What changed in this filing

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Item 1. Financial Statements

2025-10-20 compared with 2025-07-21 · 124 added, 119 removed, 526 unchanged (32% of the section changed)

30 unchanged sentences

150,000,000 shares authorized;

121,711,600 and 118,296,448 issued and outstanding at May 31, 2025 and February 25, 2025, respectively.

125,126,752 and 118,296,448 issued and outstanding at August 31, 2025 and February 25, 2025, respectively.

Additional paid-in capital

6 unchanged sentences

Three-Months Ended

Six-Months Ended

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

2 unchanged sentences

Engineering, research and development

Selling, general and administration

Selling, general & administration

Total operating expenses

2 unchanged sentences

Interest expense, net (including $ 485 , $ 272 , $ 1,095 and $ 543 to related parties, respectively)

Loss on debt extinguishment – related party

Change in fair value of derivative liability

Gain on debt extinguishment – related party

Change in fair value of derivative warrant 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 unaudited financial

AURA SYSTEMS, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS’

Ended May 31, 2025

Three and Six Months Ended August 31, 2025

(amounts in thousands, except share data)

4 unchanged sentences

Balance, May 31, 2025 (unaudited)

Common shares issued for cash

Balance, August 31, 2025 (unaudited)

$ ( 507,733 )

Three Months Ended May 31, 2024

Three and Six Months Ended August 31, 2024

(amounts in thousands, except share data)

5 unchanged sentences

Balance, May 31, 2024 (unaudited)

Common shares issued for cash

Fair value of stock options

Balance, August 31, 2024 (unaudited)

$ ( 500,638 )

See accompanying notes to these unaudited financial

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(amounts in thousands)

1 unchanged sentence

Depreciation and amortization

Amortization of debt discount

Inventory write-down

1 unchanged sentence

Change in fair value of derivative liability

Fair value of stock options

Changes in operating assets and liabilities:

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Accrued interest

Customer advances

Operating lease liability

18 unchanged sentences

Conversion feature of convertible note payable – related party accounted as derivative liability

See accompanying notes to these unaudited financial

See accompanying notes to

these unaudited financial statements.

AURA SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED MAY 31, 2025 AND 2024

THREE AND SIX MONTHS ENDED AUGUST 31, 2025 AND

(Amounts in thousands, except share and per

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The accompanying unaudited condensed financial

statements as of and for the three months ended on May 31, 2025 and 2024, have been prepared in conformity with accounting principles

generally accepted in the United States of America (“U.S.

GAAP”) and the applicable rules and regulations of the Securities

and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures normally

included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring nature that are

necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as of February 28,

2025, was derived from the Company’s audited Financial Statements as of February 28, 2025, included in the Company’s Annual

Report on Form 10-K filed with the SEC on June 13, 2025.

statements as of and for the three and six months ended on August 31, 2025 and 2024, have been prepared in conformity with accounting

principles generally accepted in the United States of America (“U.S.

GAAP”) and the applicable rules and regulations of the

Securities and Exchange Commission (the “SEC”) regarding interim financial reporting.

Certain information and note disclosures

normally included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules

and regulations.

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring

nature that are necessary for a fair presentation of the results for the periods presented.

The Condensed Balance Sheet information as

of February 28, 2025, was derived from the Company’s audited Financial Statements as of February 28, 2025, included in the Company’s

Annual Report on Form 10-K filed with the SEC on June 13, 2025.

These financial statements should be read in conjunction with that report.

results of operations for the period ended May 31, 2025, may not necessarily be indicative of the results of the full fiscal year ending

February 28, 2026.

The results of operations for the period ended August 31, 2025, may not necessarily be indicative of the results of the full fiscal year

ending February 28, 2026.

The Company’s fiscal year ends on the last

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has experienced recurring operating losses and relies on debt and equity offerings to generate working capital.

During the three month period ended May 31, 2025,

During the six month period ended August 31, 2025,

the Company recognized a net loss of $ 7,605 and used cash in operating activities of $ 1,510 .

As of May 31, 2025, the Company also has a

shareholder deficit of $ 39,586 and notes payable totaling $ 5,266 are also past due.

These factors raise substantial doubt about the Company’s

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

In addition, the Company’s

independent registered public accounting firm, in its report on the Company’s February 28, 2025, financial statements, raised substantial

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

The financial statements do not include any adjustments that might

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

As of August 31, 2025, the Company also has

a shareholder deficit of $ 43,501 and notes payable totaling $ 5,266 are also past due.

These factors raise substantial doubt about the

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

the Company’s independent registered public accounting firm, in its report on the Company’s February 28, 2025, financial statements,

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

The financial statements do not include any

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

In the event if the Company is unable to generate

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risk on cash and cash equivalents.

During the three months ended May 31, 2025, one

During the three months ended August 31, 2024,

one customer accounted for 55 % and one customer accounted for 12 % of revenues.

No other customer accounted for more than 10% of revenues.

During the six months ended August 31, 2025, one

customer accounted for 90 % and one customer accounted for 10 % of revenues.

