What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-06-13 compared with 2024-06-04 · 756 added, 710 removed, 775 unchanged (65% of the section changed)

13 unchanged sentences

financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation,

our President and Chief Financial Officer concluded as of February 29, 2024, that our disclosure controls and procedures were effective.

Based on this evaluation, and as a result of the material weakness

described below, our President and Chief Financial Officer concluded as of February 28, 2025, that our disclosure controls and procedures

were not effective.

Management’s Annual Report on Internal Control Over Financial

16 unchanged sentences

effectiveness of the Company’s internal control over financial reporting as of February 28, 2025.

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

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 this assessment,

because of the material weakness described below, the Company’s management concluded that as of February 28, 2025, the Company’s

internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with U.S.

generally accepted accounting principles.

A material weakness is a deficiency,

or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material

misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified a material

weakness in our internal control over financial reporting related to the Company having an insufficient number of full-time personnel

with an appropriate level of U.S.

GAAP knowledge and experience and ongoing training in the application of U.S.

GAAP and SEC disclosure

requirements commensurate with the Company’s financial reporting requirements.

Notwithstanding the identified

material weaknesses, management has concluded that the Financial Statements included in this Annual Report on Form 10-K present fairly,

in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in conformity

Planned Remediation of Material Weaknesses

Our management has been actively

engaged in developing and implementing remediation plans to address material weakness described above.

These remediation efforts are ongoing

and include or are expected to include increasing personnel resources and technical accounting expertise within the accounting function.

During the second, third, and fourth quarters of 2024, and as of the date of this Report, we continue to work with an outside consultant

with experience and expertise in U.S.

GAAP and public company SEC accounting and reporting requirements to assist management with its

accounting and reporting of complex and/or non-recurring transactions and related disclosures.

Changes in Internal Control Over Financial Reporting

5 unchanged sentences

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 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.

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.

OTHER INFORMATION

Regarding Foreign Jurisdictions that Prevent Inspections.

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

6 unchanged sentences

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,

4 unchanged sentences

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

4 unchanged sentences

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

Mann as the Company’s Chief Financial Officer.

Steven Willett to succeed Mr.

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.

Director, Member of the Audit Committee

Diaz-Verson, Jr.

Salvador Diaz-Verson, Jr.

Director, Chairman of the Audit Committee

Mann (2), (3)

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

the Audit Committee, former Chief Financial Officer

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

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

Robert Lempert

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

Chief Financial Officer

Douglas and Mr.

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.

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.

In July 2019, the Board of Directors appointed Ms.

President and Chairman of the Board, appointed Mr.

Mann as Chief Financial Officer and appointed Dr.

Lempert as Secretary.

February 14, 2022, Mr.

Mann resigned as Chief Financial Officer.

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.

information with respect to our current directors and executive officer is provided below.

Salvador Diaz-Versón,

1 unchanged sentence

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.

9 unchanged sentences

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.

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.

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.

Gary Douglas .

12 unchanged sentences

Cipora Lavut .

Lavut was one of Aura’s original founding members.

Is the current President and Chairwoman of the Board.

She was one of Aura’s original founding members.

From 1987 to 2002 Ms.

Lavut served on Aura’s Board and as

a Senior Vice President.

served on Aura’s Board and as a Senior Vice President.

During this period, Ms.

Lavut was instrumental to Aura receiving large contracts from The Boeing Company,

Litton Industries and the United States Air Force.

Lavut also provided critical investor relations and marketing support during

Lavut was instrumental to Aura receiving large contracts

from The Boeing Company, Litton Industries, and the United States Air Force.

Lavut also provided critical investor relations and marketing

support during this time.

Lavut left Aura in 2002.

Lavut presently provides marketing and business consulting to a variety of retail

and service-oriented businesses.

She holds a B.A.

Business degree from California State University, Northridge.

At the request of Aura’s then Board of Directors and management, in 2006

Lavut returned to Aura as Vice President in charge of investors relations and corporate communication.

In January 2016, Ms.

left the Company to pursue other business ventures.

She returned to Aura in June 2019.

She holds a B.S degree in business from California

State University, Northridge .

Robert Lempert .

3 unchanged sentences

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

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

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

8 unchanged sentences

Laurent, Montreal, Canada.

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

17 unchanged sentences

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

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.

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.

Family Relationships

2 unchanged sentences

Committees of the Board of Directors

The Board maintains the following committees to assist it in discharging

its oversight responsibilities.

The Board maintains the following

committees to assist it in discharging its oversight responsibilities.

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.

4 unchanged sentences

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 .

1 unchanged sentence

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.

5 unchanged sentences

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.

8 unchanged sentences

Stock Option Plan.

During Fiscal 2024, no stock

compensation was awarded to any of the Company’s directors.

During Fiscal 2025, stock

compensation for an aggregate of 3,000,000 stock options, with a fair value of $1,342, were awarded to the Company’s directors.

