,

if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.

Our performance is largely

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Our continued

ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees and

The incentives to attract, retain and motivate employees and consultants provided by our ability to pay competitive salaries

and rates as well as offering additional incentives such as stock option grants or by future arrangements may not be as effective as

If we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to

grow effectively.

ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees and consultants.

The incentives to attract, retain and motivate employees and consultants provided by our ability to pay competitive salaries and rates

as well as offering additional incentives such as stock option grants or by future arrangements may not be as effective as in the past.

If we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively.

Our business is subject to the risks of

earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as computer viruses, terrorism, or

earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as computer viruses, terrorism, or pandemics.

Our corporate headquarters

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of operations.

Failure to maintain effective internal

controls over financial reporting could adversely affect our business and the market price of our Common Stock.

Failure to maintain effective internal controls

over financial reporting could adversely affect our business and the market price of our Common Stock.

Pursuant to rules adopted

by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial

reporting and provide a management report on our internal controls over financial reporting in all annual reports.

This report contains,

among other matters, a statement as to whether our internal controls over financial reporting are effective and the disclosure of any

material weaknesses in our internal controls over financial reporting identified by management.

Section 404 also requires our independent

registered public accounting firm to audit the effectiveness of our internal control over financial reporting.

by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial reporting

and provide a management report on our internal controls over financial reporting in all annual reports.

This report contains, among other

matters, a statement as to whether our internal controls over financial reporting are effective and the disclosure of any material weaknesses

in our internal controls over financial reporting identified by management.

Section 404 also requires our independent registered

public accounting firm to audit the effectiveness of our internal control over financial reporting.

As described in ITEM 9A, Controls

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and completeness of our financial reports, which would have an adverse effect on our business and the market price of our Common Stock.

Trading on the OTC Markets is volatile

and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares .

Trading on the OTC Markets is volatile and

sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares .

Our common stock is quoted

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

What changed 10-K

Item 1A. Risk Factors