During the three months ended May 31, 2024, one customer accounted

During the six months ended August 31, 2024, one customer accounted

for 55 % and one customer accounted for 12 % of revenues.

No other customer accounted for more than 10% of revenues.

As of May 31, 2025, four vendors accounted for

40 %, 12 %, 12 % and 10 % of accounts payable.

As of August 31, 2025, four vendors accounted

for 40 %, 12 %, 12 % and 12 % of accounts payable.

As of February 28, 2025, four vendors accounted for 42 %, 12 %, 11 % and 9 % of accounts payable.

46 unchanged sentences

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

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

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

Unobservable inputs.

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, other current

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The following table sets forth by level, within

the fair value hierarchy, the Company’s assets and liabilities at fair value as of May 31, 2025 and February 28, 2025:

the fair value hierarchy, the Company’s assets and liabilities at fair value as of August 31, 2025 and February 28, 2025:

August 31, 2025

(amounts in thousands)

5 unchanged sentences

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 May 31, 2025,

the derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended August 31,

2025, as follows:

(amounts in thousands)

2 unchanged sentences

Change in fair value of derivative liability

August 31, 2025

Loss per share

9 unchanged sentences

debt, and the treasury stock method for options and warrants, which could occur if all potentially dilutive securities were exercised.

For the three months ended May 31, 2025 and 2024,

For the six months ended August 31, 2025 and 2024,

the calculations of basic and diluted loss per share are the same because potentially dilutive securities would have had an anti-dilutive

13 unchanged sentences

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 12).

The Company is in the process of evaluating this ASU to determine its

impact on the Company’s disclosures.

Other recent accounting pronouncements issued

9 unchanged sentences

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 May 31, 2025 and February 28, 2025, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

As of August 31, 2025 and February 28, 2025, 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.

1 unchanged sentence

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

As of May 31, 2025 and February 28, 2025, the outstanding balance of the convertible notes payable amounted to $ 90 and $ 110 , respectively, and are past due.

At May 31, 2025, the total outstanding convertible

As of August 31, 2025 and February 28, 2025, the outstanding balance of the convertible notes payable amounted to $ 90 and $ 110 , respectively, and are past due.

At August 31, 2025, the total outstanding convertible

notes payable of $ 1,493 and accrued interest of $ 546 are convertible into 1,910,991 shares of common stock at conversion rates ranging

11 unchanged sentences

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

As of May 31, 2025 and February 28, 2025, the outstanding balance of the convertible note amounted to $ 3,000 and is past due.

As of August 31, 2025 and February 28, 2025, the outstanding balance of the convertible note amounted to $ 3,000 and is past due.

(b) Convertible note payable-Director

2 unchanged sentences

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

As of May 31, 2025 and February 28, 2025, the outstanding balance of the convertible note amounted to $ 20 and is past due.

As of August 31, 2025 and February 28, 2025, 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 .

The convertible note payable to Robert Kopple and associated entities (collectively “Kopple”)

as amended in March 2024, 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 2029.

As of August 31, 2025 and February 28, 2025, the outstanding balance of the convertible note payable was $ 9,259 .

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

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 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 2029.

As of May 31, 2025 and February 28, 2025, the outstanding balance of the convertible note payable was $ 9,259 .

The convertible note (i) requires $ 2,000 , originally due December 2024,

to be paid by December 2025;

(ii) added a fee of $ 15 monthly until the Company makes a principal payment of $ 2,000 ;

(iii) 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;

(iv) requires the Company to pay 20 % of all collected revenues within 10 days of the end of each fiscal quarter;

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 ;

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 of the warrants granted to Kopple from March 8, 2029, to March 31, 2031.

March 2024 amendment to the Kopple note payable

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 below);

(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 expense.

On April 28, 2025, Kopple agreed to further extend the installment payment of $ 2,000 due March 31, 2025, to June 30, 2025, in exchange for another cash payment of $ 100,000 .

During 2025, the installment payment of $ 2,000 , due in December 2024,

has been extended four times until December 31, 2025, in exchange for total consideration of $ 325,000 , which was recorded as interest

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.

The Company accounted for the amended terms of the Kopple note payable as a debt extinguishment.

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 upon issuance of $ 22,194 , and the change in the fair value of the amended warrants of $ 33 , and (ii) the net carrying amount of the former note payable of $ 12,162 .

7 unchanged sentences

these covenants will not affect the operations of the Company.

At May 31, 2025, the total outstanding

At August 31, 2025, the total outstanding

convertible notes payable-related party of $ 12,279 and accrued interest of $ 3,352 are convertible into 101,420,837 shares of common stock

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The aggregate total of the note payable-software

licenses as of May 31, 2025, amounted to $ 171 .

licenses as of August 31, 2025, amounted to $ 79 .

(d) Notes payable – machinery and other

3 unchanged sentences

and will mature in April 2029.

As of May 31, 2025, the outstanding balance of the note payable amounted to $ 197 .

As of August 31, 2025, the outstanding balance of the note payable amounted to $ 213 .