During Fiscal 2024, no stock

1 unchanged sentence

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 29, 2024 and February 28, 2023.

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, 2025 and February 29, 2024.

2022 Summary Compensation Table

and Principal Position

Gary Campbell

Chief Financial Officer

Name and Principal Position

For Fiscal 2025, Ms.

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

Lavut has been accruing an annual salary of $250,000 and has been paid $140,000 in cash over the same period, deferring the balance.

For Fiscal 2024, Ms.

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.

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

Outstanding Equity Awards at 2025 Fiscal Year-End

4 unchanged sentences

as of February 28, 2025.

Name and Principal Position

Contractual Life

1 unchanged sentence

Price of Options

Lavut, President and Board Chair

Salvador Diaz-Verson,

Jr., Director

Gary Douglas,

Robert Lempert,

Cipora Lavut, President and Board Chair

Salvador Diaz-Verson, Jr., Director

Gary Douglas, Director

David Mann, Director

Robert Lempert, Director

Option Exercises and Stock Vesting During Fiscal 2025

No stock options were exercised during Fiscal

2024 by the individuals named in the Summary Compensation Table.

No stock options were exercised

during Fiscal 2025 by the individuals named in the Summary Compensation Table.

No stock options were granted nor was there any

2 unchanged sentences

No stock options were exercised

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.

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

No stock options were granted

nor was there any vesting of previously granted stock options during Fiscal 2024 related to the individuals named in the Summary Compensation

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

4 unchanged sentences

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 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.

The following table sets forth,

to the extent of our knowledge, certain information regarding our common stock owned as of February 28, 2025 (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)

Robert Lempert (5)

1 unchanged sentence

Gary Campbell

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

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

5% Stockholders

Less than 1% of outstanding

Warren Breslow (7)

BetterSea LLC (8)

Less than 1% of outstanding shares

Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission.

12 unchanged sentences

Mann holds a power of attorney to vote such shares.

Includes common shares only as of February 29, 2024.

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 common shares only as of February 28, 2025.

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 29, 2024

Securities Authorized for Issuance Under Equity Compensation Plans

as of February 28, 2025

Equity Compensation Plan Information as of February 28, 2025

Plan Category

Securities to be

(Excluding Securities

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

warrants, see Note 13 to our financial statements appearing elsewhere in this report.

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, 2025 (See Note 13 to the Financial Statements).

For additional information

regarding options and warrants, see Note 13 to our financial statements appearing elsewhere in this report.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

3 unchanged sentences

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

13 unchanged sentences

forth the aggregate fees billed to us by Weinberg for the year ended February 28, 2025, and for the year ended February 29, 2024:

in thousands)

(amounts in thousands)

Audit-related fees

4 unchanged sentences

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

3 unchanged sentences

Audit Related 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”.

Weinberg did not provide any

professional services to us during Fiscal 2025 or Fiscal 2024 which would constitute “audit related fees”.

Weinberg did not provide any

professional services to us during Fiscal 2025 or Fiscal 2024 which would constitute “tax fees”.

All Other Fees

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

Weinberg did not provide any

professional services to us during Fiscal 2025 or Fiscal 2024 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,

1 unchanged sentence

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.

5 unchanged sentences

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

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.

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 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

5 unchanged sentences

See Index to Financial Statements at page F-1

Financial Statement

Financial Statement Schedules

See Index to Financial Statements at page F-1

36 unchanged sentences

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,

2 unchanged sentences

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.

June 13, 2025

/s/ Cipora Lavut

Pursuant to the requirements of the Securities

3 unchanged sentences

President (Principal Executive Officer), Board Chair

June 13, 2025

/s/ Gary Campbell

Chief Financial Officer (Principal Financial Officer)

June 13, 2025

Gary Campbell

/s/ David Mann

June 13, 2025

/s/ Robert Lempert

June 13, 2025

Robert Lempert

/s/ Gary Douglas

June 13, 2025

/s/ Salvador Diaz-Verson, Jr.

June 13, 2025

Salvador Diaz-Verson, Jr.

8 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

To the Shareholders and the Board of Directors

of Aura Systems, Inc.

14 unchanged sentences

had a stockholders’ deficit of $37 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.

In addition, at February 28, 2025, notes payable and related accrued interest with an

aggregate balance of $5 million have reached maturity and are past due.

These matters raise substantial doubt about the Company’s

20 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

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 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.

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

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion

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

Going Concern Analysis

As described in Note 1 to the financial statements,

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 communication of critical audit matters does

not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter

below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for debt extinguishment

As discussed in Note 7, in March 2024, the Company

amended its existing debt agreement with KF Business Ventures et al (the “Kopple Note Payable”), resulting in the accounting

for the Kopple Note Payable as a debt extinguishment.

We identified the accounting for the amended Kopple

Note Payable as a critical audit matter due to the significant judgements and assumptions required by management in assessing the terms

of the amended agreement, which impacted the accounting treatment.

As a result, a high degree of auditor judgement and effort was required

in performing audit procedures to evaluate the accounting treatment.

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 obtained and read the amendments to the Kopple

Note Payable and other supporting documents;

● We evaluated the Company’s analysis of

the applicable accounting literature related to the treatment of the amendment to the Kopple Note Payable;

● We assessed the appropriateness and sufficiency

of the disclosures included in the financial statements relating to the debt extinguishment.

We have served as the Company’s auditor

1 unchanged sentence

Los Angeles, California

June 13, 2025

AURA SYSTEMS, INC.

BALANCE SHEETS

(amounts in thousands, except

(amounts in thousands, except share data)

Current assets

5 unchanged sentences

Security deposit

and Shareholders’ Deficit

Liabilities and Shareholders’ Deficit

Current liabilities

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)

Accounts payable and accrued expenses

Accrued interest

Customer advances

Notes payable, current portion

Convertible notes payable, current portion-past due

Convertible note payable-related party-past due

Notes payable-related parties, current portion (includes $ 700 past due)

Operating lease liability, current portion

Derivative warrant liability

Convertible note payable-related party-including $ 3,020 and $ 3,020 , respectively past due

Notes payable, current portion

Notes payable-related party, current portion -including $ 733 and $ 782 , respectively past due

Lease liabilities, current portion

Derivative liability

Total current liabilities

1 unchanged sentence

Note payable-related party, net of current portion

Operating lease liability, net of current

Lease liabilities, net of current portion

Total liabilities

Commitments and contingencies

Shareholders’

Shareholders’ deficit

Common stock:

5 unchanged sentences

Total shareholders’ deficit

liabilities and shareholders’ deficit

See accompanying notes to

these financial statements.

Total 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)

Fiscal Years Ended

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

Cost of goods sold

Gross profit (loss)

Operating expenses:

Engineering, research and development (including $ 151 and $ 150 to related party, respectively)

Engineering, research and development

Selling, general and administration

3 unchanged sentences

Interest expense, net (including $ 1,538 and $ 1,064 to related parties, respectively)

Gain on extinguishment of derivative warrant liability

Change in fair value of derivative warrant liability

Gain on debt settlement

Loss on debt extinguishment – related party

Change in fair value of derivative liability

Basic and diluted loss per share

Basic and diluted weighted-average shares outstanding

See accompanying notes to

these financial statements.

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

5 unchanged sentences

Common shares issued for cash

Fair value of warrants issued for note settlement

Fair value of warrants issued for services

Common shares issued for services

Relative fair value of warrants issued with convertible notes payable

Balance, February 29, 2024

Fair value of vested stock options

Modification of warrant agreement - related party

Common shares issued for cash

Common shares issued for services

Fair value of warrants issued with convertible notes payable

Balance, February 28, 2025

$ ( 500,128 )

See accompanying notes to

these financial statements.

See accompanying notes to these financial statements.

AURA SYSTEMS, INC.

3 unchanged sentences

Adjustments to reconcile net loss to cash used in operating activities

Depreciation and amortization

Amortization of debt discount

Inventory write-down

Gain on extinguishment of derivative warrant liability, net

Change in fair value of derivative warrant liability

Gain on debt settlement

Loss on debt extinguishment – related party

Change in fair value of derivative liability

Fair value of vested stock options

Common stock issued for services

Amortization of debt discount

Common stock warrants issued for services

Changes in operating assets and liabilities:

2 unchanged sentences

Accounts payable and accrued expenses

Accrued interest on notes payable

Accrued interest

Customer advances

3 unchanged sentences

Purchase of property and equipment

Cash used in investing activities

Cash flows from financing activities:

8 unchanged sentences

Supplemental schedule of non-cash transactions:

Fair value of warrants issued for note payable

Fair value of warrants issued for note settlement

Right of use asset and lease liability

Relative fair value of warrants issued for note payable

Notes payable issued for the purchase of property and equipment

Notes payable issued for the purchase of annual software license

Reclassification of prepaid expense to property and equipment

Adjustment effective interest rate of note payable

See accompanying notes to these financial statements.

26 unchanged sentences

Subsequent to February 28,

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.

2025, the Company issued 1,048,000 shares of common stock in exchange for cash proceeds of $ 262,000 .

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

3 unchanged sentences

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.

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

tax assets and the related valuation allowance, assumptions used in valuing derivative liabilities, assumptions used in valuing share-based

compensation, and accruals for potential liabilities.

Amounts could materially change in the future.

3 unchanged sentences

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;

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

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.

is the manufacture and delivery of axial flux induction motors and generator sets used primarily in mobile power applications.

Our principal

sales channel is sales to domestic end users and distributors and agents internationally.

In accordance with ASC 606, the Company recognizes

revenue, net of discounts, for our generator sets at the time of product delivery and acceptance by the customer (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.

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

Cost of Goods Sold

2 unchanged sentences

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.