(e) Note payable-other

As of May 31, 2025, and February 28, 2025, 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

As of August 31, 2025, and February 28, 2025,

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 %

NOTE 5 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties

consisted of the following:

Notes payable-related parties consisted of the following:

(amounts in thousands)

12 unchanged sentences

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

As of May 31, 2025

As of August 31, 2025

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

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related to leases for the period are as follows:

Three Months ended

2025 Three Months ended

Six Months ended

2025 Six Months ended

(amounts in thousands)

1 unchanged sentence

Other Information

Cash paid for amounts included in the measurement of lease liabilities for the years ended May 31, 2025 and 2024, respectively $ 78 $ 72

Cash paid for amounts included in the measurement of lease liabilities for the years ended August 31, 2025 and 2024, respectively $ 78 $ 141

Weighted average remaining lease term – operating leases (in years) 1.5 2.00

8 unchanged sentences

Maturities of the Company’s lease liability

is as follows:

are as follows:

Year Ending February 28:

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The fair value of the

derivative liability at May 31, 2025 and February 28, 2025 was $ 19,135 and $ 17,565 , respectively.

derivative liability at August 31, 2025 and February 28, 2025 was $ 22,316 and $ 17,565 , respectively.

The following tables summarize the derivative

7 unchanged sentences

NOTE 9 – SHAREHOLDERS’ DEFICIT

On May 31, 2025 and February 28, 2025, the Company

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

During the three months ended May 31, 2025, the

On August 31, 2025 and February 28, 2025, the

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

During the six months ended August 31, 2025, the

Company issued 6,830,304 shares of common stock for approximately $ 1,697 in cash.

During the three months ended May 31, 2024, the

During the six-months ended August 31, 2024, the

Company issued 6,952,363 shares of common stock for approximately $ 1,764 in cash.

3 unchanged sentences

expire in 3 years.

On May 31, 2025, there were insufficient authorized

On August 31, 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 May 31, 2025 (i) Warrants, and (ii) Convertible Notes Payable

and Convertible Notes Payable-Related Party (excluding the Convertible Note Payable-Kopple).

in the allocation of authorized and unissued shares in the following order at August 31, 2025 (i) Warrants, and (ii) Convertible Notes

Payable and Convertible Notes Payable-Related Party (excluding the Convertible Note Payable-Kopple).

The sequence is based upon reclassifying

1 unchanged sentence

This sequencing and the lack of sufficient authorized shares required the Company to

classify the conversion option of the convertible note payable-Kopple as liabilities recorded at fair value at May 31, 2025 (see Note

classify the conversion option of the convertible note payable-Kopple as liabilities recorded at fair value at August 31, 2025 (see Note

Stock Options

11 unchanged sentences

( 1,250,000 )

Total options, May 31, 2025

Exercisable, May 31, 2025

As of May 31, 2025, the intrinsic value as these

stock options amounted to $ 0 .

The exercise prices and information related to options under the 2011 Plan outstanding on May 31, 2025,

Total options, August 31, 2025

Exercisable, August 31, 2025

As of August 31, 2025, the intrinsic value as

these stock options amounted to $ 15 .

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

31, 2025, are as follows:

8 unchanged sentences

Outstanding, February 28, 2025

Outstanding, May 31, 2025

There was no intrinsic value as of May 31, 2025,

Outstanding, August 31, 2025

There was no intrinsic value as of August 31,

2025, as the exercise prices of these warrants were greater than the market price of the Company’s stock.

The exercise prices and information

related to the warrants as May 31, 2025, are as follows:

The exercise prices and

information related to the warrants as August 31, 2025, are as follows:

Exercise Price Stock Warrants

9 unchanged sentences

NOTE 10 – RELATED PARTY TRANSACTIONS

As of May 31, 2025 and February 29, 2024, Bettersea

As of August 31, 2025 and February 29, 2024, Bettersea

LLC (“Bettersea”) was an 6.9 % and 7.1 %, respectively, shareholder in the Company.

For the three months ended May 31, 2025

For the six months ended August 31, 2025

and 2024, the Company incurred total fees to Bettersea of $ 78 and $ 82 , respectively, for consulting services.

As of May 31, 2025 and February

28, 2025, a total of approximately $ 247 and $ 225 , respectively, was due to Bettersea and included in accounts payable and accrued expenses.

As of May 31, 2025 and February 28, 2025, accrued

As of August 31, 2025 and

February 28, 2025, a total of approximately $ 270 and $ 225 , respectively, was due to Bettersea and included in accounts payable and accrued

As of August 31, 2025 and February 28, 2025, accrued

expenses include accrued payroll due to officers and of $ 313 and $ 272 , respectively.

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Three Months Ended

Six Months Ended

Cost of sales

Operating expenses

Employee compensation and benefits

Stock-based compensation

Consulting and outside provider costs

6 unchanged sentences

NOTE 13 – SUBSEQUENT EVENTS

Subsequent to May 31, 2025, the Company issued

Subsequent to August 31, 2025, the Company issued

1,124,000 shares of common stock in exchange for cash proceeds of approximately $ 281,000 .

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-Q

Item 1. Financial Statements