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

15 unchanged sentences

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.

to ten years .

Leasehold improvements are amortized over the shorter of the useful life or the remaining period of the applicable lease

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.

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, 2025 and February 29, 2024, management determined there

15 unchanged sentences

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.

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

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

assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over

the lease term.

The Company uses its incremental borrowing rate based on the information available at lease commencement in determining

the present value of unpaid lease payments.

Customer Advances

26 unchanged sentences

Share-Based Compensation

The Company periodically

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

services and for financing costs.

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

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

Recognition of compensation expense for non-employees is in the

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

The Company periodically issues

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

and for financing costs.

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

8 unchanged sentences

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

Derivative Warrant Liability

Derivative Financial Instruments

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.

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.

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.

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 model.

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.

To determine the number of

authorized but unissued shares available to satisfy outstanding convertible securities, the Company uses a sequencing method to prioritize

its convertible securities as prescribed by ASC 815-40-35.

At each reporting date, the Company reviews its convertible securities to determine

their classification is appropriate.

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.

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

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

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

Level 3 – Unobservable inputs.

The recorded amounts of inventory,

2 unchanged sentences

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 29, 2024, and February 28, 2023:

The following table sets forth by level, within

the fair value hierarchy, the Company’s assets and liabilities at fair value as of February 28, 2025 and February 29, 2024:

February 28, 2025

(amounts in thousands)

Derivative warrant liability

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 .

Derivative liability – convertible note conversion option

February 29, 2024

Derivative liability

The Company estimated the fair value of the derivative

liability using the Binomial Model.

The following table provides a roll-forward of

the derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended February 28,

2025, as follows:

(amounts in thousands)

Fair Value of

February 29, 2024

Recognition of derivative liability for a convertible note payable conversion option

Change in fair value of derivative liability

February 28, 2025

Earnings (loss) per share

1 unchanged sentence

(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

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

For the years ended February

3 unchanged sentences

Convertible notes

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.

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 in 2025.

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

4 unchanged sentences

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.

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.

In November 2024, the Financial

Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2024-03, Income Statement—Reporting Comprehensive

Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses which includes

amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including

purchases of inventory;

employee compensation;

and depreciation, amortization and depletion expenses for each caption on the income statement

where such expenses are included.

The amendments are effective for the Company’s annual periods beginning January 1, 2027, with

early adoption permitted, and should be applied either prospectively or retrospectively.

The Company is in the process of evaluating this

ASU to determine its impact on the Company’s disclosures.

In November 2023, the FASB

issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure .

These amendments expand

a public entity’s segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the

chief operating decision maker, requiring other new disclosures, and requiring enhanced interim disclosures.

ASU 2023-07 requires public

entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures

in Topic 280 on an interim and annual basis.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim

periods beginning after December 15, 2024, applied retrospectively with early adoption permitted.

As of December 31, 2024, the Company

has adopted ASU 2023-07.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements

but has resulted in additional disclosures within the footnotes to our consolidated financial statements (See Note 17).

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.

issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange

Commission 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:

Inventories consisted of the

(amounts in thousands)

6 unchanged sentences

assets consisted of the following:

February 29, 2024

(amounts in thousands)

19 unchanged sentences

consisted of the following:

February 28, 2025

(amounts in thousands)

Convertible notes payable -past due

(a) Convertible notes payable 1 – past due

(b) Convertible notes payable 2 – past due

Unamortized debt discount

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

The notes are unsecured, bear interest

at 5 % per annum and are convertible 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

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.

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

The notes are unsecured, bear interest at 5 % per annum and are convertible into shares of common stock at a conversion price of $ 1.40 per share, as adjusted.

The notes were originally due in 2014 to 2017 and were all amended in 2018 to change the maturity date to January 11, 2023.

As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

(b) In Fiscal 2024 the Company issued convertible notes payable to unrelated individuals and entities totaling $ 110 in exchange for cash.

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

The notes payable are convertible into shares of common stock at a conversion price of $ 0.20 per share.

As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible notes payable amounted to $ 110 and $ 106 , respectively, and are past due.

At February 28, 2025, the total outstanding convertible

notes payable of $ 1,513 and accrued interest of $ 509 are convertible into 1,977,274 shares of common stock at conversion rates ranging

from $ 0.20 to $ 1.40 per share.

NOTE 7 – CONVERTIBLE NOTE PAYABLE-RELATED

Convertible note payable

– related party consisted of the following:

Convertible note payable – related party

consisted of the following:

(amounts in thousands)

Convertible note payable -past due

January 24, 2017, the Company entered into a debt refinancing agreement with a former director and current shareholder of the Company.

(a) Convertible note payable to former director – past due

(b) Convertible note payable to director – past due

(a) Convertible note payable-former Director

On January 24, 2017, the Company entered into a debt refinancing agreement with a former director and current shareholder of the Company.

As part of the agreement, the Company issued a $ 3,000 convertible note.

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

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

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

The convertible note is unsecured, bears interest at 5 % per annum, and was due February 2, 2023.

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

As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible note amounted to $ 3,000 and is past due.

(b) Convertible note payable-Director

On October 4, 2023, the Company issued a convertible note payable of $ 20 in exchange for cash to a member of the Company’s Board of Directors.

The convertible note is unsecured, bears interest at rate of 10 % per annum and matured in March 2024.

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

As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible note amounted to $ 20 and is past due.

In March 2022, the Company entered into a binding

term sheet agreement (“note payable”) with Robert Kopple and associated entities (collectively “Kopple”) in the

aggregate of $ 10,000 .

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

in the Company.

The Kopple note payable was previously reported as a note payable-related party (see Note 9).

In March 2024, the Company

and Kopple amended the note payable, which, among other things, added a conversion feature to the note payable.

Accordingly, the amended

note payable is now reported as a convertible note payable-related party.

The convertible note payable to Kopple is

secured by tangible and intangible assets of the Company, bears interest at a rate of 10 % per annum ( 15 % on default) and matures in June

As of February 28, 2025, the outstanding balance of the convertible note payable was $ 9,259 .

March 2024 amendment to the Kopple note

The amendment to the Kopple note payable (i) replaced

a requirement to pay the $ 3,850 past due principal balance with the requirement to pay $ 2,000 on or before December 15, 2024 (see extension

(ii) increased the stated interest rate to 10 % ( 15 % on default);

(iii) added a fee of $ 15 monthly until the Company makes a principal

payment of $ 2,000 by December 2024;

(iv) effective August 30, 2024, the Company granted Kopple a 36 month right (but not any obligation)

to convert the note payable into equity of the Company at a conversion price equal to the lower of $ 1 per share or 50 % of the 10 day volume

weighted average price per share of the Company’s common stock;

(v) requires the Company to pay 20 % of all collected revenues within

10 days of the end of each fiscal quarter;

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

of equity, debt or convertible debt above $ 3,500 ;

(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 (viii) extends the warrant expiration date of the warrants granted to Kopple from March 8, 2029,

to March 31, 2031.

On February 28, 2025, an installment payment of

$ 2,000 , due in December 2024, was extended to March 31, 2025 in exchange for a cash payment of $ 100,000 , which was recorded as interest

On April 28, 2025, , Kopple agreed to extend the installment payment of $ 2,000 for an additional 90 days to June 30, 2025, in

exchange for another cash payment of $ 100,000 .

Accounting for March 2024 amendment to the

Kopple note payable as debt extinguishment

The Company accounted for the amended terms of the Kopple note payable

as a debt extinguishment because the present value of the cash flows under the amended debt terms is greater by more than 10 % compared

to the present value of the remaining cash flows under the original existing debt terms.

Furthermore, the amendment granted a conversion

option to the note holder and is deemed substantially different from the existing note.

As a result, the net carrying amount of the existing

note payable of $ 12,164 was derecognized and amended convertible note payable was recorded at its fair value of $ 9,259 .

The Company recorded

a loss on debt extinguishment of $ 19,324 as a result of this amendment, which is the difference between (i) the fair value of the amended

convertible note payable of $ 9,259 , combined with the fair value of the conversion option of $ 22,194 (see Note 12), and the change in

the fair value of the amended warrants of $ 33 , and (ii) the net carrying amount of the existing note payable of $ 12,162 .

At February 28, 2025, Kopple alleges that the Company failed to comply

with certain non-monetary terms including failing to hold a shareholders’ meeting by August 1, 2024, and failure to pay 20 % of all

collected revenues within 10 days of the end of each fiscal quarter.

In addressing the alleged violation of terms, the Company has provided

for interest at the rate of 15 % per annum and reported the entire convertible note payable as current.

The 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.

At February 28, 2025, the total outstanding

convertible notes payable-related party of $ 12,279 and accrued interest of $ 2,345 are convertible into 57,114,750 shares of common stock

at conversion rates ranging from $ 0.20 to $ 1.40 per share.

NOTE 8 – NOTES PAYABLE

Notes payable consisted of

the following:

Notes payable consisted of the following:

(amounts in thousands)

2 unchanged sentences

(b) Notes payable-vehicle and equipment

(d) Notes payable – machinery and other equipment

Unsecured notes payable

(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.

(e) Note payable-other

(a) Note payable-EID loan

During Fiscal 2021, the Company

received a $ 150 loan under the United States Small Business Administration (“SBA”) Economic Injury Disaster Loan (“EID

Loan”) program.

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

(b) Notes payable-vehicle and equipment

During Fiscal 2022, the Company

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 .

During Fiscal 2022, the Company issued two notes payable to purchase

equipment and a vehicle for $ 288 .

The notes are secured by the equipment and vehicle purchased.

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 .

The first note with the original principal

of $ 210 was paid in full in October 2024.

The second note with original principal of $ 78 is due January 20, 2027, and requires 72 equal

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

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.

During Fiscal 2024, the Company

obtained a loan of $ 150 from a financing institution to finance the use of a third-party software license by the Company.

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.

During Fiscal 2025, the Company

obtained a loan of $ 179 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 14.41 % per annum and will mature in

November 2025.

The aggregate total of the note payable-software

licenses as of February 28, 2025, amounted to $ 208 .

(d) Notes payable – machinery and other

During Fiscal 2025, the Company

obtained a loan of $ 274 from a financing institution to finance the purchase of a production machine.

The note payable is secured by the

production machine and will mature in April 2029.

As of February 28, 2025, the outstanding balance of the note payable amounted to $ 238 .

(e) Note payable-other

As of February 28, 2025, and

February 29, 2024, the Company has one note payable due to an individual issued in September 2015 that is payable on demand with an interest

rate of 10 % per annum.

NOTE 9 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties

consisted of the following:

Notes payable-related parties consisted of the

(amounts in thousands)

Unsecured notes payable

(a) Notes payable - Kopple (restructured)

(b) Note payable- Gagerman

February 28, 2025

(a) Note payable-Kopple (see Note 7)

(b) Note payable- Gagerman – past due

(a) Kopple Notes

(a) Note payable-Kopple

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.

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

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 installments,

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

Additionally,

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

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

remains in uncured default in its payment obligations.

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

with Kopple under ASC 470 and determined that the guidance under troubled debt restructuring should apply as the Company was experiencing

financial difficulties and Kopple granted a concession.

Per ASC 470-60, the carrying value of the restructured note remains the same as

before the restructuring, reduced only by the fair value of the warrants issued in connection with the transaction.

The Company determined

that the future undiscounted cash flows of the restructured new Kopple note exceeded the carrying value, and accordingly, no gain was

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

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

price of $ 0.85 per share.

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.

of $ 3,000 became due, of which only $ 150 was paid.

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.

As of February 29, 2024, the outstanding

principal balance amounted to $ 10,915 .

In March 2024, the

Company and Kopple again amended the note payable and the Company accounted for the amended terms of the note payable as a debt extinguishment

and the net carrying amount of the existing note payable and accrued interest of $ 12,164 was derecognized, and the amended note payable

is now classified as a convertible note payable-related party (see Note 7).

(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

the Company issued an unsecured demand promissory note to him in the amount of $ 82 that bears interest at a rate of 10 % per annum.

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

June 2022, Gagerman brought suit against the Company for repayment of this alleged note.

Despite the fact that, based on Gagerman’s

allegations, the note was issued during a period when Gagerman was the Company’s CEO, CFO, Corporate Secretary and Chairman of

the Company’s Board of Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note.

disputes that any amount is presently owed to Gagerman.

Additionally, the Company has filed a cross-complaint against Gagerman for, among

things, conversion, violation of California Business & Professions Code §17200, and various breaches of fiduciary duty that

the Company believes Gagerman committed against the Company.

on Gagerman’s claims, as of February 29, 2024, and February 28, 2023, the outstanding balance of the Gagerman notes payable and

accrued interest would amount to approximately $ 172 and $ 164 , respectively.

As of February 29, 2024, and February 28, 2023, despite the

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

the amount being claimed by Gagerman.

Melvin Gagerman, the Company’s

former CEO and CFO whose employment was permanently terminated in July 2019, claimed that in April 2014 the Company issued an unsecured

demand promissory note to him in the amount of $82 that bears interest at a rate of 10 % per annum.

Gagerman claimed that this note has

not been repaid.

In June 2022, Gagerman brought suit against the Company for repayment of this alleged note.

Although the Company disputed

Gagerman’s claims, under the guidance of ASC 450 – Contingencies , the Company had recorded the claimed note payable

$ 82 and corresponding accrued interest .

On October 1, 2024, the Company and Gagerman agreed to a settlement.

As part of the settlement, Gagerman released any and all claims against the Company, including those related to the note payable of $ 82

and corresponding accrued interest.

As a result, the Company recorded a gain on debt settlement of $ 179 for the year ended February 28,

2025, representing the derecognition of the note payable balance of $ 82 and the corresponding accrued interest balance of $ 97 .

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.

Company owned 49 % of a Chinese joint venture named Jiangsu Shengfeng.

The Joint venture advanced Aura $ 700 in prior years for products

that the Company failed to deliver to the joint venture.

The Company reached an agreement with the joint venture regarding the return

of $ 700 that had been advanced to the Company in prior years provided the joint venture remains as an operating company.

in November 2019, the Company issued a non-interest-bearing promissory note for $ 700 to the joint venture to be paid over an 11-month

period beginning March 15, 2020, through February 15, 2021.

The joint venture stopped operations in 2020 as a result of COVID-19 and never

resumed or restarted operations.

In early fiscal 2024 the joint venture was dissolved and liquidated without filing any demands or claims

for payments.

As of February 28, 2025 and February 29, 2024, the outstanding balance of this note payable amounted to $ 733 .

NOTE 10 – ACCRUED INTEREST

2 unchanged sentences

(amounts in thousands)

Accrued interest-convertible notes payable (past due)

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

Accrued interest-notes payable – related party

Accrued interest-notes payable and other

Convertible notes payable (past due) (see Note 6)

Convertible notes payable - related party – Kopple (see Note 7)

Convertible notes payable - related party – others ) (see Note 7)

Notes payable - related party – Kopple (see Note 9)

Notes payable - related party – others (see Note 9)

Notes payable (see Note 8)

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.

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.

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 initial monthly

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

The lease liability

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

In April 2024, the Company

entered into a 60-month financing lease for a forklift with a cost of $ 47 .

The lease has an interest rate of 8 %, including a

bargain purchase option to acquire the forklift at the end of the lease term for a payment of one dollar.

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

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.

The components of lease expense

4 unchanged sentences

Other Information

Cash paid for amounts included in the measurement of lease liabilities for the years ended February 29, 2024, and 2023, respectively $ 285 $ 274

Cash paid for amounts included in the measurement of lease liabilities for the years ended February 28, 2025 and February 29, 2024, respectively $ 285 $ 285

Weighted average remaining lease term – operating leases (in years) 1.7 2.5

Average discount rate – operating leases 10.0 % 10.0 %

The 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

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

Ending February 28:

Maturities of the Company’s

lease liability is as follows:

Year Ending February 28:

Total lease payments

1 unchanged sentence

Present value of lease liabilities

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)

NOTE 12 – DERIVATIVE LIABILITY

In March 2024, pursuant to the amendment of the Kopple note payable

(see Note 7), the Company granted Kopple the right to convert the amended note payable into equity of the Company at a conversion price

equal to the lower of one-dollar per share or 50 % of the 10 day volume-weighted average price per share of the Company’s common

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging.

result, the Company determined that the conversion option was not considered indexed to the Company’s own stock and should be classified

as a derivative liability since it does not have an explicit limit to the number of shares to be delivered upon settlement of the conversion

The derivative liability is remeasured to fair value at each reporting period, and the change in the fair value is recognized

in earnings in the accompanying statements of operations.

The Company estimated the fair value of the conversion option derivative liability

using a Black-Scholes option pricing model and recorded the fair value of the derivative liability of $ 22,194 at March 7, 2024, the date

of issuance, and $ 17,565 at February 28, 2025.

The following tables summarize the derivative

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

February 28, 2025

2024 - Issuance

Risk free interest rate

2 unchanged sentences

Expected dividend yield

Number of warrants

Fair value of derivative warrant liability

(amounts in thousands, except share data)

February 28, 2022

Change in fair value of derivative warrant liability

Gain on extinguishment on expiration of warrants

( 4,687,734 )

February 28, 2023

Gain on extinguishment on expiration of warrants

February 29, 2024

Number of common stock issuable

Fair value of derivative liability

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.

On February 28, 2025 and February

29, 2024, the Company had 150,000,000 shares of $ 0.0001 par value common stock authorized for issuance.

During the year ended February

28, 2025, the Company issued 13,501,563 shares of common stock for approximately $ 3,453 in cash.

As part of the offering, the Company

also granted certain investors warrants to purchase 3,000,000 shares of common stock.

The warrants are fully vested, exercisable at $ 1.00

per share, and will expire in 3 years.

During the year ended February

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.

On February 28, 2025, there were insufficient authorized and unissued

shares for the Company to satisfy all of its commitments to deliver shares.

The Company’s sequencing policy resulted in the allocation

of authorized and unissued shares in the following order at February 28, 2025 (i) Warrants, and (ii) Convertible Notes Payable and Convertible

Notes Payable-Related Party.

The sequence is based upon reclassifying securities with the earliest maturity date first.

This sequencing

and the lack of sufficient authorized shares resulted in the Company recording the conversion option of the convertible note payable-Kopple

as a derivative liability (see Note 12).

Stock Options

14 unchanged sentences

Exercisable, February 28, 2025

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

Outstanding, February 28, 2022

During the year ended February

28, 2025, the Company’s Board of Directors approved options exercisable into 4,000,000 shares to be issued pursuant to the Company’s

3,000,000 options were issued to Board members, and 1,000,000 options were issued to an employee, with immediate vesting.

The stock options are exercisable

at a price of $ 0.50 per share and expire in ten years .

The total fair value of these options at grant date was approximately $ 1,601 , which

was determined using a Black-Scholes option pricing model with the following average assumption:

stock price of $ 0.42 share, expected

term of five years, volatility of 182 %, dividend rate of 0 %, and weighted average risk-free interest rate of 4.52 %.

The expected term

represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to

vesting schedules and historical participant exercise behavior;

the expected volatility is based upon historical volatility of the Company’s

common stock;

the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect

to pay dividends in the future;

and the risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of measurement

corresponding with the expected term of the share option award.

As of February 28, 2025, the

intrinsic value as these stock options amounted to $ 205 .

The exercise prices and information related to options under the 2011 Plan outstanding

on February 28, 2025, are as follows:

Exercise Price Stock Options

Outstanding Stock Options

Exercisable Weighted

Life Weighted

Exercise Price

Outstanding Weighted

Exercise Price

50 8,250,000 8,250,000 4.81 $ 0.43 $ 0.43

1 unchanged sentence

Outstanding, February 29, 2024

Outstanding, February 28, 2025

There was no intrinsic value

as of February 28, 2025, 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

exercise prices and information related to the warrants as February 28, 2025, are as follows:

Exercise Price Stock Warrants

Outstanding Stock Warrants

Exercisable Weighted

Life Weighted

Exercise Price

Outstanding Weighted

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

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

Share Price $ 0.164 $ 0.341

Volatility % 160 % 224.6 %

Risk-Free Rate 4.9 % 2.04 %

Expected Term (yrs.) 1.5 6.9

Dividend Rate 0 % 0 %

of Warrants Exercisable

$ 0.50 3,511,664 3,511,664 6.13 $ 0.50 0.50

$ 1.00 3,000,000 3,000,000 2.43 $ 1.00 $ 1.00

NOTE 14 – INCOME TAXES

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

had no income tax expense.

Total current

Total deferred

Total Provision

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

For the years ended February

28, 2025, and February 29, 2024, the Company had no income tax expense due to recurring net loss.

For the years ended February

28, 2025 and February 29, 2024, a reconciliation of the effective income tax rate to the U.S.

statutory rate is as follows:

Federal tax benefit at statutory rate

1 unchanged sentence

Change in valuation allowance

As of February 29, 2024,

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

As of February 28, 2025, and

February 29, 2024, the following table summarizes our deferred tax asset:

(amounts in thousands)

14 unchanged sentences

During the years ended February 28, 2025 and February 29, 2024, the valuation allowance

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

increased by $ 2.4 million and $ 2.7 million, respectively.

At February 28, 2025, the

2 unchanged sentences

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

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.

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

16 unchanged sentences

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

6 unchanged sentences

As of February 28, 2025, and

February 28, 2023, accrued expenses includes accrued payroll due to officers and shareholders of $ 213 and $ 141 , respectively.

February 29, 2024, accrued expenses include accrued payroll due to officers and of $ 272 and $ 213 , respectively.

NOTE 16 – CONTINGENCIES

4 unchanged sentences

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.

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.

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).

the Company’s former CEO and CFO whose employment with Aura was permanently terminated in July 2019, brought suit against the Company

for repayment of an allegedly unsecured demand promissory note in the principal amount of $ 82 which he claims was entered into in April

2014 and bears interest at a rate of 10 % per annum.

Despite the fact that, based on Gagerman’s allegations, the note was issued

during a period when he was the Company’s CEO, CFO, Corporate Secretary and Chairman of Aura’s Board of Directors, Gagerman

has stated that he does not possess a copy of the alleged promissory note.

The Company disputes that any amount is presently owed to Gagerman

and has filed a cross-complaint against him for, among things, conversion, violation of California Business & Professions Code §17200,

and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura, including without limitation, Gagerman’s

actions in opposing the valid 2019 stockholder consent action (see Note 9).

On October 1, 2024, all litigation with Gagerman was settled

with no cost to the Company.

On March 26, 2019, various

1 unchanged sentence

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.

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.

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.

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.

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.

SEGMENT INFORMATION

The Company operates and manages its business

as one reportable and operating segment.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The Company derives revenue primarily in the United States of America and manages its business activities on a consolidated basis.

The Company’s chief operating decision maker

(CODM), its Chief Executive Officer, reviews financial information presented on a consolidated basis and decides how to allocate resources

based on net loss.

Consolidated net loss is used for evaluating financial performance.

The monitoring of budgeted versus actual results

is used in assessing performance of the Company and in establishing management’s compensation.

Significant segment expenses include employee

compensation, stock-based compensation, merchant fees, and consulting and outside provider costs.

Other operating expenses include all

remaining costs necessary to operate our business and primarily include advertising, corporate compliance, and overhead expenses.

following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

Year Ended February 28, 2025

Year Ended February 29, 2024

Cost of sales

Employee compensation and benefits

Stock-based compensation expense

Consulting and outside provider costs

Property lease and utility costs

Depreciation expense

Program software and licensing expense

Other operating expenses

Total operating expenses

Loss from operations

NOTE 17 – SUBSEQUENT EVENTS

Subsequent to February 28,

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

2025, the Company issued 1,048,000 shares of common stock in exchange for cash proceeds of approximately $ 262,000 .

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